Today the Consumer Financial Protection Bureau (CFPB) sued Comerica Bank for systematically failing its 3.4 million Direct Express cardholders – primarily unbanked Americans receiving federal benefits. The bank deliberately disconnected 24 million customer service calls, impeding cardholders from exercising their rights under the law, charged illegal ATM fees to over 1 million cardholders, and mishandled fraud complaints while providing federal benefits through the Direct Express prepaid debit card program. The CFPB is asking the court to order Comerica to halt these practices, provide refunds to affected customers, and pay civil penalties that would go to the CFPB’s victim relief fund.
“The CFPB is suing Comerica Bank for illegally harming disabled and older Americans who count on Social Security and other federal benefits,” said CFPB Director Rohit Chopra. “By deliberately disconnecting millions of calls and harvesting illegal junk fees, Comerica boosted its bottom line at the expense of Americans living on a fixed income.”
Comerica Bank is a subsidiary of Comerica Inc. (NYSE: CMA), a publicly traded financial services company that is among the 25 largest bank holding companies in the United States. Comerica is incorporated in Delaware and headquartered in Texas. At the end of 2022, Comerica reported total assets of more than $84 billion and total deposits of more than $71 billion. Since 2008, the Department of Treasury has contracted with Comerica Bank to administer the Direct Express program, which allows federal beneficiaries to receive their monthly benefits payments through prepaid debit cards. Direct Express currently serves roughly 3.4 million Americans.
While recipients of Social Security and other federal benefits often receive funds to the account of their choice, millions of senior citizens, disabled Americans, and other beneficiaries receive them through the Direct Express program. Direct Express is a prepaid card that beneficiaries can use to pay for groceries, gas, and other expenses. Since 2008, the Department of the Treasury has contracted with Comerica Bank to administer the prepaid card program. Comerica is in charge of customer service for the millions of Americans using Direct Express, many of whom are unbanked.
Direct Express customers are captive to Comerica. Rather than making sure that there was sufficient customer service to handle calls from Social Security and other benefits recipients, Comerica cut corners to boost its bottom line. When people had problems with their accounts, it was often impossible to talk to someone who would help. The CFPB’s investigation found that Comerica failed to ensure sufficient staff and even intentionally disconnected more than 24 million calls.
Specifically, the CFPB alleges that Comerica harmed its customers by:
- Deliberately disconnecting customer service calls: Comerica’s vendors intentionally dropped more than 24 million calls from customers before they could reach a representative. Customers whose calls were not dropped were routinely forced to endure excessively long wait times—often in excess of several hours—to speak with a representative to get help with unauthorized transactions, charge disputes, and lost or stolen cards.
- Charging consumers illegal ATM fees: Over one million Direct Express cardholders were charged ATM fees to access their government benefits in situations where they were legally entitled to free withdrawals.
- Misleading fraud victims: When consumers contacted Comerica alleging they had been fraudulently enrolled into the Direct Express program, the bank’s vendors frequently advised the consumers that “no error occurred” where the bank had determined that there was, in fact, enrollment fraud.
- Imposing illegal terms of service on consumers seeking to stop payments: Comerica led its consumers to agree to waive their consumer protections by requiring cardholders to contact and request merchants to stop pre-authorized payment transfers from their account in situations where the law in fact required the bank to stop the transfers itself.
- Failing to investigate account problems: Under federal law, when a customer notifies a bank about an incorrect or potentially fraudulent charge on their account, the bank must take steps to investigate the error within a specified time period. The CFPB’s investigation found that Comerica failed to meet this requirement more than 20,000 times. And when they did investigate, they frequently provided vague and confusing findings or blew off customers altogether.
- Forcing consumers to close accounts, which often resulted in additional fees: The bank’s vendors required thousands of cardholders to close their accounts to stop a preauthorized payment, resulting in consumers incurring additional fees to expedite receipt of their new debit cards to regain access to their government benefits.
Enforcement Action
Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions violating consumer financial protection laws, including engaging in unfair, deceptive, or abusive acts and practices.
The CFPB’s lawsuit seeks to stop Comerica’s unlawful conduct, to provide redress for harmed borrowers, and the imposition of a civil money penalty, which would be paid into the CFPB’s victims relief fund.
