Federal regulators punish bank for botching unemployment benefit payments
Bank of America is facing $225 million in fines from two federal regulators as a result of its freezing of accounts which resulted in delays in customers receiving unemployment benefits.
The Consumer Financial Protection Bureau (CFPB) noted that Bank of America automatically and unlawfully froze people’s accounts with a faulty fraud detection program, and then gave them little recourse when there was, in fact, no fraud.
In a statement, the CFPB noted that the action occurred at the height of the COVID-19 pandemic and had devastating results for Bank of America customers struggling in a difficult economy.
“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 CFPB fine for the violation is $100 million. A separate fine from the Office of the Comptroller of the Treasury is $125 million.
As a result of the enforcement action, Bank of America must:
- Provide redress to consumers: Bank of America must pay back the money that they wrongly denied to consumers across the country because of the faulty fraud filter. The bank must also provide each affected consumer with a lump sum consequential harm payment, to be determined through a methodology of financial harm consumers suffered due to the time their accounts remained frozen or blocked. Finally, affected consumers will have the opportunity to receive additional redress through an individualized review process.
- Pay a $100 million fine: Bank of America must pay a $100 million dollar penalty to the CFPB, which will be deposited into the victims' relief fund. The penalty reflects the severity and scope of the consumer harm caused by the bank’s practices. The OCC is separately fining the bank $125 million to be remitted to the Treasury.
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