Two US regulators have imposed a $225m fine on Bank of America for ‘botched’ disbursement of government unemployment benefits at peak of the pandemic.
The Consumer Financial Protection Bureau (CFPB) fined the lender $100m and another fine of $125m was imposed by the Office of the Comptroller of the Currency (OCC).
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Various state agencies have a contract with Bank of America to deliver unemployment and other benefit payments to consumers via prepaid debit cards and accounts.
The CFPB said that in the fall of 2020 and mid-2021, the bank deployed a faulty fraud detection system that automatically and unlawfully froze people’s accounts seeking unemployment benefits.
On top of that, Bank of America made it difficult for customers to unfreeze their prepaid cards and insufficiently staffed its call centre leaving customers on hold for hours every day for weeks trying to reach someone at the bank, the regulator said.
Furthermore, when the customers sought assistance, the bank redirected them to the California state unemployment department for verification despite knowing that the department was stretched and unable to provide services, the CFPB added.
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By GlobalDataCFPB director Rohit Chopra said: “Taxpayers relied on banks to distribute needed funds to families and small businesses to rescue the economy from collapse when the pandemic hit.
“Bank of America failed to live up to its legal obligations. And when it got overwhelmed, instead of stepping up, it stepped back.”
Bank of America has been ordered to make payments to customers who were denied benefits because of the faulty filter.
The regulators have also issued a consent order directing the lender to address the issues.
