The Consumer Financial Protection Bureau sued Comerica Bank on Friday for allegedly “systematically failing” 3.4 million cardholders who received federal benefits such as Social Security through prepaid debit cards.
The consumer watchdog alleged the bank intentionally dropped some 24 million customer service calls with holders of its Direct Express prepaid card, and subjected callers who were not dropped to “excessively long wait times — often in excess of several hours” to speak with a representative to address unauthorized transactions, charge disputes, and lost or stolen cards.
The bank also charged ATM fees to more than 1 million cardholders who were legally entitled to free withdrawals, and mishandled fraud complaints from consumers who said they had been fraudulently enrolled in the Direct Express program, the CFPB said.
Comerica also failed more than 20,000 times to address complaints of fraud in an appropriate time period, and in other instances provided “vague and confusing findings” to potential fraud victims, the CFPB alleged.
“By deliberately disconnecting millions of calls and harvesting illegal junk fees, Comerica boosted its bottom line at the expense of Americans living on a fixed income,” said CFPB Director Rohit Chopra in a prepared statement.
That’s not the only issue that has come up in connection with Comerica’s execution of the Direct Express program, a contract the bank has held with the Treasury Department since 2008. Comerica allowed a third-party vendor, i2c, to field fraud disputes and handle cardholder data from an office in Lahore, Pakistan, American Banker reported last year. The Treasury contract, however, requires all Direct Express services be provided in the U.S. or its territories.
Comerica was notified in July that the department would be seeking another bank to administer the program, and BNY emerged as the winner of that contract last month.
BNY will take over the program Jan. 3, and Comerica will work alongside BNY for three years to ensure an orderly transfer.
Comerica sued the CFPB last month for the watchdog’s investigation into Comerica’s Direct Express program, calling the probe “aggressive and overreaching.”
The CFPB has alleged that Comerica has “impaired cardholders’ ability to protect and access” funds through Direct Express since April 1, 2019.
During the probe, which began in 2021, the CFPB “has failed to acknowledge that, as Financial Agent of the Direct Express program, Comerica generally acted with the oversight and knowledge or approval of the federal government,” the Dallas-based bank alleged in the U.S. District Court for the Northern District of Texas.
“We will continue to vigorously defend our record as the financial agent for the Direct Express program and remain committed to serving our cardholders,” a spokesperson for Comerica told Banking Dive via email. “Throughout the CFPB’s investigation, we have cooperated by sharing information and data to illustrate the unique nature of this program and the fact that we operate with the oversight of the Fiscal Service. Despite our good faith efforts to provide this critical context, the CFPB has consistently ignored our arguments and documentation.”
The bank “understand[s] the significance of the Direct Express program to the millions of Americans who receive federal benefits,” and Comerica has “worked hard to serve these important cardholders,” the bank spokesperson said.
Direct Express delivers government benefits to roughly 3.4 million Americans, most of whom are unbanked.
