Bank of America Far Too Lax in Protecting New Jersey Unemployment Debit Cards, Class Action Alleges [UPDATE]

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A proposed class action alleges Bank of America, N.A. (BoA) has failed to protect prepaid debit cards containing New Jersey residents’ unemployment benefits from fraud. 

The 48-page case alleges that BoA has essentially treated New Jersey unemployment debit cards with less care than it affords to regular consumer debit and credit cards. Among other things, BoA has allegedly failed to equip New Jersey unemployment debit cards with industry-standard EMV chip technology, which has been found on all consumer credit and debit cards since 2014, the complaint says. 

“Instead, for its government benefits customers, the Bank chose to issue debit cards with only outdated magnetic stripe technology, which makes those cards far more susceptible to skimming, cloning, and other schemes that have allowed third parties to fraudulently access Plaintiff’s and Class Members’ [New Jersey Department  of Labor & Workforce] Debit Cards and Accounts,” the lawsuit reads. 

The suit also alleges Bank of America has systemically failed to take reasonable steps to secure New Jersey unemployment recipients’ information, including by failing to ensure the data was handled appropriately and not misappropriated by the bank’s subcontractors and their employees and agents. These “lax practices,” the suit says, allowed unauthorized individuals to access customers’ personal and financial information and make fraudulent transactions with their debit cards and accounts.

Bank of America has additionally fallen well short of its obligations to implement adequate and reasonable systems to detect unemployment debit card fraud and handle fraud claims submitted by cardholders, the case says. According to the suit, Bank of America failed to adequately investigate fraud claims and provide cardholders with provisional access to their benefits while investigating fraud, as well as promptly reimburse consumers whose funds may have been stolen. 

“For example, instead of providing an effective and timely process for Plaintiff and Class Members to report fraud claims, the Bank adopted a series of ‘customer service’ practices and policies that have required Plaintiff and Class Members to spend dozens of hours on the phone with customer service, and that have otherwise frustrated and obstructed plaintiff’s and Class Members’ efforts to submit such claims.”

An unemployment benefits debit cardholder who’s finally able to reach a Bank of America representative by phone to report unauthorized transactions often finds that the bank will “deny[] their fraud claims without investigation or explanation” and freeze their accounts indefinitely, the lawsuit alleges. Some unemployment benefit debit cardholders say they were also deprived of the opportunity to be heard before Bank of America froze or blocked their accounts for extended periods of time, the suit claims. 

According to the lawsuit, “tens of thousands” of New Jersey unemployment debit cardholders have been the victims of fraud throughout the pandemic. The unauthorized transactions reported by cardholders, the suit says, include massive ATM withdrawals in distant states and countries, huge charges at luxury vendors and repeated transactions with food delivery services. 

All told, BoA’s “Zero Liability” policy, through which the bank said that customers would not be responsible for unauthorized transactions, was “not implemented…as promised,” causing many New Jersey unemployment recipients to incur “significant financial losses,” the suit alleges.

The lawsuit looks to represent all persons who were Bank of America New Jersey Department of Labor & Workforce debit cardholders at any time between January 1, 2020 and the present, and whose eligibility for unemployment benefits was not revoked for failure to establish a valid identity.

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