Representing financial professionals, financial institutions and investors in investment loss, employment and disclosure matters, and in regulatory investigations nationwide.

Federal regulators fine Bank of America $225 million over ‘botched’ pandemic benefits

On Behalf of | Jul 20, 2022 | Regulatory Investigations

Federal regulators have fined Bank of America Corp. over deficiencies in the bank’s administration of public benefit payments during the COVID-19 pandemic, according to AdvisorHub.

The bank was hired by 12 states to deliver unemployment and other benefits to consumers electronically through prepaid debit cards and accounts. But the Consumer Financial Protection Bureau (CFPB) said the disbursement of these benefits was “botched” at the height of the pandemic through what it called unfair and abusive acts.

According to the CFPB, “Bank of America automatically and unlawfully froze people’s accounts with a faulty fraud-detection program, and then gave them little recourse when there was, in fact, no fraud.”

The CFPB fined the company $100 million, while the Office of the Comptroller of the Currency (OCC) ordered Bank of America to pay $125 million and provide remediation to consumers that were harmed by the practices. The OCC said many prepaid cardholders were denied access to their mandated unemployment payments without any way to remedy the situation.

“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.”

The bureau noted that in California, the bank made it difficult for people to unfreeze their prepaid debit cards or report fraudulent behavior. In addition, it promised customer service 24 hours a day seven days a week, but actually operated on a limited schedule for its call center. When customers sought help, they were directed to the state labor department, which was stretched and unable to provide services.

Responding to the enforcement actions, a Bank of America spokesperson said the company distributed more pandemic relief to Americans than any other bank and had worked closely with states to help identify and fight fraud related to unemployment payments during the pandemic.

The lawyers at Lewitas Hyman have extensive experience representing companies both large and small, as well as employees, directors, officers and shareholders, in complex commercial litigation matters pending in federal and state courts nationwide and in arbitrations before various dispute resolution forums. Our attorneys have over 55 years of collective experience litigating matters. Please contact us at (888) 655 6002 for more information about our securities and commercial litigation practice.