The Bank Slate


U.S. Bank hit with $36M in fines tied to prepaid program

U.S. Bancorp in Minneapolis was ordered to pay fines to address issues with a pandemic-era prepaid card program for distributing unemployment benefits.

The Consumer Financial Protection Bureau ordered the $668 billion-asset company to pay $21 million, including a $15 million penalty and $5.7 million in restitution to consumers. The Office of the Comptroller of the Currency also ordered U.S. Bancorp to pay a $15 million civil money penalty.

The agencies pointed to the company’s decision in the summer of 2020 to introduce new and expanded freeze criteria for the prepaid cards, claiming that the decision ended the benefits for tens of thousands of eligible cardholders.

The CFPB flagged U.S. Bancorp for violating the Electronic Transfer Act for for engaging in unfair actions or practices. The OCC cited practices that violated the Federal Trade Commission Act.

“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,” CFPB Director Rohit Chopra said in a press release.

“U.S. Bank blocked access to accounts and demanded burdensome paperwork in order for consumers to regain access to their frozen benefits,” Chopra added. “U.S. Bank must comply with the law, and the CFPB and OCC are making the bank pay for its conduct.”

“The bank stepped up to enable the government to provide assistance to those in need during the pandemic and worked to identify and combat fraud,” a bank representative told American Banker. “While a small portion of cardholders were affected due to extended holds, we prevented fraud of over $375 million and returned to the states hundreds of millions in additional funds sent to questionable accounts.” 

U.S. Bancorp warned in February that it faced a potential enforcement action tied to the program. The CFPB and OCC have already fined Bank of America $225 million tied to how the Charlotte, N.C., company ran its prepaid program.

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