Federal regulators fine Bank of America USD 225 mln

The Consumer Financial Protection Bureau (CFPB) fined the firm USD 100 million and, in a separate order, the Office of the Comptroller of the Currency is fining the bank USD 125 million. The order requires Bank of America to engage in a process that will provide restitution for consumers whose accounts were frozen over a faulty fraud detection program.

Bank of America had contracts with about 12 state agencies to deliver unemployment and benefit payments through prepaid debit cards. It now has just one, California, which recently extended the relationship. When the pandemic hit and the unemployment rate surged in 2020, these cards were the target of a great deal of fraud.

Through an investigation, CNBC found that states like California and Nevada saw an outsized share of so-called transaction fraud during the pandemic because, with few exceptions, their unemployment insurance was distributed through debit cards without chips, meaning there was a lower level of security. Prepaid government cards typically lack chips because they can be more expensive to produce.