Bank fined $225 million after blocking Iowans access to jobless benefits during pandemic

By: - July 20, 2022 11:18 am

Bank of America is being fined $225 million for freezing the unemployment benefits of thousands of jobless individuals in Iowa and other states. (Photo by krisanapong detraphiphat/Getty Images)

Federal regulators are fining Bank of America $225 million for freezing the unemployment benefits of thousands of jobless individuals in Iowa and 11 other states during the pandemic.

The bank is facing a $100 million penalty from the Consumer Financial Protection Bureau and a fine of $125 million from the Office of the Comptroller of Currency.

The two agencies have determined that Bank of America — which was hired by Iowa and 11 other states to provide unemployment benefits on prepaid debit cards — froze people’s accounts with an automated fraud detection program “and then gave them little recourse when there was, in fact, no fraud,” according to a press release announcing the penalties.

Jesse Dougherty, spokesperson for Iowa Workforce Development, said the agency contracted with Bank of America for the use of debit cards to distribute unemployment benefits to Iowans from 2015 until January 2021.

During the pandemic, Dougherty said, IWD “learned of some instances” where the accounts containing Iowans’ unemployment benefits had been frozen by the bank and so the agency worked with those individuals to “resolve whatever issue” they had.

“As far as we know, we were able to resolve any issues claimants had with Bank of America,” Dougherty said.

Dougherty was not able to say how many Iowans’ accounts were frozen by the bank or how much of their money was rendered inaccessible. “It doesn’t appear there’s a way to give you an accurate estimate for that,” Dougherty said, noting that some Iowans may have contacted Bank of America about the issue without any involvement by IWD.

The Consumer Financial Protection Bureau has reported that 100,000 debit cardholders nationwide lost access to their benefits. Bank of America must now pay back the money it “wrongly denied to consumers across the country,” the bureau said, adding that those payments are expected to run into the hundreds of millions of dollars.

The bureau has highlighted Bank of America’s actions in California, where regulators say the bank made it difficult for people to access their money or report fraudulent behavior. The bank allegedly boasted of 24-7 customer service, but its call center actually operated on a limited schedule and directed consumers to overwhelmed labor officials at state agencies.

Bank of America should have known after meeting with California labor officials in the summer of 2020 that “it was essentially redirecting people into a black hole,” the bureau said in a press release.

“Taxpayers relied on banks to distribute needed funds to families and small businesses to rescue the economy from collapse when the pandemic hit,” said bureau director Rohit Chopra. “Bank of America failed to live up to its legal obligations. And when it got overwhelmed, instead of stepping up, it stepped back.”

The bank has been previously sanctioned by federal regulators. In 2014, the Consumer Financial Protection Bureau fined the bank $727 million over illegal credit card practices, and in May it imposed a $10 million civil penalty against the bank for unlawful garnishments.

In addition to Iowa and California, the states impacted by Bank of America’s debit-card practices are Arizona, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Nevada, New Jersey, North Carolina and South Carolina.

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Clark Kauffman
Clark Kauffman

Deputy Editor Clark Kauffman has worked during the past 30 years as both an investigative reporter and editorial writer at two of Iowa’s largest newspapers, the Des Moines Register and the Quad-City Times. He has won numerous state and national awards for reporting and editorial writing. His 2004 series on prosecutorial misconduct in Iowa was named a finalist for the Pulitzer Prize for Investigative Reporting. From October 2018 through November 2019, Kauffman was an assistant ombudsman for the Iowa Office of Ombudsman, an agency that investigates citizens’ complaints of wrongdoing within state and local government agencies.