Dallas-based bank Comerica has been sued by the Consumer Financial Protection Bureau, which accused it of neglecting beneficiaries of the federal Direct Express program. The agency seeks refunds for affected customers, and payment of penalties into a victim relief fund.

The allegations of mismanagement arise from a 2008 contract Comerica made with the Treasury Department’s Bureau of Fiscal Services to administer federal benefits on prepaid debit cards. These benefits, which include Social Security payments, were allocated on cards for upwards of 3.4 million Americans who do not have bank accounts.  

Pattern of neglect

The lawsuit wraps up a probe launched by the Justice Department in 2021. In November of this year, Comerica launched its own lawsuit against the CFPB, alleging that that investigation was overly costly and overstepped the CFPB’s lawful authority.

According to the CFPB’s complaint, Comerica routinely interfered with beneficiaries of the Direct Express program’s access to critical services since 2019. The alleged misconduct included Comerica deliberately disconnecting customer service calls, charging illegal ATM fees, and forcing account closures that resulted in incidental fees.  

The bank was also accused of failing to investigate fraud: when Direct Express customers notified the bank about erroneous charges or fraudulent enrollment in the program, the bank failed to investigate, summarily dismissed user concerns, or provided misleading and confusing statements.  

The contract between Comerica and the Treasury contained requirements that established a maximum 10-minute wait time for customers seeking to connect with a company representative.

Instead, the CFPB’s complaint stated that customers were instead made to endure an average of one hour of wait time, and some waited for as long as two-and-a-half hours.

Outsourcing

Comerica also outsourced customer service functions to non-US vendors, in further violation of the contract, according to a report by American Banker.

Comerica’s alleged misdeeds violated the 1978 Electronic Fund Transfer Act (EFTA) and its enabling Regulation E, which protects users engaging in electronic banking. Regulation E also holds Comerica liable for any violations that may have been created by third-party service vendors.

In July, the Treasury notified Comerica that it would not renew its Direct Express contract with the bank, which was set to expire in January 2025. In November, the Treasury tapped BNY to pick up the contract, and Comerica will begin a three-year transition period before fully handing over the reins.

“By deliberately disconnecting millions of calls and harvesting illegal junk fees, Comerica boosted its bottom line at the expense of Americans living on a fixed income,” said CFPB director Rohit Chopra