US banking regulators have Bank of America fined $225 million over “botched” handling of jobless benefits during the coronavirus pandemic.
The Office of the Comptroller of the Currency (OCC) and the Consumer Financial Protection Bureau (CFPB) said on Thursday the bank had a faulty fraud detection program that improperly froze the prepaid card accounts of thousands of people seeking jobless benefits in 2020 and 2021, Reuters reported.
The regulators also ordered the bank to pay redress to affected consumers, which the CFPB estimated would be in hundreds of millions of dollars more, in addition to the fine.
In addition to these actions, the bank now also faces a pair of consent orders from the OCC and CFPB, which directs the bank to overhaul its policies and address shortcomings.
The CFPB said the bank administered prepaid jobless benefit debit cards on behalf of 12 states when jobless claims surged during the pandemic. The bank implemented an automatic fraud filter, which resulted in thousands of cardholders having their accounts improperly frozen.
Regulators said the bank made it hard for people to unfreeze their cards, inadequately staffing their call centers and requiring people to spend hours on hold to try and address the matter.
“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 bank issued a statement in response to the regulatory action. It did not admit nor deny the findings.
A bank spokesperson said US states were in charge of reviewing and approving unemployment applications, and the penalties arose “despite the government’s own acknowledgment that the unemployment program expansion during the pandemic created unprecedented criminal activity.”
Meanwhile, the number of Americans filing new claims for unemployment benefits increased to the highest level in nearly five months last month.
The report from the Labor Department also showed unemployment rolls remained at a more than 52-year low at the end of May.
Amid reports of companies freezing hiring or contemplating layoffs in anticipation of a recession next year, the weekly jobless claims data is being closely watched.