Just weeks into the new year, Bank of America is facing a proposed class action lawsuit relating to the bank’s alleged failure to secure debit cards used to distribute unemployment benefits to jobless Californians. The case, Yick v. Bank of America, 21-CV-376 was filed in the United States District Court of the Northern District of California by plaintiff Jennifer Yick, a real estate professional who found herself unemployed from the COVID-19 pandemic. Through California’s Employment Development Department (EDD), she obtained unemployment benefits that she could access through a Bank of America Visa debit card. Her account, however, fell victim to numerous unauthorized transactions, with the bank unwilling to restore the stolen funds. The plaintiff filed this action on behalf of herself as well as the hundreds of thousands of proposed class members that were affected by this fraud.
Bank of America’s Unemployment Benefits History
In 2010, Bank of America entered into an exclusive contract with the state of California to distribute unemployment benefits through its prepaid debit cards. At the time, California residents were still reeling from the Great Recession of 2008. With unemployment rates at 12.1%, the state was paying out $66 million per day to jobless Californians. The Bank of America’s debit cards were meant to replace paper unemployment checks—a step forward in efficiency according to a report by the Employment Development Department.
The cards were provided at no cost to the state, but the bank agreed to share some revenue from transaction fees. For the cardholders, the bank guaranteed low fees and to provide terms that were “more favorable than most people have for their own personal bank accounts,” according to the report.
Since the drastic spike in unemployment during the COVID-19 pandemic, problems with Bank of America’s cards, such as money being withdrawn from accounts without authorization or flagged for potential fraud, have resulted in approximately frozen 377,500 cards this past fall, with around 350,000 accounts still impacted.
The Class Action Allegations
The plaintiff in Yick v. Bank of America is a cardholder on one of these impacted accounts. As the complaint alleges, the plaintiff discovered fraudulent charges on her debit card on December 1, 2020 and tried for days to reach a Bank of America agent that could assist her. After an email inquiry to an address provided by a bank representative was returned as undeliverable, the plaintiff filed a police report at her local precinct concerning the fraudulent charges. The plaintiff asserts that despite following all of the instructions in her account agreement and making “consistent, diligent efforts to recover the funds stolen from her account,” Bank of America offered her “no meaningful response or assistance.”
The plaintiff alleges various causes of action against Bank of America, such as negligence, breach of contract, and violations of California’s Consumer Privacy Act and Unfair Competition Law, among others. It is alleged that the bank failed to secure EDD cardholder account information, which resulted in a “massive security breach” in “millions of dollars” in stolen, unauthorized EDD transactions. The complaint further alleges that the data breach is, in part, due to the bank’s use of outdated magnetic stripe technology, opposed to the more recent and allegedly safer EMV chip technology now used by other banks.
The complaint also cites Bank of America’s “Zero Liability” policy, in which it promises to protect EDD benefits recipients from fraudulent transactions. According to its agreement with EDD cardholders, they “may incur no liability for unauthorized use” of their cards, and in the event of a timely reported unauthorized transaction, the bank will credit the account within 10 business days.
The complaint requests declaratory and injunctive relief prohibiting Bank of America from engaging in misconduct as well as refunding all class members the funds taken from their accounts from unauthorized transactions.
Bank of America’s Response
The defendant bank has yet to file its answer to the complaint, but in response to a November 2020 letter from California lawmakers concerning the rampant fraud, the bank asserted that fraud is not something that typically happens to the EDD debit cards. The bank assured that “[w]hen a legitimate cardholder reports that he or she has had fraud on his or her account (such as unauthorized use) and Bank of America’s investigation confirms the report, Bank of America covers the losses to the cardholder consistent with federal law and pursuant to our ‘Zero Liability’ policy for unauthorized transactions.”
In response to the complaint, a Bank of America spokesperson has asserted that “that the bank is committed to returning funds to legitimate unemployment claimants” and has increased its staff size. The bank sets forth that the “vast majority” of unemployment fraud within California is related to the state’s own application vetting, not the debit cards themselves. As the spokesperson explains: “California’s unemployment program faces billions of dollars in fraud…Bank of America is working every day with the state to prevent criminals from getting money and ensuring legitimate recipients receive their benefits.” Fraud investigations are ongoing in California as well as the other states with which Bank of America has similar contracts. As for the legal ramifications, this resolution will be up to the court’s discretion as the proposed class action proceeds.