Bank of America slapped with $225 million fine by federal regulators
Fraudulent applications shot up during the COVID-19 pandemic
Federal regulators have hit Bank of America with a $225 million fine for what they allege were shortcomings in how the bank handled jobless benefits during the COVID-19 pandemic.
The Office of the Comptroller of the Currency (OCC) and the Consumer Financial Protection Bureau (CFPB) accused Bank of America of improperly freezing prepaid cards for thousands of people who sought jobless benefits during the pandemic.
Bank of America contracted with a dozen states to administer prepaid jobless benefit debt cards. The bank had an automatic fraud filter, which – according to CFPB – led to thousands of cardholders having their accounts improperly frozen.
Federal regulators accused Bank of America of making it difficult for people to unfreeze their cards, alleging that the firm’s call centers were insufficiently staffed, requiring people to spend hours on hold trying to solve the problem.
BNPL INCLUSION IN CREDIT REPORTS CAUSES GROWING CONSUMER CONCERNS, SURVEY CLAIMS
"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."
Bank of America has shot back at the allegations, saying states were responsible for reviewing and approving applications and directing the company to issue payments.
"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 to more pandemic relief to Americans than other bank," a spokesman for the company said in a statement provided to FOX Business. "In addition, we provided assistance to millions more by deferring mortgage, credit card and other payments."
Bank of America said these transactions continued despite the government being aware that the unemployment expansion during the pandemic created "unprecedented criminal activity where illegal applicants were approved billions of dollars in payments.
"Bank of America partnered with our state clients to identify and fight fraud throughout the pandemic," the company said. "For example, we worked with California to identify hundreds of thousands of suspicious cards and assisted the state in protecting billions of dollars."
CLICK HERE TO GET THE FOX BUSINESS APP
In addition to the fines, Bank of America now faces consent orders from the OCC and CFPB directing the bank to overhaul its policies and address shortcomings – a process that lingers for years. Per these orders, Bank of America is directed to establish a remediation plan to identify harmed consumers and determine the amount of debt that should be repaid.