The Consumer Financial Protection Bureau announced Thursday (July 14) that it has leveled a $100 million fine at Bank of America for allegedly messing up the disbursement of state unemployment benefits during the pandemic.
Bank of America reportedly “automatically and unlawfully” froze peoples’ accounts with a flawed fraud detection program, according to a CFPB press release. The CFPB also alleged the bank didn’t offer impacted individuals much recourse, even if there was no fraud.
In its order, the CFPB said Bank of America must now go through a process that is “estimated to result in hundreds of millions of dollars in redress to consumers.” The bank will also be facing a fine of $125 million from the Office of the Comptroller of the Currency, per the release.
All of it follows the rapid increase in the unemployment rate in early 2020 immediately after the pandemic hit. That saw millions of people trying to access unemployment benefits, which in turn also came with a large amount of fraud.
The CFPB release noted that there were cases of identity theft affecting customers who had legitimate accounts. There were also a number of criminals who applied for and received unemployment insurance benefits, some of whom filed false error claims to get more money.
According to the CFPB, Bank of America engaged in “unfair and abusive” acts, which resulted in many Californians not getting their benefits when the pandemic was in full swing. The bank reportedly changed its practices for investigating debit card fraud, putting in a fraud filter that had a “simple set of flags” that triggered an account freeze.
The bank also reportedly made it difficult for people to unfreeze their cards or to report fraudulent use of the cards, the CFPB alleged, with long hold times on the phone and a limited amount of agents available at its call center.
A Bank of America spokesperson told PYMNTS that the bank had been hired by states to review the unemployment payments, and the states were responsible for looking over the applications.
“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 more pandemic relief to Americans than any other bank,” the spokesperson said. “In addition, we provided assistance to millions more by deferring mortgage, credit card and other payments.”
The spokesperson said Bank of America had been fighting fraud during the pandemic, as well.
Earlier this year, PYMNTS wrote that Bank of America ended 2021 on a “high note,” with record levels of digital engagement and an improved economy all around.
According to the bank’s figures at the time, 70% of households were actively using its digital platforms, while the bank saw 41.4 million active digital banking users — a 5% increase — making 2.7 billion logins.