Federal regulators fined Bank of America (NYSE:BAC) $225 million for “botching the disbursement of state unemployment benefits at the height of the pandemic,” according to media reports.
The Consumer Financial Protection Bureau fined the firm $100 million and, in a separate order, the Office of the Comptroller of the Currency is fining the bank $125 million.
The order requires Bank of America to engage in a process that will provide restitution for consumers whose accounts were frozen over what the CFPB called a “faulty fraud detection program.”
Both fines were announced on Thursday.
“The bank failed these prepaid cardholders by denying them access to their mandated unemployment funds during the height of the pandemic, and leaving these vulnerable consumers without an effective way to remedy the situation,” said Acting Comptroller of the Currency Michael Hsu.
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.
The bank said that, “the states were responsible for reviewing and approving applications and directing [BofA] to issue payments.”
As such, Bank of America said it helped the government to “successfully issue more than $250 billion in pandemic unemployment benefits to more than 14 million people and overall distributed more pandemic relief to Americans than any other bank.”
BAC opened Friday up 76 cents, or 2.4%, to $30.84.