Those who have had their unemployment benefits deposited in their bank accounts might be interested to learn about the recent wrongful termination case against Bank of America. The lawsuit was filed by Yick and focuses on unauthorized transactions in his bank account. The company’s internal processes for reporting and investigating are also discussed.
Pick v. Bank of America
Hundreds of thousands of Californians are suing Bank of America for allegedly failing to protect their unemployment benefit accounts from fraudsters. Plaintiffs allege that Bank of America failed to secure debit cards with chip technology, that they failed to reimburse victims for fraudulent transactions, and that they have violated the Electronic Funds Transfer Act.
The complaint raised several issues, including that the bank’s claim fraud filter incorrectly identifies legitimate UI cardholders as criminals. That the bank did not adequately investigate complaints of unauthorized transactions, that private account information was not protected, and that Bank of America’s customer service was inefficient.
The complaint is based on the facts that the Employment Development Department (“EDD”) contracted with Bank of America NA to electronically pay out unemployment benefits through prepaid debit cards. The bank has been a contractor with the state since 2010.
According to the complaint, Bank of America NA failed to secure the EDD debit cards with chip technology, it failed to investigate unauthorized transactions, and it failed to reimburse victims for fraudulent transactions.
Maryland’s DETR is working toward introducing a direct deposit
Having a Bank of America debit card is not the same as receiving a direct deposit. For starters, you’ll be instructed to withdraw funds, and you’ll have to fill out a BEACON 2.0 portal to qualify for benefits.
However, the best way to receive a direct deposit is to enroll in the program, and Bank of America is on the ball. The Maryland Department of Employment and Training (DETR) is on a mission to convert all state employees and residents to the new electronic payment system and expects to implement it by April 2021. Until then, the Department will be sending out about 175 paper checks per week. It’s unclear how much money will be involved, but a department spokesperson estimated that about a quarter of a million dollars will be spent on the switchover and that the switch is likely to be funded in part by the Maryland Treasury.
Prepaid cards would be faster and more efficient for the unemployed
During the Great Recession, California was awash in jobless benefits, averaging a staggering 12.1% unemployment. One might be hard-pressed to find a single unemployed Californian who had a checking account. In fact, 8.4 million households lacked a checking or savings account.
For many of these people, the prepaid debit card was the only option. In addition to being the fastest way to receive unemployment insurance payments, a prepaid debit card can be used to purchase goods and services in a number of different ways. This includes in-store purchases, in-app purchases, and online purchases.
While a prepaid debit card is no doubt the fastest and cheapest way to receive unemployment benefits, banks are still acting as middlemen in the transaction. This includes the fee-for-service and other small fees. These fees can add up to a significant amount of missed opportunities to stimulate the economy.
Nick’s account fell victim to unauthorized transactions
Pick, who lost her job in the COVID-19 pandemic, received unemployment benefits through the California Employment Development Department. The company promised to protect EDD cardholders from fraudulent transactions. It also guaranteed low fees and favorable terms to its customers. However, Yick’s account fell victim to numerous unauthorized transactions. She says the bank isn’t doing enough to keep criminals from gaining access to her account.
Pick has filed a class action lawsuit against the nation’s largest bank on behalf of hundreds of thousands of proposed class members. She is alleging that the bank’s security measures were insufficient to protect EDD cardholders from a “massive security breach” that resulted in millions of dollars in unauthorized transactions.
In fact, Bank of America refunded $56.1 million in fraud claims – less than half of the total dollar value of the claims. The company has also promised to improve its customer service and provide preliminary relief to the class. It is unclear whether the company will follow through on its promises.
Bank of America’s internal processes for reporting and investigating
Until recently, Bank of America’s internal processes for reporting and investigating unemployment insurance claims did not allow victims of fraud to report suspicious transactions in person. This led to thousands of legitimate cardholders being harmed. In addition, Bank of America failed to adequately manage its risk and internal controls.
The Consumer Financial Protection Bureau (CFPB) launched an investigation into the U.S. and issued an enforcement order against the bank. The order requires the bank to redress any harm to consumers and improve its enterprise-wide complaints risk management. The bank must also make hundreds of millions of dollars in redress available to affected consumers. This includes a lump sum compensatory payment and compensation for financial harm. The methodology for determining the amount of redress will be determined by a review of the methodology of the harm.
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