U.S. Bancorp Fined $36 Million for Frozen Unemployment Accounts

U.S. Bancorpwill pay $36 million to settle regulators’ claims that it improperly kept unemployed Americans from easily accessing benefits through assistance programs at the peak of the Covid-19 pandemic.

The Consumer Financial Protection Bureau said Tuesday that fraud concerns prompted the lender in 2020 to freeze tens of thousands of benefit accounts that it was contracted to fill with government unemployment funds. However, the bank lacked a clear process for people whose accounts had been frozen to prove their identities and use the prepaid assistance cards, according to the watchdog.

U.S. Bank, as the firm’s bank subsidiary is known, will pay around $21 million to settle the CFPB case, with $5.7 million going to impacted consumers and $15 million as a penalty. Separately, the Office of the Comptroller of the Currency said U.S. Bank violated its rules and would pay a $15 million penalty. The firm didn’t admit or deny the allegations in either settlement.

Rohit Chopra, director of the Consumer Financial Protection Bureau

Photographer: Ting Shen/Bloomberg

“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,” 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.”

According to the CFPB, U.S. Bank had been contracted by more than a dozen states to distribute unemployment benefits. The assistance was to be delivered through the firm’s ReliaCard prepaid cards, the regulator said.

In a statement, U.S. Bank said that its interventions had prevented more than $375 million in fraud. “This saved taxpayers from significant losses during challenging times,” the bank said. “The Bank is proud of the enhancements it has made to the ReliaCard program since the inception of the pandemic. We remain committed to serving our state agency clients and their customers.”

To contact the reporter on this story:
Paige Smith in New York at psmith494@bloomberg.net

To contact the editors responsible for this story:
Sally Bakewell at sbakewell1@bloomberg.net

Ben Bain

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