Bank of America fined for mishandling unemployment debit cards during pandemic

By: - July 18, 2022 6:37 am

A fault fraud filter led to delays for jobless claimants nationwide obtaining their benefits, federal regulators said last week. (Photo by Justin Sullivan/Getty Images)

Federal regulators have fined Bank of America $225 million for “botching” the distribution of state unemployment funds during the pandemic, leading to delayed payments for people relying on jobless benefits.

The bank faces two fines: a $100 million penalty from the Consumer Financial Protection Bureau and a separate fine of $125 million from the Office of the Comptroller of Currency.

The federal agencies found Bank of America — which contracted with states to provide unemployment benefits on prepaid debit cards — froze people’s accounts with a fault fraud detection program, “and then gave them little recourse when there was, in fact, no fraud,” according to a press release announcing the fine.

“Taxpayers relied on banks to distribute needed funds to families and small businesses to rescue the economy from collapse when the pandemic hit,” Rohit Chopra, director of the Consumer Financial Protection Bureau, 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.”

The Consumer Financial Protection Bureau highlighted Bank of America’s actions in California, where regulators said the bank made it difficult for people to unfreeze their prepaid debit cards or report fraudulent behavior, touted 24-7 customer service but actually operated on a limited schedule for its call center, and directed customers seeking help to contact overwhelmed state labor officials.

Bank of America should have known after meeting with California labor officials in the summer of 2020 that “it was essentially redirecting people into a black hole,” the Consumer Financial Protection said in a press release.

It’s unclear how many New Jerseyans were affected by Bank of America’s practices, but the findings echo what claimants in the Garden State have reported experiencing while trying to get their benefits. The New Jersey Department of Labor worked with Bank of America up until May, when labor officials said the bank chose not to renew its contract.

“Workers in New Jersey and other states turn to unemployment in times of need because it provides a crucial safety net. But, far too many workers faced hurdles receiving those benefits — especially those who were potential victims of fraud, which reached unprecedented levels at the height of the COVID-19 pandemic,” said Angela Delli-Santi, spokeswoman for the Labor Department.

The state Labor Department urges anyone who believes they were impacted by the administration of the prepaid debit card to reach out to Bank of America.

Eleven other states used Bank of America to distribute prepaid debit cards during the pandemic. Currently, the bank only has a contract with California through June 30, 2023.

Jobless claims surged in March and April 2020 as the spread of the coronavirus led government officials to shutter businesses for months, leading to unprecedented numbers of layoffs and furloughs. Hundreds of thousands of claims were suddenly being filed after months of low unemployment, overwhelming state labor departments nationwide and delaying benefits for thousands of people.

As part of the Consumer Financial Protection Bureau’s action, Bank of America must pay back the money it “wrongly denied to consumers across the country,” the agency said.

“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,” it said.

The bank has been previously sanctioned by federal regulators. The Consumer Financial Protection Bureau fined the bank $727 million over illegal credit card practices in 2014, and issued a $10 million civil penalty fine over unlawful garnishments in May.

Our stories may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0. We ask that you edit only for style or to shorten, provide proper attribution and link to our web site. Please see our republishing guidelines for use of photos and graphics.

Sophie Nieto-Munoz
Sophie Nieto-Munoz

Sophie Nieto-Muñoz, a New Jersey native and former Trenton statehouse reporter for NJ.com, shined a spotlight on the state’s crumbling unemployment system and won several awards for investigative reporting from the New Jersey Press Association. She was a finalist for the Livingston Award for Young Journalists for her report on PetSmart's grooming practices, which was also recognized by the New York Press Club. Sophie speaks Spanish and is proud to connect to the Latinx community through her reporting.

MORE FROM AUTHOR