By Alice Seeley
On July 15, the Consumer Financial Protection Bureau (CFPB) fined Bank of America (BofA) $100 million for “botching the disbursement of state unemployment benefits” during the COVID-19 pandemic.
According to the bureau, the bank “automatically and unlawfully froze people’s accounts” due to a new automatic fraud detection system at the peak of the COVID-19 pandemic. BofA made it “very difficult” for consumers with state unemployment benefits to unfreeze their accounts.
The CFPB claimed that “people were on hold for hours every day for weeks trying to talk to someone at the bank.” BofA stated customer service agents were available 24 hours a day, seven days a week when in reality, customer service was very limited. When consumers asked for assistance unfreezing their accounts, the bank sent them back to the state unemployment department, although the state department was underemployed and unable to provide services.
The CFPB ordered BofA to pay back the money to consumers affected by the fraud detection system and pay a $100 million fine to the bureau, which will be deposited into the victims’ relief fund.
The same day, the Office of the Comptroller of the Currency (OCC) announced it would also fine Bank of America $125 million for “violations of law and unsafe practices” concerning the bank’s administration of distributing unemployment benefits.
BofA is in charge of the Unemployment Benefits Prepaid Card Program for 12 states: Arizona, California, Iowa, Kansas, Kentucky, Massachusetts, Maryland, Michigan, North Carolina, New Jersey, Nevada, and South Carolina. The OCC discovered that BofA violated Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices, and found other problems with the bank’s handling of the prepaid card program.
The OCC ordered BofA to take corrective actions concerning consumers whose access to unemployment benefits was denied or delayed and to pay a $100 million civil money penalty and redress harmed consumers. The $100 million penalty will be paid to the U.S. Treasury.