Bank of America penalized $225M over prepaid card program


Bank of America was fined by OCC regulators for how it handled consumer claims of unauthorized transactions unemployment benefits prepaid card program


Bank of America has been slapped with $225 million in penalties by federal authorities for “unfair and deceptive practices” related to customers’ unemployment benefits programs.

On Thursday, the Office of the Comptroller of the Currency said it assessed $125 million in civil penalties against the Charlotte-based bank. And the Consumer Financial Protection Bureau also ordered the bank to pay a $100 million civil money penalty and redress harmed consumers, according to a news release from the OCC.

The violations are related to unsafe or unsound prepaid card program distribution of unemployment insurance and other public benefit payments, according to federal regulators.

“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 in a statement.

The bank also must provide remediation to consumers harmed by the bank’s practices and violations of law, according to the OCC.

“Banks must pay attention to the financial health of their customers and conduct their activities in accordance with all consumer protection laws,” Hsu said. “When they don’t, we will act accordingly.”

The bank administered the Unemployment Benefits Prepaid Card Program for 12 states: Arizona, California, Iowa, Kansas, Kentucky, Massachusetts, Maryland, Michigan, North Carolina, New Jersey, Nevada and South Carolina.

Bank of America response

Bank of America was hired by the 12 states to administer unemployment payments, and the states were responsible for reviewing and approving applications and directing payments, bank officials said in a statement to The Charlotte Observer.

“Bank of America’s support to the states enabled 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,” Bank of America said.

The bank said the federal government acknowledged the expansion of the unemployment program during the COVID pandemic created unprecedented criminal activity.

“Bank of America partnered with our state clients to identify and fight fraud throughout the pandemic,” the bank said. “For example, we worked with California to identify hundreds of thousands of suspicious cards and assisted the state in protecting billions of dollars.

The OCC investigation

Bank of America neither admitted nor denied the findings by the OCC, the agency said in its consent order with the bank.

The bank violated the Federal Trade Commission Act’s “prohibition of unfair or deceptive acts or practices, in connection with the bank’s failure to adequately investigate and resolve consumer claims of unauthorized transactions,” the OCC investigation found.

The OCC also found deficiencies beginning in 2020, including in operational processes, risk management and internal controls that resulted in violations of law and harm to consumers.

Bank of America has begun taking corrective actions, according to the OCC’s consent order.

This story was originally published July 14, 2022 2:35 PM.

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