Federal Court Issues Preliminary Injunction Against Bank of America, Protects Rights of California's Unemployed
The U.S. District Court in San Francisco issued a sweeping preliminary injunction against Bank of America today, prohibiting the Bank from violating federal law and breaching its contract with hundreds of thousands of Californians who receive unemployment and disability benefits through the Bank’s prepaid debit cards.
The law firm of Cotchett, Pitre & McCarthy filed the class action lawsuit Yick v. Bank of America, N.A. in January 2021, alleging that the Bank breached its exclusive contract with the California Employment Development Department (EDD) and violated the rights of thousands of California benefits recipients. Eight similar lawsuits were filed shortly thereafter. In March, the court consolidated all nine cases and appointed Cotchett, Pitre & McCarthy and Altshuler Berzon as interim co-lead counsel for the proposed class.
Plaintiffs allege that during the pandemic hundreds of thousands of benefits recipients had their unemployment benefits stolen out of their prepaid debit card accounts due to the Bank’s failure to implement basic security measures, including its failure to include industry-standard security chips on the cards. Under federal law and the Bank’s “Zero Liability” policy, the Bank is required to investigate cardholders’ claims of unauthorized transactions on their account. Instead of conducting the required investigations, Plaintiffs allege that Bank of America summarily denied cardholder claims and froze their accounts. The Bank then failed to handle the high volume of customer service calls from cardholders, leaving many cardholders without access to their benefits for months on end.
Plaintiffs filed a Motion for Preliminary Injunction on April 1, 2021, supported by the written testimony of many benefits recipients who described the harm caused by the Bank’s practices, including losing their homes, not being able to afford medication, and having to ration out food for their children. After a hearing on the motion, the court found that “the harm being suffered by the class members is irreparable.” As the court stated:
The class is comprised of people who depend on unemployment benefits to get through the pandemic. As the plaintiffs’ evidence shows, continued denial of these benefits will seriously hinder the ability of many class members to feed their families and keep a roof over their heads.
The court further found that plaintiffs “have demonstrated a strong likelihood of success on their claims that Bank of America (BofA) has violated, and continues to violate, the Electronic Fund Transfers Act” and “is systematically breaching its contracts with cardholders and violating California’s Unfair Competition Law.”
The court then ordered the parties to meet with a U.S. Magistrate Judge to negotiate a joint proposal for injunctive relief. On June 1, 2021, the court entered its final Order.
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 Order also requires 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 a direct toll-free number to enable class members to reach the Claims Initiation Call Center, and expand the call center’s hours to 24 hours per day, 7 days per week within 60 days after the Order
* Establish a direct toll-free number to enable class members to authenticate their identity and resolve challenges to blocked accounts, to be open 24 hours per day, 7 days per week
* Staff the call centers such that the average speed to answer is no more than five minutes, 90% of the time
* Provide written notices to class members regarding the new toll-free numbers.
Plaintiffs allege that Bank of America’s unlawful practices deprived unemployed Californians of their only lifeline in this pandemic. 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.
The court’s order provides substantial and immediate relief to hundreds of thousands of unemployed Californians. The order prohibits the Bank from freezing accounts based on a flawed fraud filter, requires the Bank to reopen unauthorized transaction claims it summarily denied, and requires the Bank to comply with the law by investigating those claims and providing provisional credit. The new customer service numbers will help to relieve the long wait times and dropped calls that made it so difficult for cardholders to submit claims and unfreeze their accounts.
Michael Rubin of Altshuler Berzon, co-lead counsel for the Class:
This historic injunction provides critical prospective relief, requiring the bank to unblock frozen accounts, meaningfully investigate the cardholders’ unauthorized-transaction claims, and restore their UI benefits. Next, the case will turn to the root cause of the massive card-hacking and plaintiffs’ allegation that the bank is responsible because of its penny pinching decision to use outmoded magnetic stripe technology on all UI debit cards instead of the far more secure EMV chip technology that the bank uses on all of its other credit and debit cards.
Stacey Leyton of Altshuler Berzon:
The Bank’s failure to comply with its legal and contractual obligations has caused incalculable harm to UI recipients. This injunction is critical, because it will restore much-needed benefits to tens of thousands of Californians.
With the preliminary injunction in place, the case will now proceed to discovery and a trial on the merits of plaintiffs’ claims which seek a permanent injunction and monetary relief for the Class.
Joe Cotchett, founding partner of Cotchett, Pitre & McCarthy, stated:
This is the most egregious case of a major bank’s total disregard of its fiduciary responsibility to protect the most vulnerable account holders we have seen in a long time. The pandemic took its toll on so many people and the bank just sought to protect its profits.
The lawsuit is Yick v. Bank of America, Case No. 3:21-cv-00376-VC, in the U.S. District Court for the Northern District of California. Cotchett, Pitre & McCarthy LLP and Altshuler Berzon LLP are interim co-lead counsel for the Class.