U.S. Bank: Home of Fake and Frozen Accounts
The banking giant moves in nefarious ways
America’s “Big 5” banks aren’t exactly known for an amazing customer experience.
In fact, in recent years, a number of the big banks have been perpetrators of fraud and other illegal activity.
Big Banks Being Bad
Unfortunately, US Bank is offering one more example of bad news for customers of big banks.
The bank will pay a $21 million penalty for illegally freezing customer accounts during the COVID-19 pandemic.
“At a time when unemployment was close to 15%, many out-of-work Americans throughout the country had little choice but to rely on U.S. Bank for their unemployment benefits. 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. “U.S. Bank must comply with the law, and the CFPB and OCC are making the bank pay for its conduct."
This follows a 2022 fine for a fake account scandal.
In that case, U.S. Bank employees illegally accessed customer credit reports in order to create fake accounts in an attempt to meet sales goals.
Shades of Wells Fargo, to be sure.
The CFPB outlined the harms to consumers, including by the creation of unwanted accounts, negative effects on credit profiles, and the loss of control over personally identifiable information. Customers also had to waste time and energy closing unauthorized accounts and resolving consequences stemming from them, including seeking refunds for improperly charged fees.
That case carried a $37.5 million penalty.
While big banks offer convenience in terms of ubiquitous physical locations, they also seem to carry significant risks for consumers. Plus, online-only banks, local banks, and credit unions all offer options that compete on service. These options offer the added benefit of less fraud risk.
While “Big Banks” can be highly problematic for consumers, other consumer finance players also pose risks.
One recent example: Toyota Motor Credit was fined $60 million for illegal lending practices, including withholding refunds owed consumers and making it nearly impossible to cancel optional add-ons bundled into car loans.
"Toyota's lending arm illegally withheld refunds, made borrowers run through obstacle courses to cancel unwanted services, and tarnished their credit reports," said CFPB Director Rohit Chopra. "Given the growing burdens of auto loan payments on Americans, we will continue to pursue large auto lenders that cheat their customers."