US Bank has agreed to a combined settlement of nearly $36m in separate agreements with both the Consumer Financial Protection Bureau (CFPB) and the Treasury Department’s Office of the Comptroller of the Currency (OCC).

US Bank, a wholly owned subsidiary of US Bancorp and the fifth-largest commercial bank in the US, will pay $5.7m to consumers harmed by its actions and a penalty of $15m as required under the CFPB’s order.

And, as per the OCC’s order, it will pay a $15m civil money penalty for violations of bank law relating to its administration of a prepaid card program designed for the distribution of public unemployment insurance benefit payments.

Unemployment benefits

Both settlements arise from allegations that the bank hindered consumers’ ability to access their unemployment benefits amidst the challenges posed by the Covid-19 pandemic.

In the early stages of the Covid-19 pandemic in 2020, US Bank held contracts with a minimum of 19 states and the District of Columbia to facilitate the distribution of unemployment benefits. These benefits were delivered through US Bank’s ReliaCard prepaid card.

“At a time when unemployment was close to 15%, many out-of-work Americans throughout the country had little choice but to rely on US Bank for their unemployment benefits.”

Rohit Chopra, Director, CFPB

A substantial number of individuals encountered prolonged freezes on their accounts, lasting for weeks or even longer, the CFPB and OCC alleged. To resolve these freezes, consumers were required to undergo identity verification, but US Bank lacked a satisfactory mechanism for them to do so, the agencies said.

Additionally, a significant portion of affected consumers reported that the bank failed to provide provisional account credits after unauthorized transfers were reported from their accounts.

“At a time when unemployment was close to 15%, many out-of-work Americans throughout the country had little choice but to rely on US Bank for their unemployment benefits,” CFPB Director Rohit Chopra said. “US Bank blocked access to accounts and demanded burdensome paperwork in order for consumers to regain access to their frozen benefits. US Bank must comply with the law, and the CFPB and OCC are making the bank pay for its conduct,” Chopra said.

Bank of America

Last July, the CFPB fined Bank of America (BofA) $100m for botching the disbursement of state unemployment benefits at the height of the pandemic, saying the bank engaged in unfair and abusive acts and practices.

The CFPB said BofA automatically and unlawfully froze people’s accounts with a faulty fraud detection program, and then gave them little recourse when there was, in fact, no fraud. The agency’s order required BofA to “undertake a process that is estimated to result in hundreds of millions of dollars in redress to consumers”.

In a separate order, the OCC fined the bank $125m for its violations of banking laws.

Last July, the CFPB said US Bank pressured its employees to meet sales goals as part of their job requirements, offering them incentives for selling bank products, the regulator said. To meet those goals, the bank’s employees illegally accessed customer credit reports and personal data to open accounts without permission, the agency’s investigation found. The CFPB fined the bank $37.5m after a five-year investigation.