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U.S. Bank fined $30M for illegal conduct during pandemic

Cincinnati, OH
Fine Amount: 
$30 million plus consumer redress of $5.7M
Penalty Type: 
Issued by: 

The CFPB issued a stipulated consent order against U.S. Bank National Association after reviewing the bank's administration of unemployment insurance benefit prepaid debit cards, and finding the following violations of law:

  • U.S. Bank engaged in unfair acts or practices by failing to provide unemployment insurance benefit cardholders with adequate means to verify their identities and timely regain access to their government benefits, in violation of Sections 1031 and 1036 of the Consumer Financial Protection Act (CFPA), 12 U.S.C. §§ 5531(a) and (c), 5536(a)(1)(B); and
  • U.S. Bank failed to timely investigate and resolve unemployment insurance benefit cardholders’ notices of error concerning alleged unauthorized electronic fund transfers, in violation of EFTA, 15 U.S.C. § 1693f(a), (c), and Section 1005.11(b)(2), (c)(2) of Regulation E.

Details of the Bureau's finding can be found in the Consent Order, linked above. In summary (from the OCC's order (see below)):

  • U.S. Bank had contracts with at least 19 states to issue and administer prepaid debit cards to distribute unemployment insurance benefits to recipients in its ReliaCard UI Program.
  • In March 2020, millions became unemployed and Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (CARES ACT), which created the new Pandemic Unemployment Assistance (PUA) benefit. The CARES Act and PUA expanded unemployment benefits eligibility and provided greater benefit amounts than previously available. As a result, the number of participants in the ReliaCard UI Program increased substantially, as did the volume of benefits issued by the states and distributed by the Bank. The Program also experienced an exponential increase in fraud.
  • In response to rising rates of fraud in the ReliaCard UI Program, the Bank increased fraud prevention measures in late August 2020, resulting in account freezes, which denied certain legitimate consumers access to the benefits loaded on prepaid cards until those consumers could validate their identities with the Bank.
  • Deficiencies in the Bank’s unfreeze process from August 2020 through at least March 2021 impeded many consumers’ ability to authenticate their identity and regain access to their unemployment benefits through their ReliaCard UI accounts in a reasonable timeframe, typically taking weeks and sometimes even months.
  • The deficiencies included instances where the Bank failed to timely notify consumers of the freezes to their accounts; the Bank’s call center representatives provided consumers with unclear, inconsistent, or inaccurate guidance on the unfreeze process; and the Bank’s process to unfreeze accounts resulted in errors and long delays.

The OCC also issued a consent order to U.S. Bank National Association to pay a civil money penalty of $15M, for the same conduct described in the CFPB order. The OCC found the bank's actions to be unfair practices under Section 5 of the Federal Trade Commission Act.

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