U.S. Bank has committed to a combined settlement of nearly $36m in separate agreements with both the Consumer Financial Protection Bureau (CFPB) and the Treasury Department’s Office of the Comptroller of the Currency (OCC).
The settlements arise from allegations that the bank hindered consumers’ ability to access their unemployment benefits amidst the challenges posed by the Covid-19 pandemic.
CFPB has ordered U.S. Bank, a wholly owned subsidiary of U.S. Bancorp, to pay $5.7m to consumers harmed by its actions and pay a penalty of $15m.
OCC has imposed a $15m civil money penalty against U.S. Bank for violations of law relating to the bank’s administration of a prepaid card programme designed for the distribution of public unemployment insurance benefit payments.
In the early stages of the Covid-19 pandemic in 2020, U.S. Bank held contracts with a minimum of 19 states and the District of Columbia to facilitate the distribution of unemployment benefits.
Several individuals, who had recently lost their jobs, depended on the delivery of these benefits through U.S. Bank’s ReliaCard prepaid card.
However, a substantial number of these individuals encountered prolonged freezes on their accounts, lasting for weeks or even longer.
To resolve these freezes, consumers were required to undergo identity verification, but U.S. Bank lacked a satisfactory mechanism for them to do so.
Additionally, a significant portion of affected consumers reported that U.S. Bank failed to provide provisional account credits after unauthorised transfers were reported from their accounts.
CFPB director Rohit Chopra said: “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.
“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 must comply with the law, and the CFPB and OCC are making the bank pay for its conduct.”
In July last year, the bank was fined $37.5m by CFPB for illegally accessing and exploiting its customers’ personal data to sell its products.
