U.S. Bank is being forced by two U.S. government agencies to cough up a total of $35.7 million for keeping thousands of consumers using its ReliaCard prepaid debit cards from accessing unemployment benefits during the height of the Covid pandemic.
After an investigation into the bank’s conduct, the Consumer Financial Protection Bureau found that the bank froze tens of thousands of accounts and did not provide consumers with a “reliable and quick way” to restore access, according to a Dec. 19 press release from the CFPB.
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Consumers’ accounts were frozen for at least a few weeks or more from August 2020 through March 2021, and in order to unfreeze their accounts, they had to verify their identities, but were not given an ”adequate” way to do so. Consumers also flagged that the bank did not give them provisional account credits after they reported “unauthorized transfers” from their accounts.
Consumer Financial Protection Act violation noted
The CFPB concluded that U.S. Bank violated both the Consumer Financial Protection Act and the Electronic Fund Transfer Act for freezing accounts and not providing provisional account credits.
“At a time when unemployment was close to 15%, many out-of-work Americans throughout the country had little choice but to rely on U.S. Bank for their unemployment benefits,” said CFPB Director Rohit Chopra in the press release. “U.S. Bank blocked access to accounts and demanded burdensome paperwork in order for consumers to regain access to their frozen benefits."
During the height of the Covid pandemic in April, the unemployment rate reached 14.7%, which was a level that has not been seen since the 1930s. Between March and April 2020, the country lost 22 million jobs. The industries that suffered the most job loss due to the pandemic were those that provided in-person services such as the leisure and hospitality industries.
After former President Donald Trump signed the CARES Act in March 2020, which provided pandemic unemployment programs, the federal government provided a total of $650 billion in benefits for those programs between March 2020 and September 2021.
As a result of the CFPB’s findings during its investigation, the bank is forced by the bureau to pay $5.7 million to consumers who were negatively affected by the its actions. U.S. Bank is also being hit with a $15 million penalty which will go to the CFPB’s victims relief fund.
Adjustments to how the bank provides consumers with access to unemployment funds and how it issues provisional account credits will also be made to make the processes easier for consumers.
OCC hits bank with $15 million fine
In addition, the Office of the Comptroller of the Currency, which coordinated with the CFPB during its investigation into the bank’s alleged illegal conduct, is also fining the bank $15 million for what it called "unfair practices."
In an emailed statement to TheStreet responding to the recent fines, U.S. Bank said that only a "small portion" of ReliaCard prepaid debit card holders were affected by the account freezes and also claims that it saved taxpayers money.
"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. This saved taxpayers from significant losses during challenging times," said U.S. Bank in the statement.
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