Bank of America fined $225m for ‘botched’ unemployment benefit payments during pandemic

A Bank of America logo is pictured in the Manhattan borough of New York City, New York, U.S., January 30, 2019. REUTERS/Carlo Allegri/File Photo

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WASHINGTON, July 14 (Reuters) – Bank of America (BAC.N) has been fined $225 million by two U.S. banking regulators for what they said was “sloppy” handling of unemployment benefits during the pandemic.

The Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau said the bank had a flawed fraud detection program that improperly froze the accounts of thousands of people seeking unemployment benefits in 2020 and 2021 .

In addition to the fine, regulators ordered the bank to pay harmed consumers compensation, which the CFPB said would amount to hundreds of millions of dollars more.

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As unemployment claims surged during the pandemic, the CFPB said the bank, which administered prepaid debit cards for unemployment benefits on behalf of 12 states, implemented an automatic fraud filter, which led to the improper freezing of their accounts for thousands of cardholders.

He added that the bank was making it difficult for people to unblock their cards, causing them to spend hours on hold trying to fix the problem.

“Taxpayers relied on the banks to distribute needed funds to families and small businesses to save the economy from collapse when the pandemic hit,” CFPB Director 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 did not admit or deny the findings. In a statement, a spokesperson for the bank said the states were responsible for reviewing and approving unemployment claims, and the penalties were imposed “despite the government’s own acknowledgment that the expansion of the unemployment program during the pandemic has created unprecedented criminal activity”.

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Reporting by Pete Schroeder; edited by Jonathan Oatis and Aurora Ellis

Our standards: The Thomson Reuters Trust Principles.

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