Regulators fine Bank of America $225m over automated fraud filter that froze unemployment-benefit cards

What happened?

Bank of America held contracts with 12 states, including California, to pay unemployment and other government benefits through prepaid debit cards. As claims and fraud surged during the pandemic, the bank changed how it handled cardholders' notices of error about unauthorized transfers: from 28 September 2020 it ran them only through a newly developed automated Fraud Filter and, for any notice meeting one of the filter's three indicators, "automatically determined that no error had occurred", according to the CFPB consent order.[2][4]

For notices that tripped the filter, the bank also froze the cardholder's prepaid account or, after 17 March 2021, blocked the card. The CFPB found the bank knew or should have known the filter would sometimes reach the wrong answer, quoting an internal September 2020 presentation: "Fraudulent determinations would require a detailed review of specific accounts, which given the volume, is unmanageable." Frozen cardholders went weeks, and in some cases months, without their benefits; some incurred late fees and missed bills, and some faced foreclosure, eviction or car repossession, according to the order.[2]

Between 28 September 2020 and 8 June 2021 the bank used the filter to deny approximately 188,000 notices of error nationwide without further investigation, the CFPB found. In late September or early October 2020 it also applied the filter retroactively to more than 11,000 California (EDD) notices of error it had already investigated and paid, reversing the credits; the CFPB called this an abusive practice. The CFPB's press release said the bank also left consumers on hold for hours and sent them back to an overwhelmed state agency.[1][2]

The OCC separately found unfair or deceptive practices under Section 5 of the FTC Act in the bank's failure to investigate and resolve claims of unauthorized transactions, plus deficiencies in operational processes, risk management and internal controls. Reuters, CNBC, American Banker and Banking Dive reported the $225 million total on the day the orders were announced.[4][7][8][9][10]

When did it happen?

1. Sep 28, 2020

   Bank of America starts running unemployment-card notices of error only through its new automated Fraud Filter, denying and freezing any that meet one of three indicators.[2]

2. Oct 2020

   The bank applies the filter retroactively to more than 11,000 already-paid California notices of error and reverses the credits (late September or early October 2020, per the CFPB).[2]

3. Jun 8, 2021

   The bank stops relying solely on the Fraud Filter; the CFPB counts about 188,000 notices of error denied by it since September 2020.[2]

4. Jul 14, 2022

   The CFPB ($100m penalty) and the OCC ($125m penalty) issue consent orders requiring redress and program fixes.[1][4][5]

5. Jun 11, 2026

   The OCC terminates its July 2022 consent order AA-ENF-2022-21 against Bank of America.[6]

What was the impact?

• Financial: $225 million in civil money penalties ($100m CFPB, $125m OCC), plus redress the CFPB estimated at hundreds of millions of dollars · ≈ $225 million[1][2][4]
• Customers: About 188,000 notices of error denied by the filter nationwide; tens of thousands of California EDD cardholders had accounts frozen; more than 11,000 paid credits reversed[1][2][4]
• Other: Cardholders went weeks or months without benefits; some faced late fees, missed bills, foreclosure, eviction or car repossession, per the CFPB order. The total redress actually paid has not been published in the sources reviewed.[1][2][4]

Severity 4 of 5: Rubric 4 (consent orders, many customers): two consent orders with $225m in civil money penalties, after the bank used its automated fraud filter to deny about 188,000 notices of error and froze the accounts of tens of thousands of California cardholders, per the CFPB.

How did Bank of America respond?

Bank of America neither admitted nor denied the findings. Spokesman Bill Halldin said: "Bank of America partnered with our state clients to identify and fight fraud throughout the pandemic. This action arose despite the government's own acknowledgement that the unemployment program expansion during the pandemic created unprecedented criminal activity where illegal applicants were able to get states to approve tens of billions of dollars in payments." The bank told CNBC that the states were responsible for reviewing and approving applications and that it had issued more than $250 billion in pandemic unemployment benefits to more than 14 million people.[7][8][9]

What was the outcome, and did regulators act?

Both orders required Bank of America to repay consumers wrongly denied, make lump-sum consequential-harm payments and offer an individualized review; the OCC's remediation payments also satisfy the CFPB's parallel requirement. The OCC additionally ordered corrective action on risk management, contract review and complaints handling. The OCC terminated its consent order (AA-ENF-2022-21) on 11 June 2026. As of 2026-10-21 the CFPB's action page still lists its order (2022-CFPB-0004) as "Post Order/Post Judgment", with no termination posted.[1][3][4][6]

• CFPB Consent Order against Bank of America, N.A. (Jul 14, 2022, penalty $100 million)
• OCC Consent Order against Bank of America, N.A. (Jul 14, 2022)
• OCC Consent Order + Civil Money Penalty against Bank of America, National Association (Jul 14, 2022, penalty $125 million)

1. Federal Regulators Fine Bank of America $225 Million Over Botched Disbursement of State Unemployment Benefits at Height of Pandemic official
   Consumer Financial Protection Bureau · Jul 14, 2022
   “Instead of conducting reasonable investigations, it implemented a fraud filter with a simple set of flags that automatically triggered an account freeze. This set a low bar to freeze the unemployment insurance benefits of many people, harming thousands of legitimate cardholders needing the money.”
2. Consent Order, In the Matter of Bank of America, N.A., File No. 2022-CFPB-0004 official
   Consumer Financial Protection Bureau · Jul 14, 2022
   “From September 28, 2020 to June 8, 2021, Respondent used its Fraud Filter to determine no error had occurred for approximately 188,000 notices of error submitted by Affected Consumers nationwide concerning alleged unauthorized EFTs, without any further investigation or considering any other information relevant to Affected Consumers' notices.”
3. Enforcement action: Bank of America, N.A. (2022-CFPB-0004) official
   Consumer Financial Protection Bureau · Jul 14, 2022
   “In the fall of 2020, and continuing through mid-2021, Bank of America changed its practices for investigating prepaid debit cardholder notices of error to solely rely on an automated fraud filter, which it knew or should have known would incorrectly determine that no error had occurred and which led to its incorrectly freezing or blocking accounts.”
4. OCC Assesses $125 Million Civil Money Penalty Against Bank of America, Orders Restitution for Unfair and Deceptive Practices (NR 2022-84) official
   Office of the Comptroller of the Currency · Jul 14, 2022
   “The OCC found that the bank's practices violated Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices, in connection with the bank's failure to adequately investigate and resolve consumer claims of unauthorized transactions.”
5. Consent Order for the Assessment of a Civil Money Penalty, Bank of America, N.A., AA-ENF-2022-22 official
   Office of the Comptroller of the Currency · Jul 14, 2022
   “The Comptroller finds, and the Bank neither admits nor denies, the following”
6. Order Terminating the Consent Order, Bank of America, N.A., AA-ENF-2026-32 official
   Office of the Comptroller of the Currency · Jun 11, 2026
   “issued, through the duly authorized representative of the Comptroller of the Currency ("Comptroller") a Consent Order against the Bank dated July 14, 2022, AA-ENF-2022-21 ("Order") ... directs that the Order be, and it hereby is, TERMINATED.”
7. Bank of America fined $225 mln for 'botched' disbursement of jobless benefits during pandemic news
   Reuters · Jul 14, 2022
   “The bank did not admit nor deny the findings.”
8. Bank of America fined $225 million over unemployment benefits program news
   CNBC · Jul 14, 2022
   “In a statement to CNBC, the bank said that, "the states were responsible for reviewing and approving applications and directing [BofA] to issue payments."”
9. BofA fined $225 million for failing to rein in benefits fraud news
   American Banker · Jul 14, 2022
   “"Bank of America partnered with our state clients to identify and fight fraud throughout the pandemic," said BofA spokesman Bill Halldin.”
10. Bank of America fined $225M over 'botched' disbursement of unemployment benefits news
    Banking Dive · Jul 14, 2022