BOA fined $225M for suspending pandemic unemployment benefits

A pair of authorities fined Bank of America a total of $225 million for failings connected to unemployment compensation payouts made during the epidemic.

BOA was fined $125 million by the Office of the Comptroller of the Currency (OCC) and $100 million by the Consumer Financial Protection Bureau (CFPB) on Thursday for irregularities with its processing of fraud warnings on prepaid cards for unemployment benefits.


According to an OCC news release, BOA froze client accounts in 12 states owing to fraud alarms, but failed to "adequately investigate and resolve consumer allegations of unlawful transactions."


Bank of America stated that it was employed by these 12 states to manage unemployment benefits, paying out over $250 billion to 14 million individuals.


BOA “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 said in its statement. In the fall of 2020, the bank installed a new fraud filter on prepaid debit cards “with a simple set of flags that automatically triggered an account freeze. This set a low bar to freeze the unemployment insurance benefits of many people, harming thousands of legitimate cardholders needing the money,” the CFPB said.



Additionally, the bank made it difficult for consumers to thaw their frozen accounts. "People having prepaid debit cards for unemployment insurance benefits were unable to file reports online or in person at bank offices. "Bank customers were placed on hold for hours per day, seven days per week," the CFPB claimed. BOA also sent clients to state authorities that were overburdened and unable to manage the amount of complaints.


In addition to incorrect fraud warnings and blocked accounts, the OCC discovered flaws with "operational procedures, risk management, and internal controls" with the programmes.


The OCC has ordered BOA to reimburse clients who were injured by the bank's decision to freeze their unemployment benefits due to a nonexistent fraud. BOA must also "take extensive remedial action to strengthen its risk management and oversight of the initiative, as well as its contract review and approval procedure and enterprise-wide complaints risk management."


"This move was taken notwithstanding the government's own admission that the unemployment programme extension during the pandemic led to extraordinary criminal behaviour in which unauthorised applicants were able to convince states to accept tens of billions of dollars in payments," the bank stated in an email. "Throughout the epidemic, Bank of America collaborated with our state clients to investigate and combat fraud. For instance, we supported California in identifying hundreds of thousands of suspect cards and safeguarding billions of dollars.

By fLEXI tEAM