CFPB and OCC Order US Bank To Pay $36M

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CFPB and OCC Order US Bank To Pay $36M
The seal of the Consumer Financial Protection Bureau (CFPB) is seen at their headquarters in Washington, D.C., U.S., May 14, 2021. REUTERS/Andrew Kelly/File Photo

In a shocking development, U.S. Bank faces a hefty $36 million penalty imposed by the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC) for allegedly freezing tens of thousands of accounts during the pandemic. The regulatory bodies assert that the bank‘s actions, which hindered customers from receiving crucial unemployment benefits, have triggered a cascade of penalties and restitution.

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CFPB and OCC Order US Bank To Pay $36M : CFPB and OCC Unleash Penalties

The CFPB and OCC issued a joint announcement on Tuesday, revealing that U.S. Bank has consented to paying a staggering $15 million penalty to the CFPB and an additional $15 million fine imposed by the OCC. Moreover, the bank is required to disburse $5.7 million to customers who suffered due to its actions.

Frozen in Crisis: Allegations Unveiled

According to the CFPB, Minneapolis-based U.S. Bank faced severe allegations of failing to offer a swift and reliable means for customers to regain access to their frozen accounts amid the height of the COVID-19 pandemic. Shockingly, the bank allegedly neglected to provide provisional account credits to customers affected by unauthorized transfers, leaving them stranded without access to essential funds.

CFPB and OCC Order US Bank To Pay $36M : Chopra’s Condemnation

CFPB Director Rohit Chopra condemned U.S. Bank’s actions, emphasizing the dire consequences during a period when unemployment soared. “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,” said Chopra, adding that the bank’s demands for burdensome paperwork exacerbated the plight of consumers.

CFPB and OCC Order US Bank To Pay $36M : Contracts and Catastrophe

The CFPB disclosed that U.S. Bank held contracts with at least 19 states and Washington, D.C., to distribute unemployment benefits through its ReliaCard prepaid card. However, the bank allegedly froze accounts of tens of thousands of customers due to expanded anti-fraud controls, leaving them in limbo for extended periods.

Violations and Regulatory Wrath

The CFPB contended that U.S. Bank violated the Consumer Financial Protection Act and the Electronic Fund Transfer Act, while the OCC accused the bank of engaging in unfair practices under the Federal Trade Commission Act. This dual violation triggered an intense regulatory response, leading to the hefty penalties.

CFPB and OCC Order US Bank To Pay $36M : Guardrails and Mandates

In addition to the monetary fines, the CFPB’s consent order establishes limitations on how U.S. Bank can restrict customer access to unemployment benefit account funds. The order also mandates that customers submitting error notices online are not required to provide additional written confirmation to receive provisional account credits.

U.S. Bank’s Defense

U.S. Bank responded to the allegations, stating that the pandemic presented unprecedented challenges to its ReliaCard program, which experienced a staggering 4,000% growth. The bank argued that it prevented over $375 million in fraud and returned millions to states, attributing the account freezes to extended holds.

Past Troubles and Ongoing Changes

This is not the first time U.S. Bank has faced regulatory heat. Last year, the CFPB fined the bank $37.5 million over allegations of unauthorized accounts. U.S. Bank claims to have enhanced its ReliaCard program since the pandemic began.

CFPB and OCC Order US Bank To Pay $36M : Conclusion

As the CFPB case unfolds, the financial giant finds itself in the midst of legal turmoil once again. The shocking revelations and the massive penalty serve as a stark reminder of the far-reaching consequences for financial institutions neglecting their duty during times of crisis.