Bank of America has been penalized $225 million in fines for “botching” the handling of unemployment benefits during the pandemic, according to federal banking regulators.
The Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau fined the national bank for improperly freezing the accounts of thousands, limiting access to their unemployment benefits, the CFPB said in a statement on Thursday.
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“Taxpayers relied on banks to distribute needed funds to families and small businesses to rescue the economy from collapse when the pandemic hit,” said CFPB Director Rohit Chopra. “Bank of America failed to live up to its legal obligations. And when it got overwhelmed, instead of stepping up, it stepped back.”
The bank, which has approximately 4,100 branches, has contracts with 12 state agencies, including those in Arizona, California, and Maryland, to deliver unemployment and other benefit payments to people electronically through prepaid debit cards and accounts.
Regulators said an investigation found that Bank of America changed its practices for prepaid debit card fraud on unemployment insurance benefit accounts that set a “low bar” for accounts to get flagged and frozen between the fall of 2020 through mid-2021.
“Bank of America made it very difficult for people to unfreeze their prepaid debit cards or for people to report fraudulent use of their cards. People with unemployment insurance benefit prepaid debit cards could not make reports online, or in person at bank branches. People were on hold for hours every day for weeks trying to talk to someone at the bank,” the CFPB said.
Bank of America said states were responsible for “reviewing and approving applications and directing [Bank of America] to issue payments.”
“This action arose despite the government’s own acknowledgment that the unemployment expansion during the pandemic created unprecedented criminal activity where illegal applicants were able to get states to approve tens of billions of dollars in payments,” Bank of America said in a statement to CNBC.
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The CFPB fined the bank $100 million, and the OCC issued a separate fine of $125 million.
Bank of America has also been directed to pay back money wrongly held up by the faulty fraud filter to consumers in a lump sum, which could be “hundreds of millions of dollars” in redress.
The Washington Examiner reached out to Bank of America for comment.
