The Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency reached separate settlements with U.S. Bank yesterday that will see the financial services company pay $36 million in fines and restitution to consumers for blocking access to unemployment benefits for tens of thousands of individuals during the COVID-19 pandemic.
What Happened: Back in 2020, U.S. Bank had contracts with 19 states and the District of Columbia to deliver unemployment benefits to individuals via prepaid debit cards. But the bank was unable to keep up with a 40-fold increase in the number of individuals receiving unemployment benefits and its anti-fraud controls froze the accounts for tens of thousands of individuals.
- Making matters worse, the bank purportedly did not provide consistent and accurate instructions to individuals whose accounts had been frozen about how to unfreeze them, leaving consumers unable to access their funds.
- When an unauthorized transfer is reported, banks are required to provide provisional account credits in their investigations takes more than 10 days. In thousands of cases, U.S. Bank failed to provide provisional creditors because it improperly required additional written information from consumers.
- The bank was found by the CFPB to have violated the Consumer Financial Protection Act and the Electronic Funds Transfer Act and found by the OCC to have violated the Federal Trade Commission Act. Both regulators had previously taken action against Bank of America for similar violations, assessing $225 million in fines back in 2022.
The Details: The bank will pay $5.7 million back to consumers who were harmed by having their accounts frozen. It will also pay a $15 million fine to the CFPB and a $15 million fine to the OCC.
What U.S. Bank Said: In acknowledging the challenges that it faced during “unprecedented times,” the bank took the opportunity to point out how much fraud it uncovered during the pandemic.
“While a small portion of cardholders were affected due to extended holds, we prevented fraud of over $375 million and returned to the states hundreds of millions in additional funds sent to questionable accounts,” it said in a statement.
