US regulators fine Bank of America $225 million

The Consumer Financial Protection Bureau (CFPB) has fined Bank of America (BoA) $100 million for “botching” the payment of government unemployment benefits at the height of the pandemic.

The CFPB has fined BoA $100 million

“Bank of America automatically and illegally froze people’s accounts with a flawed fraud detection program, giving them little recourse when in fact there was no fraud,” the CFPB says.

“Taxpayers relied on banks to provide needed funds to families and small businesses to save 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 overwhelmed, it went back instead of going up.”

The CFPB adds that during its investigation, it found that Bank of America engaged in “unfair and abusive acts and practices” that caused Californians to miss out on their unemployment benefits during the pandemic.

Specifically, the CFPB notes that the bank:

• Instead of conducting “reasonable investigations,” implemented a flawed fraud filter with a simple set of flags that automatically triggered an account freeze.
• Left distressed customers “in the lurch”. People with prepaid unemployment insurance debit cards struggled to report online or in person at bank branches, despite being told the bank had agents available 24 hours a day, 7 days a week.
• Transferred the money to an “overwhelmed” government agency.

As part of the enforcement action, the CFPB says BoA will be required to provide restitution to its customers along with a one-time damages payment, and also pay a $100 million fine to the CFPB, which it says it will deposit into a victims’ relief fund.

In a separate order, the Office of the Comptroller of the Currency (OCC) also fined the bank $125 million for “violations and unsafe or unsound practices related to the bank’s administration of a prepaid card program to distribute unemployment insurance and other government benefit payments.”

The OCC also ordered the bank to “provide relief to injured consumers whose access to unemployment benefits was denied or delayed.”

The OCC penalty will be paid to the US Treasury.

Headquartered in Charlotte, North Carolina, with approximately 4,100 branches and $2.5 trillion in consolidated assets, BoA is the second largest bank in the United States.

It was previously sanctioned by the CFPB — in 2014 — when it was ordered to pay $727 million in restitution to victims of illegal card practices. In May 2022, it was ordered to pay a $10 million civil penalty for illegal garnishments.