WASHINGTON - U.S. Bank, the nation's fifth-largest bank, has been hit with a hefty fine totaling $36 million by federal regulators for violations of consumer protection laws related to the blocking of access to unemployment insurance benefits during the Covid-19 pandemic. The Consumer Financial Protection Bureau (CFPB) announced on Tuesday that it has fined the bank nearly $21 million, while the Office of the Comptroller of the Currency (OCC) imposed an additional penalty of $15 million.

According to the CFPB, U.S. Bank froze access to hundreds of thousands of prepaid debit cards used for distributing unemployment insurance benefits through its ReliaCard program. This action was taken in response to suspected fraud as unemployment rates soared close to 15% during the summer of 2020. However, the bank failed to provide consumers with a reliable method to regain access to their frozen benefits, leading to significant hardships.

"U.S. Bank blocked access to accounts and demanded burdensome paperwork in order for consumers to regain access to their frozen benefits," said CFPB Director Rohit Chopra in a statement, highlighting the bank's actions as an infringement on consumer rights.

The demand for prepaid cards surged dramatically as the pandemic gripped the nation, with states issuing a staggering $794 billion in combined state and federal unemployment benefits between March 2020 and July 2021. This caused the usage of prepaid cards to increase by nearly 4000%, according to Cheryl Leamon, a representative for U.S. Bank.

While U.S. Bank defended its actions, stating that they prevented over $375 million in fraudulent activities and returned questionable funds to the states, it did acknowledge the need for improvements. Leamon revealed that enhancements have been made to the ReliaCard program to address the issues faced by consumers.

However, the bank's actions were found to be in violation of the Consumer Financial Protection Act and the Electronic Fund Transfer Act. U.S. Bank incorrectly required additional written confirmation about unauthorized electronic fund transfers, and as a result, consumers were unable to access their funds without it. The bank also faced allegations of unfair practices under the Federal Trade Commission Act.

As part of the settlement, U.S. Bank will be required to pay $5.7 million in redress to affected consumers and an additional $15 million as a civil money penalty. The OCC penalty will be directed to the U.S. Treasury.

"U.S. Bank must comply with the law, and the CFPB and OCC are making the bank pay for its conduct," stated CFPB Director Chopra, emphasizing the importance of holding financial institutions accountable for their actions.

U.S. Bank, headquartered in Minneapolis, Minnesota, with $668 billion in assets as of September 30, finds itself facing significant fines and a call to rectify its practices to protect consumer rights and ensure seamless access to vital unemployment benefits during unprecedented times.