Fred Prouser/Reuters
- U.S. Bank has been fined $35.7 million for preventing some customers from accessing unemployment funds during the pandemic.
- The CFPB said it froze tens of thousands of accounts and made it hard for customers to regain access.
- The bank also failed to provide provisional account credits to some customers who reported unauthorized transfers, the CFPB said.
U.S. Bank has been fined $35.7 million by two different federal regulators for freezing some customers' access to unemployment benefits during the pandemic.
U.S. Bank had contracts with at least 19 states and the District of Columbia to deliver unemployment benefits to millions of Americans through its ReliaCard prepaid card, the Consumer Financial Protection Bureau (CFPB) said.
But the bank "froze tens of thousands of accounts" after it expanded anti-fraud controls and didn't provide a reliable and quick way for customers to prove their identities and regain access to their unemployment funds, the CFPB said.
For freezes U.S. Bank imposed between August and November 2020, it took on average a month or longer for consumers to unfreeze their ReliaCard accounts, the regulator noted.
"Many out-of-work Americans throughout the country had little choice but to rely on U.S. Bank for their unemployment benefits," CFPB Director Rohit Chopra said in a statement. "U.S. Bank blocked access to accounts and demanded burdensome paperwork in order for consumers to regain access to their frozen benefits."
Meanwhile, thousands of other customers found that U.S. Bank failed to provide provisional account credits after they reported unauthorized transfers, the CFPB said.
Banks have to provide provisional account credits if their investigations take more than 10 days, but U.S. Bank failed to do so "in thousands of cases" because it improperly required customers to first provide additional written confirmation about the suspected unauthorized transfers, the CFPB said.
U.S. Bank violated the Consumer Financial Protection Act and the Electronic Fund Transfer Act, the CFPB said. The CFPB ordered U.S. Bank to pay $5.7 million to affected consumers whose ReliaCard accounts were frozen, as well as a $15 million penalty.
The Office of the Comptroller of the Currency also ordered U.S. Bank to pay a $15 million civil money penalty, which it said would be paid to the US Treasury and was coordinated with but separate from the CFPB's order.
The bank did not admit or deny any wrongdoing, the CFPB said.
Business Insider has contacted U.S. Bank for comment. A spokesperson for the bank told CNBC that a small portion of cardholders were affected due to extended holds, but that it had prevented more than $375 million of fraud and also returned hundreds of millions sent to questionable accounts to the states. The bank has also since improved its ReliaCard program, the spokesperson said.
The CFPB said that U.S. Bank, based in Minneapolis, Minnesota, is the US' fifth largest commercial bank.
Last year, the CFPB fined U.S. Bank $37.5 million for allegedly pressuring employees to meet sales goals by opening fraudulent checking and savings accounts, credit cards, and lines of credit without customers' permission.