Bank of America is fined $225 million for mishandling pandemic unemployment benefits.
Two federal regulators on Thursday fined Bank of America $225 million for mishandling prepaid debit card accounts used by a dozen states to distribute unemployment benefits during the pandemic, and the bank must compensate people for damages, an amount likely to total hundreds of millions more, federal officials said.
Due to a flawed fraud detection program, Bank of America improperly froze accounts and blocked customers who sought to unlock them, cutting people off from desperately needed funds in 2020 and 2021, Consumer Financial said. Desktop protection.
“Taxpayers relied on banks to distribute needed funds to families and small businesses to save the economy from collapse when the pandemic hit,” said Rohit Chopra, director of the consumer office. “Bank of America failed to meet its legal obligations. And when he was overwhelmed, instead of stepping up, he backed off.
Bank of America said the problems stem from state systems beleaguered by fraudulent claims.
The pandemic “has created unprecedented criminal activity where illegal claimants have been able to trick states into approving tens of billions of dollars in payments,” said Bill Halldin, a spokesman for the bank. “Bank of America’s support for states has enabled the government to successfully issue more than $250 billion in pandemic unemployment benefits to more than 14 million people and, overall, has distributed more pandemic relief to Americans than any other bank.”
Bank of America has contracts with a number of states to pay unemployment benefits and other benefits. In many states it makes these payments by direct deposit, but the benefits of the pandemic in 12 were distributed on prepaid debit cards.
As unemployment rose at the start of the pandemic, states – with the support of the federal government – expanded their unemployment benefits. Thieves piled on, flooding states with fraudulent claims and stealing cards and funds from legitimate claimants. Bank of America responded by deploying an automated filter.
The bank offered insufficient support to customers trying to regain access to their money, refusing to take their complaints online or at branches and instead directing them to a call center where wait times stretched over hours, according to the Consumer Affairs Office.
In California, Bank of America referred people to a state unemployment agency that was so overwhelmed the bank “should have known it was basically redirecting people to a black hole,” the office said. Other states affected are Arizona, Iowa, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Nevada, New Jersey, North Carolina and South Carolina.
Bank of America must refund consumers the money withheld from them and pay each affected person a lump sum payment for “consequential damages” that will be based on factors such as how long the account remained frozen.
A spokesperson for the Office of Consumer Affairs estimated that the abusive freezes had harmed 100,000 cardholders, and the office said it expected repair payments to total “hundreds of millions of dollars “. Irrespective of these payments, the bureau fined the bank $100 million and the Office of the Comptroller of the Currency fined it an additional $125 million.
The bank will have 90 days to submit its personal reimbursement plan to the Consumer Affairs Office. The bank intends to contact those eligible for compensation, Mr Halldin said.