Federal regulators are fining Bank of America $225 million for freezing unemployment benefits for thousands of unemployed workers in Iowa and 11 other states during the pandemic.
The bank faces a $100 million fine from the Consumer Financial Protection Bureau and a $125 million fine from the Office of the Comptroller of the Currency.
The two agencies determined that Bank of America — which was hired by Iowa and 11 other states to provide unemployment benefits on prepaid debit cards — froze people’s accounts with an automated fraud detection program.” and then gave them little recourse when there was, in fact, no fraud,” according to a press release announcing the sanctions.
Jesse Dougherty, a spokesperson for Iowa Workforce Development, said the agency contracted with Bank of America to use debit cards to distribute unemployment benefits to Iowans from January 2015 to 2021.
During the pandemic, Dougherty said, IWD “learned of some instances” where accounts containing Iowans’ unemployment benefits had been frozen by the bank and so the agency worked with those individuals to “resolve any issues” they had.
“To the best of our knowledge, we were able to resolve all of the issues the plaintiffs had with Bank of America,” Dougherty said.
Dougherty was unable to say how many of Iowans’ accounts have been frozen by the bank or how much of their money has been made inaccessible. “There doesn’t seem to be a way to give you an accurate estimate for this,” Dougherty said, noting that some Iowans may have contacted Bank of America about the matter without any involvement. of the IWD.
The Consumer Financial Protection Bureau reported that 100,000 debit cardholders nationwide had lost access to their benefits. Bank of America must now return money it “wrongfully withheld from consumers across the country,” the bureau said, adding that those payments are expected to run into the hundreds of millions of dollars.
The bureau highlighted Bank of America’s actions in California, where regulators say the bank has made it difficult for people to access their money or report fraudulent behavior. The bank reportedly boasts 24/7 customer service, but its call center actually operated on a limited schedule and directed consumers to overwhelmed labor officials at state agencies.
Bank of America should have known after meeting with labor officials in California in the summer of 2020 that “it was essentially redirecting people to a black hole,” the bureau said in a press release.
“Taxpayers relied on the banks to distribute needed funds to families and small businesses to save the economy from collapse when the pandemic hit,” office manager Rohit Chopra said. “Bank of America failed to meet its legal obligations. And when he was overwhelmed, instead of stepping up, he backed off.
The bank has already been sanctioned by federal regulators. In 2014, the Consumer Financial Protection Bureau fined the bank $727 million for illegal credit card practices, and in May imposed a civil penalty of $10 million on the bank for illegal foreclosures.
In addition to Iowa and California, states impacted by Bank of America’s debit card practices include Arizona, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Nevada, New Jersey , North Carolina and South Carolina.