Federal regulators fine Bank of America $225 million over botched payment of state unemployment benefits at height of pandemic


WASHINGTON DC – Today, the Consumer Financial Protection Bureau (CFPB) fined Bank of America $100 million for botching the payment of state unemployment benefits at the height of the pandemic. Bank of America automatically and illegally froze people’s accounts with a flawed fraud detection program, then gave them little recourse when there was, in fact, no fraud. Today’s order forces Bank of America to begin a process that is expected to result in hundreds of millions of dollars in damages for consumers. In a separate order, the Office of the Comptroller of the Currency (OCC) also fines the bank $125 million.

“Taxpayers relied on the banks to distribute needed funds to families and small businesses to save the economy from collapse when the pandemic hit,” CFPB Director Rohit Chopra said. “Bank of America failed to meet its legal obligations. And when he was overwhelmed, instead of stepping up, he backed off.

Bank of America (NYSE: BAC) is a national bank based in Charlotte, North Carolina, with approximately 4,100 branches. It has been designated as a global systemically important bank by the Financial Stability Board, and as of December 31, 2021, the company had $2.5 trillion in consolidated assets, making it the second largest bank in the world. United States. The bank has already been sanctioned by the CFPB. In 2014, the CFPB ordered Bank of America to pay $727 million in damages to its victims for illegal credit card practices. And in May of this year, the CFPB ordered Bank of America to pay a $10 million civil penalty for unlawful foreclosures.

Bank of America has contracts with various state agencies to provide unemployment payments and other benefits to consumers electronically through debit cards and prepaid accounts. For example, since 2011, Bank of America has had an exclusive contract with the State of California to provide unemployment payments and other benefits to California consumers electronically through debit cards and prepaid accounts. Under the Electronic Funds Transfer Act, consumers are protected when using electronic methods to transfer money; this includes prepaid cards. Protections include that after a consumer contacts the financial institution to report an error, the financial institution must conduct a prompt, reasonable, and prompt investigation.

When the COVID-19 pandemic hit in early 2020, the unemployment rate jumped. Millions of consumers applied for unemployment insurance benefits. The outbreak included much of the fraud. There was a significant amount of identity theft that affected eligible cardholders with legitimate prepaid debit card accounts, but there was also a significant number of criminals who applied for and began receiving credit card benefits. insurance who filed bogus claims to access additional funds.

In its investigation, the CFPB found that Bank of America engaged in unfair and abusive acts and practices that kept Californians from collecting their unemployment benefits at the height of the pandemic, when many people had the most need money. Specific findings include that the bank:

  • Replacing Reasonable Investigations with a Faulty Anti-Fraud Filter: In the fall of 2020, and through mid-2021, Bank of America changed its practices for investigating prepaid debit card fraud on Unemployment Insurance Benefits accounts. Instead of conducting reasonable investigations, he implemented a fraud filter with a simple set of indicators that automatically triggered an account freeze. This set a low bar for freezing many people’s unemployment insurance benefits, hurting thousands of legitimate cardholders in need of cash. The bank also retroactively applied its fraud filter to deny certain error notices submitted by prepaid debit cardholders that the bank had previously investigated and paid.
  • Left consumers in distress in the embarrassment: Bank of America has made it very difficult for people to unblock their prepaid debit cards or for people to report fraudulent use of their cards. People with prepaid debit cards for unemployment insurance benefits could not report online or in person at bank branches. People were on hold for hours every day for weeks trying to talk to someone at the bank. Additionally, the bank told its customers that it had agents available 24 hours a day, seven days a week, when in fact it had a more restricted schedule for its claims call center. Since Bank of America was the strongly preferred provider for unemployment benefits in California, consumers had no choice but to switch providers.
  • Passed the buck to an overwhelmed state agency: When consumers asked for help, the bank often referred them to the California State Unemployment Service for verification in order to regain access to their benefits. But the bank knew the department was overburdened and unable to provide services; the bank met with the department dozens of times over the summer of 2020 and should have known it was essentially redirecting people to a black hole.

Enforcement measures

Under the Consumer Financial Protection Act, the CFPB has the power to take action against institutions that violate consumer financial laws, including by engaging in unfair, deceptive or abusive acts or practices. Bank of America will:

  • Provide redress to consumers: Bank of America must refund money it wrongfully withheld from consumers across the country due to the faulty fraud filter. The bank must also provide each affected consumer with a lump sum payment for consequential damage, to be determined according to a methodology of the financial harm suffered by consumers due to the length of time that their accounts remained frozen or blocked. Finally, affected consumers will have the opportunity to receive additional relief through an individualized review process.
  • Paying a $100 million fine: Bank of America must pay a $100 million fine to the CFPB, which will be deposited in the victim relief fund. The penalty reflects the seriousness and extent of the harm caused to the consumer by the bank’s practices. The OCC separately fines the bank $125 million to be remitted to the Treasury.

Read today’s order.

Consumers can submit complaints about financial products or services by visiting the CFPB website or by calling (855) 411-CFPB (2372).


The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces federal consumer finance law and ensures that markets for consumer financial products are fair, transparent and competitive. For more information, visit consumerfinance.gov.


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