By: Ken Chase.
The Consumer Financial Protection Bureau (CFPB) and Office of the Comptroller of the Currency (OCC) levied fines against Bank of America this week for its failure to properly disburse state unemployment benefits during the Covid-19 pandemic. In a press release announcing the action, the CFPB claimed that the bank’s fraud detection program erroneously froze benefit recipient accounts and then failed to provide the redress required by law.
According to the release, BoA adopted new fraud detection processes during the pandemic, replacing “reasonable investigations” with automated fraud filters. Those filters then erroneously flagged thousands of benefit recipients’ accounts and froze them, denying those people their much-needed benefits. The bank compounded the offense by implementing procedures that prevented those benefit recipients from directly appealing the faulty decisions.
The recipients who did manage to get through to BoA’s agents were often told that their only redress was to contact state unemployment officials to verify their benefit status. The CFPB asserts that this redirection further harmed those benefit recipients, since state agencies were overwhelmed with benefit claims at the time. Worse, Bank of America should have been aware that the unemployment department was overwhelmed and unlikely to be able to respond to appeals in a timely manner.
CFPB Director Rohit Chopra suggested that BoA’s actions represented a failure to live up to its obligations to America’s small businesses and families:
“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.”
Under the terms of the enforcement order, Bank of America will be required to provide consumers with the money that its fraud filters falsely denied them during the pandemic. In addition, each of those harmed customers will receive a “consequential harm payment” based on the financial harm they endured while their accounts were frozen, while also retaining the right to seek further redress via a formal review process.
Meanwhile, the bank will be required to pay the CFPB a penalty of $100 million. That fine will be placed in the board’s victim relief fund. In addition, the OCC has levied a separate fine of $150 million that will be provided to the U.S. Treasury.