WASHINGTON–The Consumer Financial Protection Bureau (CFPB) has ordered U.S. Bank to pay nearly $21 million for keeping out-of-work consumers from accessing unemployment benefits at the height of the COVID-19 pandemic.
According to the CFPB, U.S. Bank froze tens of thousands of accounts.
“However, it failed to provide people a reliable and quick way to regain access,” the CFPB stated. “The bank also failed to provide provisional account credits, while investigating potentially unauthorized transfers.”
The order requires U.S. Bank to pay $5.7 million to consumers harmed by its actions and to pay a $15 million penalty.
The CFPB said the Office of the Comptroller of the Currency (OCC) separately fined U.S. Bank $15 million, with the two agencies coordinating during their investigations into U.S. Bank’s illegal conduct.
U.S. Bank is a wholly-owned subsidiary of U.S. Bancorp in Minneapolis, and is the fifth-largest commercial bank in the country, with 2,000 branches in 26 states. As of Sept. 30, 2023, U.S. Bank had $668 billion in assets.
Contracts in 19 States
“At the onset of the COVID-19 pandemic in 2020, U.S. Bank had contracts with at least 19 states and the District of Columbia to deliver unemployment benefits,” the CFPB sated. “Millions of newly out-of-work consumers relied on the unemployment benefits delivered through U.S. Bank’s ReliaCard prepaid card. However, tens of thousands of those consumers found their accounts frozen for weeks or more at a time. Consumers had to verify their identities to unfreeze their accounts, but the bank lacked an adequate way for them to do so.
“Many of other consumers found U.S. Bank failed to provide them provisional account credits after they reported unauthorized transfers from their accounts,” the Bureau added.
Specific Harm
The CFPB said it found that U.S. Bank violated the Consumer Financial Protection Act and the Electronic Fund Transfer Act. Specifically, the bank harmed consumers by withholding:
- Access to state benefits. “Expanded anti-fraud controls, implemented by U.S. Bank, resulted in tens of thousands of frozen accounts. However, U.S. Bank did not provide consistent, accurate instructions to consumers on how to unfreeze their accounts quickly. That left consumers unable to access unemployment funds.”
- Provisional account credits. “When accountholders report unauthorized transfers, banks must provide provisional account credits if their investigations take more than 10 days. In thousands of cases, U.S. Bank failed to provide provisional credits. The bank failed to provide the credits because it improperly required additional written confirmation about the suspected unauthorized transfers from consumers. These actions left consumers unable to spend the funds they had reported as unauthorized transfers.”
Enforcement Action
The CFPB’s order requires U.S. Bank to:
- Pay $5.7 million to consumers. U.S. Bank is required to provide redress to the tens of thousands of consumers harmed by the bank’s administration failures.
- Provide consumers access to their unemployment funds. The order set guardrails on how U.S. Bank can limit consumer access to unemployment benefit account funds. The bank must have adequate processes to help consumers regain access.
- Issue provisional account credits. Consumers who submit a notice of error online will not have to submit additional, written confirmation about an unauthorized electronic transfer to receive provisional account credits.
- Pay a $15 million fine. U.S. Bank will pay a $15 million penalty to the CFPB’s victims relief fund.
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