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One of the largest banks in the nation is in trouble with the federal government over its conduct with consumers during the height of the Covid-19 pandemic.
On Tuesday, the Consumer Financial Protection Bureau (CFPB) ordered Minneapolis-based U.S. Bank to pay $21 million in fines for violation of the Consumer Financial Protection Act and the Electronic Fund Transfer Act. Of this, $5.7 million of the fines will go directly to consumers harmed by the bank’s actions, with an additional $15 million penalty that will go to the CFPB’s victims relief fund.
According to the CFPB, the bank kept out-of-work consumers from accessing unemployment benefits during the peak of the pandemic and failed to provide provisional account credits during investigations into potentially unauthorized transfers. In addition to the fine, the bank must also implement adequate processes to help affected consumers regain access to their unemployment funds, as well as ensure consumers with frozen accounts are provided provisional account credits until the issue is resolved.
“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 a statement. “U.S. Bank blocked access to accounts and demanded burdensome paperwork in order for consumers to regain access to their frozen benefits.”
U.S. Bank is the fifth largest commercial bank in the country, with over $668 billion in assets, according to the CFPB. In 2020, it had contracts with 19 states and Washington, D.C., to deliver unemployment benefits through its ReliaCard prepaid debit card program. Of the millions of consumers who relied on ReliaCard for unemployment benefits, tens of thousands experienced frozen accounts for weeks at a time, with no good way of unfreezing them due to a lack of ability to verify their identity, CFPB said.
Many impacted customers were also not provided any provisional account credits while their accounts were frozen.
U.S. Bank spokesman Lee Henderson noted in an email to TCB that the ReliaCard debit cards grew nearly 4,000% during the pandemic, which posed new challenges for the bank’s unemployment benefits program.
“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,” Henderson said. “The Bank is proud of the enhancements it has made to the ReliaCard program since the inception of the pandemic.”
