The federal government on Thursday fined Bank of America $225 Million for “botching” its handling of unemployment funds during the pandemic. It also ordered the bank to pay millions of workers.
The Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency made the announcement. Regulators said Bank of America blocked legitimate users from accessing lifeline funds at the same time imposters were stealing an unknown amount of money from government coffers.
“Taxpayers relied on banks to distribute needed funds to families and small businesses to rescue the economy from collapse when the pandemic hit,” CFPB Director Rohit Chopra said in a statement. “Bank of America failed to live up to its legal obligations. And when it got overwhelmed, instead of stepping up, it stepped back.”
In addition to the fines, people who filed for unemployment might receive payments.
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“Today’s order requires Bank of America to undertake a process that is estimated to result in hundreds of millions of dollars in redress to consumers,” the CFPB said.
Bank of America has 90 days to submit plan to pay people. As soon as we learn about the redress process, we’ll update this article.
The CFPB said an investigation found that Bank of America “engaged in unfair and abusive acts and practices that resulted in Californians not getting their unemployment benefits at the height of the pandemic.” Fundamentally, the agency accuses Bank of America of wrongfully withholding people’s unemployment payments -- most of which were deposited onto debit cards.
“Bank of America changed its practices for investigating prepaid debit card fraud on the unemployment insurance benefit accounts. Instead of conducting reasonable investigations, it implemented a fraud filter with a simple set of flags that automatically triggered an account freeze,” the CFPB said.
People lashed out. The CFPB said Bank of America then directed those unemployed workers back to the state’s Employment Development Department (EDD). “The bank knew the [EDD] was stretched and unable to provide services; the bank met with [EDD] dozens of times in the summer of 2020 and should have known it was essentially redirecting people into a black hole,” the CFPB said.
In a statement, Bank of America said, “this [fine] arose despite the government’s own acknowledgement that the unemployment program 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.”
A state audit has previously assigned blame for myriad failures to both EDD and Bank of America.
Bank of America said it used to “serve” a dozen states with unemployment payment cards. It’s now down to one: California. EDD renewed its contract with Bank of America through 2023, Bank of America said. A request for comment from EDD was not immediately returned.
