In addition to publishing some recent advisory opinions, the Consumer Financial Protection Bureau (CFBP) has been busy cooking up some enforcement actions (EA). Here are two notable EAs that have come out recently.
Bank of America Consent Order
On July 14, 2022, the CFPB announced a consent order with Bank of America (B of A) for UDAAP and Regulation E violations. Bank of America had contracted to provide state-issued unemployment benefits to benefit recipients via prepaid cards. Regulation E requires prepaid government benefit cards to follow the error resolution process under section 1005.11. However, during the unemployment benefit surge brought on by the pandemic, Bank of America failed to conduct “reasonable investigations” as required by Reg E, and instead tried to weed out fraud by setting up a “a fraud filter with a simple set of flags that automatically triggered an account freeze” when fraud was suspected. The bureau alleged that this resulted in “thousands of legitimate cardholders” have their accounts frozen due to false-positives in the fraud filter, which meant those cardholders could not access their unemployment benefits. The bureau also alleged that B of A made it difficult for cardholders to unfreeze their prepaid cards or report fraudulent use of their cards, and also referred consumers to the California state unemployment department, which the CFPB says B of A knew was overwhelmed.
The violations, as outlined in the consent order, include:
- B of A engaged in unfair acts or practices by determining no error had occurred and freezing cardholder accounts based solely on the results of its automated Fraud Filter;
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