With seven words last week, U.S. Bank upgraded a warning to investors regarding an ongoing probe by the Consumer Financial Protection Bureau into the bank’s handling of prepaid card-based unemployment insurance payments.
“Also, the [CFPB] has been investigating the Company’s administration of unemployment insurance benefit prepaid debit cards during the pandemic timeframe and is considering a potential enforcement action,” the Minneapolis-based lender wrote in a filing Feb. 27 with the Securities and Exchange Commission.
The investigation is nothing new. The bank disclosed that in November. But the words “and is considering a potential enforcement action” are a more recent addition.
This wouldn’t be the first time in recent weeks that a bank signaled a change in forecast through subtle language. Goldman Sachs, for example, told investors in August that it was cooperating with a CFPB investigation into credit-card practices. But last month, the bank’s SEC filing said the probe involved the CFPB “and other governmental bodies.” It did not detail which ones.
If a penalty materializes, U.S. Bank would not be the first lender to pay over COVID-era distribution of card-based unemployment benefits. Bank of America in July paid $225 million to the CFPB and the Office of the Comptroller of the Currency to end a similar investigation.
More than 42% of the $71.7 billion in pandemic unemployment programs issued in four states over six months in 2020 were paid improperly, the Labor Department’s Office of the Inspector General found last year. An estimated $9.9 billion (13.8%) was paid to fraudsters, the report showed.
U.S. Bank last week said it is cooperating “with all pending examinations.”
A number of banks over the past month issued their annual reports to the SEC, and in them, several flagged regulatory matters that hadn’t previously been reported. Wells Fargo, for example, told investors the SEC and Commodity Futures Trading Commission were probing the bank’s compliance with record-keeping requirements in connection with a long-running crackdown on bankers’ use of unapproved messaging platforms to perform company business. BNY Mellon, Fifth Third, and asset manager BlackRock issued similar warnings last week.
To that end, U.S. Bank, too, said last week that its broker-dealer and registered investment adviser subsidiaries received a request for information from the SEC concerning that issue, which ensnared 11 banks last year, resulting in a payout of $1.8 billion in penalties.
