Lawsuit Claims Bank of America Unlawfully Pockets Interest, Investment Income Earned on California Benefits Payments

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A proposed class action lawsuit accuses Bank of America of illegally retaining millions in interest and investment income that rightfully belongs to individuals receiving benefits from California’s Employment Development Department (EDD).

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The 18-page lawsuit says that until February 2024, the EDD issued unemployment, disability and Paid Family Leave benefits through Bank of America prepaid debit cards. The suit alleges the bank has earned tens of millions per year in interest and investment income on these deposited funds it maintains and has wrongfully kept these earnings for itself rather than distribute them to benefits recipients.

Pursuant to the terms and conditions of Bank of America’s contract with consumers, the benefits payments are considered “special deposits,” which are distinct from standard deposit accounts that would give the bank a property right to the funds, the case explains.

California law stipulates that only the owner of the funds in a special deposit is entitled to any earnings, the complaint says. By law, interest or other investment returns earned on the funds “always remain the property of the Benefit Recipients while the Funds are held” by Bank of America, and the bank is “not entitled to derive any benefit from their use,” the filing asserts.

“In accepting these special deposits, [Bank of America] assumed a fiduciary duty to handle the Funds in accordance with their specified purpose, for the sole benefit of Benefits Recipients,” the suit charges. “This duty precluded [the bank] from using the deposits for its own purposes.”

The Bank of America lawsuit claims that by seizing the earnings generated on these deposits, the bank has breached its fiduciary duty to customers and converted their property for its own use, in violation of state law.

The suit looks to represent all California residents who maintained EDD card accounts with Bank of America.

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