Bank of America fined $225 million for mishandling pandemic unemployment benefits.

Two federal regulators fined Bank of America $225 million Thursday for mishandling prepaid debit card accounts used by a dozen states to distribute unemployment benefits during the pandemic, and the bank must compensate people for the damages, an amount likely to run into the hundreds of millions more, the federal government reported. officials said.

Due to a flawed fraud detection program, Bank of America improperly froze accounts and blocked customers seeking to unlock them, preventing people from accessing desperately needed funds in 2020 and 2021, the Financial Protection Bureau said. of the Consumer.

“Taxpayers relied on banks to distribute the necessary funds to families and small businesses to rescue the economy from collapse when the pandemic hit,” said Rohit Chopra, director of the consumer bureau. “Bank of America failed to meet its legal obligations. And when he was overwhelmed, instead of stepping forward, he stepped back.”

Bank of America said the problems arose from state systems beset with fraudulent claims.

The pandemic “created unprecedented criminal activity in which illegal applicants managed to get states to approve tens of billions of dollars in payments,” said Bill Halldin, a spokesman for the bank. “Bank of America’s support to 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 aid to Americans. than any other bank.

Bank of America signed contracts with several states to deliver unemployment payments and other benefits. In many states, you make those payments through direct deposit, but the pandemic benefits in 12 were distributed on prepaid debit cards.

As unemployment rose at the start of the pandemic, states, with federal support, expanded their unemployment benefits. Thieves piled in, flooding states with fraudulent claims and stealing cards and funds from legitimate claimants. Bank of America responded by implementing an automated filter.

The bank offered insufficient support to customers who tried to regain access to their money, refusing to take their claims online or at branches and instead directing them to a call center where wait times stretched into hours, according to the statement. consumer office.

In California, Bank of America directed people to a state unemployment agency that was so overwhelmed that the bank “should have known it was essentially redirecting people into a black hole,” the office said. The other affected states are Arizona, Iowa, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Nevada, New Jersey, North Carolina and South Carolina.

Bank of America must reimburse consumers for the money that was withheld and pay each affected individual a lump-sum “consequential damages” payment that will be based on factors including how long the account was frozen.

A spokesman for the consumer bureau estimated that the inappropriate freezes harmed 100,000 cardholders, and the bureau said it expected compensation payments to total “hundreds of millions of dollars.” Apart from those payments, the bureau fined the bank $100 million and the Comptroller of the Currency fined it an additional $125 million.

The bank will have 90 days to submit to the consumer’s office its plan to pay people. The bank intends to contact those eligible for compensation, Halldin said.

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