Two US government regulators – the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC) – have issued a fine of $225 million to Bank of America for how it handled benefit payments during the pandemic.
The federal agencies fined the bank over claims that how it distributed unemployment benefits during the pandemic was harmful to consumers.
The OCC levied a $125 million civil fine against the bank for alleged law violations and “unsafe or unsound practices.” The bank was also fined $100 million by the CFPB for the same reason. According to officials, those affected will receive restitution shortly.
How did Bank of America harm consumers?
According to the OCC and CFPB, Bank of America had signed up contracts with multiple US states to get benefits to consumers at the start of the pandemic via pre-paid money cards.
The regulators say that Bank of America’s fraud detection system automatically froze a large number of these cards, despite there being no actual fraud, meaning that millions of Americans weren’t able to access funds or pay for their everyday living expenses.
CFPB Director Rohit Chopra said: “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.”
The OCC added: “Banks must pay attention to the financial health of their customers and conduct their activities in accordance with all consumer protection laws. When they don’t, we will act accordingly.”
However, Bank of America has disputed this action, saying that it was dealing with “unprecedented” levels of fraud linked to pandemic relief programs.
The bank said it helped get state support to around 14 million Americans worth over $250 billion and, “provided assistance to millions more by deferring mortgage, credit card, and other payments.”