The Consumer Financial Protection Bureau (CFPB) has ordered U.S. Bank to pay nearly $21 million after it prevented out-of-work consumers from accessing their unemployment benefits during the COVID-19 pandemic peak. The bank froze tens of thousands of accounts without providing a reliable and quick way for individuals to regain access. 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 who suffered due to its actions, along with a $15 million penalty. Additionally, the Office of the Comptroller of the Currency (OCC) has imposed a separate fine of $15 million on U.S. Bank. Both the CFPB and OCC worked in cooperation during their investigations into U.S. Bank’s illegal conduct.
U.S. Bank, a wholly-owned subsidiary of U.S. Bancorp (NYSE: USB), is based in Minneapolis and is the fifth-largest commercial bank in the country. As of September 30, 2023, U.S. Bank had $668 billion in assets.
During the initial phase 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 bank’s ReliaCard prepaid card was used by millions of newly unemployed consumers to receive their benefits. However, tens of thousands of these consumers found their accounts frozen for weeks or more at a time.
The bank required consumers to verify their identities to unfreeze their accounts, but it lacked an adequate mechanism for them to do so. Moreover, U.S. Bank failed to provide provisional account credits to several consumers who reported unauthorized transfers from their accounts.
The CFPB found that U.S. Bank violated the Consumer Financial Protection Act and the Electronic Fund Transfer Act. Specifically, the bank withheld access to state benefits and provisional account credits, causing significant harm to consumers.
Under the CFPB order, U.S. Bank is required to pay $5.7 million to consumers affected by the bank’s administrative failures. It also mandates U.S. Bank to provide consumers access to their unemployment funds and issue provisional account credits. The bank is further required to pay a $15 million penalty to the CFPB’s victims relief fund.
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