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Protecting people’s access to their money

History has made it clear that when companies don’t have to compete for business, there is a risk that they’ll take unfair advantage of the situation. When the COVID-19 pandemic hit in early 2020, Congress and many states and localities provided additional unemployment assistance and other benefits. The Consumer Financial Protection Bureau (CFPB) found that many companies took advantage of the limited choices that people have for accessing public benefits like unemployment assistance. Some banks may have unlawfully seized this money to satisfy negative account balances or pay entirely different debts. And one institution automatically and unlawfully froze people’s accounts with a faulty fraud detection program, and then gave them little recourse when there was, in fact, no fraud. In 2022, the CFPB reported a 673% increase in consumer complaints about government benefit prepaid cards , in large part due to government programs that distribute funds to consumers through such cards. In fact, of all types of prepaid cards, the CFPB receives the most complaints about government benefit prepaid cards.

The CFPB is committed to ensuring that workers and families are protected when they receive money, including government benefits, that they are entitled to under law. For instance, the CFPB administers the Electronic Fund Transfer Act (EFTA), which requires that after a consumer contacts a financial institution about an error on their account, the financial institution must conduct a prompt, reasonable, and timely investigation. These protections apply to prepaid cards, including prepaid cards loaded with government benefits such as unemployment assistance.

Today, the CFPB filed a friend-of-the-court (“amicus”) brief in the U.S. Court of Appeals for the Fourth Circuit to ensure people receive these important protections. In this case, an individual became unemployed when his business shut down during the pandemic. He applied for unemployment assistance and was eligible to receive almost $15,000. He chose to receive his benefits on a prepaid government benefit card, which was available only from Bank of America. He then waited months for the card to arrive, and when it finally did, he discovered that the card was showing an account balance of $0. He called the bank and learned that his account had been depleted with numerous unauthorized charges. When he complained, Bank of America repeatedly denied his claim and offered no explanation for the denial.

When this individual sued Bank of America for violating EFTA, the bank fought the case by claiming that it didn’t have to follow that law when it received this consumer’s complaint. Bank of America admitted that EFTA generally requires financial institutions to provide a reason when it denies consumers’ complaints about errors on their account. But Bank of America argued that it was free to ignore EFTA for this account because, it said, EFTA doesn’t apply to accounts loaded with unemployment assistance related to the pandemic.

The CFPB’s amicus brief explains that, to the contrary, EFTA’s protections clearly apply to prepaid card accounts used to distribute certain types of government benefits—including unemployment assistance related to the pandemic. A different result would create an exception that the law’s regulations don’t provide. These protections are especially important when people don’t have much choice about doing business with a particular company.

The case is Mohamed v. Bank of America, N.A., No. 22-1954 (4th Cir.).

Read the CFPB’s amicus brief.

If you have a problem with a prepaid card or other consumer financial product or service, you can submit a complaint with the CFPB.

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