U.S. Bank (NYSE:USB) has been fined about $21 million by the federal government for cutting off access to unemployment insurance benefits during the height of the COVID-19 pandemic. The initial fine was imposed by the Consumer Financial Protection Bureau, and the Office of the Comptroller of the Currency imposed an additional $15-million penalty on the bank over the same practices.
Said a CFPB official, “U.S. Bank blocked access to accounts and demanded burdensome paperwork in order for consumers to regain access to their frozen benefits.”
The fifth-largest commercial bank in the country, U.S. Bank administered prepaid debit cards to distribute unemployment insurance benefits through its ReliaCard program.
But starting in the summer of 2020, when unemployment rose close to 15%, the bank froze tens of thousands of accounts due to suspected fraud. It then failed to provide a reliable method for consumers with frozen cards to regain access to their benefit money, the CFPB said.
As part of the settlement, the bank did not admit or deny wrongdoing.
Between March 2020 and July 2021, states issued $794 billion in combined state and federal unemployment benefits.
Users who had their accounts frozen between August 2020 and March 2021 waited an average of a few weeks to a month or more to regain access to benefits because U.S. Bank did not provide an easy method to verify identities.
USB shares fell 44 cents, or 1%, to $43.77.
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