Bank of America has been hit with a massive $225 million fine by federal regulators after mishandling the disbursement of unemployment benefits and other government money during the peak of the pandemic.
The Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau has also ordered the bank to reimburse customers who were unlawfully refused access to unemployment benefits.
These customers will be able to have their cases assessed individually and get further compensation.
For many years, Bank of America has worked with states to administer unemployment benefits via prepaid cards.
The sum of unemployment benefits provided through the bank’s prepaid cards scheme increased to $27 billion in the early months of the pandemic in July 2020, up from $1 billion in January of that year.
However, fraud has also increased.
The authorities said the bank put filters in place to detect fraud, blocking the accounts of thousands of unemployed Americans.
The Acting Comptroller of the Currency Michael J. Hsu said: “Banks must pay attention to the financial health of their customers and conduct their activities in accordance with all consumer protection laws.”
Bank of America used to disburse unemployment benefits on behalf of 12 states, but it has now left the business in all except California.
The bank stated that it assisted in the distribution of more than $250 million in unemployment compensation to 14 million Americans.
It added that the state and federal officials agreed that the quick increase of unemployment benefits in the early months of the pandemic resulted in a flood of bogus claims.
The bank said: “Bank of America partnered with our state clients to identify and fight fraud throughout the pandemic.”
“For example, we worked with California to identify hundreds of thousands of suspicious cards and assisted the state in protecting billions of dollars.”
Bank of America assisted California’s Employment Development Division, or EDD, in delivering benefits to more than eight million Americans in 2020 alone.
Fraud might have cost it up to $10.4 billion of the nearly $111 billion it paid out between March and December 2020.
Source: The Wall Street Journal