Bank Of America Fined $225 Million For Allegedly Freezing & Mishandling Customers¡¯ Bank Accounts

The Bank of America has been fined a massive amount of $225 million by federal regulators for messing up with various customers' bank accounts amidst the disbursement of state unemployment benefits at the height of the pandemic.

The Consumer Financial Protection Bureau (CFPB) fined the firm $100 million and, in a separate order, the Office of the Comptroller of the Currency is fining the bank $125 million, as per CNBC report.

The order requires Bank of America to engage in a process that will provide restitution for consumers whose accounts were frozen over what the CFPB called a ¡°faulty fraud detection program.¡±

Both fines were announced on Thursday, i.e. yesterday.

Because of a faulty fraud detection program, Bank of America had allegedly frozen accounts and created difficulties for customers who sought to have them unlocked, hence cutting people off from desperately needed funds in 2020 and 2021.

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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,¡± as per The New York Times report.

¡°The bank failed these prepaid cardholders by denying them access to their mandated unemployment funds during the height of the pandemic, and leaving these vulnerable consumers without an effective way to remedy the situation,¡± said Acting Comptroller of the Currency Michael Hsu. ¡°Banks must pay attention to the financial health of their customers and conduct their activities in accordance with all consumer protection laws.¡±

Bank of America reportedly had contracts with about 12 state agencies to deliver unemployment and benefit payments through prepaid debit cards. It now has just one, California, which recently extended the relationship. When the pandemic hit and the unemployment rate surged in 2020, these cards were the target of a great deal of fraud.

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The Bank¡¯s Statement

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In a statement, the bank said that, ¡°the states were responsible for reviewing and approving applications and directing [BofA] to issue payments.¡± As such, Bank of America said it helped the government to ¡°successfully issue more than $250 billion in pandemic unemployment benefits to more than 14 million people and overall distributed more pandemic relief to Americans than any other bank.¡±

¡°This action arose despite the government¡¯s own acknowledgement 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, adding that it ¡°partnered with our state clients to identify and fight fraud throughout the pandemic.¡±

Also, CNBC mentioned that states like California and Nevada saw an outsized share of so-called transaction fraud during the pandemic because, with few exceptions, their unemployment insurance was distributed through debit cards without chips, meaning there was a lower level of security.

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