The Consumer Financial Protection Bureau confronts one of America's largest banking institutions over allegations of exploiting vulnerable federal benefits recipients.
According to The Detroit News, the CFPB has filed a lawsuit against Comerica Bank, accusing the financial institution of deliberately disconnecting millions of customer service calls and charging illegal fees to Direct Express cardholders who receive Social Security and veterans benefits.
The lawsuit, filed in the U.S. District Court for the Northern District of Texas, targets Comerica's handling of 3.4 million Direct Express cardholders. These beneficiaries, primarily Americans without traditional bank accounts, depend on federal benefits for their daily expenses.
Service Failures Mount
CFPB Director Rohit Chopra issued a strong statement about the bank's conduct:
The CFPB is suing Comerica Bank for illegally harming disabled and older Americans who count on Social Security and other federal benefits. 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.
The investigation revealed that Comerica intentionally disconnected 24 million customer service calls. This practice left many beneficiaries waiting for hours to report unauthorized transactions, dispute charges, or seek assistance with lost or stolen cards.
The bank's understaffing of customer service representatives directly impacted its ability to handle the volume of incoming calls. This systematic failure particularly affected vulnerable customers who needed immediate assistance with their benefits.
Legal Battle Intensifies
Comerica Bank, operating as a financial agent for the Direct Express program since 2008, has countered the allegations with its own lawsuit. The bank claims the CFPB has exceeded its authority and undermined its investigation's legitimacy.
The program's complexity involves distributing funds to cardholders over a one- to two-day period each month. Comerica maintains it has worked diligently with the U.S. Treasury Department's Fiscal Service Bureau to address any issues.
The CFPB's lawsuit alleges 20,000 instances where Comerica failed to investigate claims of incorrect or fraudulent charges within required timeframes. When investigations did occur, customers often received vague findings or no response at all.
Financial Impact Unfolds
Comerica's financial performance has already shown signs of strain, with net income dropping 38% year-over-year to $528 million in the first nine months of 2024. The bank held $63.9 billion in deposits as of September's end.
The CFPB seeks substantial remedies, including refunds for affected customers and civil penalties. The bureau's action aims to halt the alleged illegal practices and provide compensation through its victim relief fund.
The legal proceedings could significantly impact Comerica's reputation and financial standing. Share prices reflected market concerns, falling 1.1% to $69.12 following the news.
Stakes Rise in Benefits Program Dispute
The Consumer Financial Protection Bureau's lawsuit against Comerica Bank centers on allegations of systemic misconduct in the Direct Express card program, affecting 3.4 million federal benefits recipients. The case focuses on practices including deliberate call disconnections, illegal fee charges, and mishandling of fraud complaints.
The resolution of this case, scheduled for court proceedings in Texas, will determine both the future of the Direct Express program and potential compensation for affected beneficiaries. The outcome could also influence how similar government benefit distribution programs are managed and overseen in the future.
