A federal judge has ordered Bank of America to unfreeze the accounts of unemployed California workers whose benefits were blocked because the financial behemoth presumed the payments could be linked to fraud.
The U.S. District Court in San Francisco, through a preliminary injunction, also blocked Bank of America from automatically freezing payments of unemployment benefits if the accounts are flagged by an automated filter devised to identify potential fraud.
The bank froze numerous accounts of unemployed California workers because the company used an automated filter to halt payments if the computers indicated the accounts could be linked to fraud.
Hundreds of thousands of California workers who lost their jobs might potentially be affected.
The judge’s ruling is a new twist in a wide-ranging fraud scandal that has engulfed the state Employment Development Department and numerous California workers who lost their jobs in the wake of coronavirus-related business shutdowns.
The EDD contracted with Bank of America to provide secure accounts for the processing of unemployment benefits, including the issuing and handling of debit cards that workers could use to access their benefit payments.
In January, alarmed that Bank of America had frozen many unemployment payments due to fraud concerns, law firm Cotchett, Pitre & McCarthy sued the bank through a class action on behalf of affected workers. Another law firm, Altshuler Berzon, teamed up with Cotchett, Pitre & McCarthy to represent the affected workers.
“Not only did the bank fail to implement basic security measures, it then treated EDD cardholders who were the victims of fraud as if they were the criminals, often freezing them out of their accounts for months on end,” said Brian Danitz, a partner at Cotchett, Pitre & McCarthy.
U.S. District Court Judge Vince Chhabria has issued an order with an array of provisions.
The order prohibits Bank of America from:
— Freezing accounts based on the Bank’s automated fraud filter
— Denying claims of unauthorized transactions based on the automated filter
— Denying claims or provisional credit without conducting an investigation
— Denying claims without providing a written explanation of the Bank’s findings
The judge also ordered Bank of America to:
— Reopen any claim the Bank closed or denied based on its automated fraud filter, and provide written notice to cardholders that their claims have been reopened
— Provide provisional credit if the new or reopened claim cannot be resolved within 10 business days, and complete the investigation within 45 days
— Establish direct toll-free numbers for affected workers.
— Staff bank call centers so that the average speed to answer is no more than five minutes, 90% of the time
The class-action lawsuit will next focus on the root cause of the massive card hacking and whether Bank of America blundered by not using state-of-the-art chips on the debit cards. The bank is using the older magnetic stripe technology for the cards.
“The bank’s failure to comply with its legal and contractual obligations has caused incalculable harm to unemployment insurance recipients,” said Stacey Leyton, an attorney with law firm Altshuler Berzon. “This injunction is critical because it will restore much-needed benefits.”
During March and April of 2020, some 2.7 million California workers lost their jobs at the outset of the business shutdowns to combat the coronavirus. In April of this year, 1.58 million California residents were still unemployed.
California workers seeking government assistance have encountered a bureaucratic maze of obstacles caused by a string of EDD miscues.
EDD failures include a broken phone center, glitch-hobbled computer system, suspended benefit payments, and fraud.
“My account was emptied by unauthorized transactions on my Bank of America EDD debit card,” said Jennifer Wick, a San Francisco resident and real estate agent who is the named plaintiff in the class action complaint.
Source: Orange County Register