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BofA should face class motion over 2020 profit card fraud By Reuters

© Reuters. FILE PHOTO: A Financial institution of America brand is pictured within the Manhattan borough of New York Metropolis, New York, U.S., January 30, 2019. REUTERS/Carlo Allegri

By Jody Godoy

(Reuters) – Financial institution of America (NYSE:) should face cardholder allegations that it bungled its response to unauthorized transactions on unemployment and incapacity advantages playing cards in California through the pandemic, a San Diego choose dominated on Thursday.

U.S. District Decide Larry Alan Burns mentioned advantages recipients can transfer ahead with a proposed class motion lawsuit claiming the financial institution violated state legislation by issuing playing cards to hundreds of thousands of Californians that lacked normal safety measures.

The cardholders additionally declare Financial institution of America broke federal legislation by failing to analyze fraud claims or summarily freezing tens of 1000’s of accounts.

A Financial institution of America spokesperson didn’t instantly reply to a request for touch upon Thursday.

The financial institution beforehand agreed to stop utilizing automated fraud detection software program to freeze accounts.

Michael Rubin, an lawyer representing the cardholders, known as the ruling a “big victory.”

The cardholders declare Financial institution of America didn’t comply with the Digital Fund Switch Act, which units guidelines for banks to resolve account errors.

In addition they say the financial institution violated California’s shopper privateness legislation by issuing playing cards with outdated magnetic stripes, reasonably than chip expertise, leaving them topic to fraud.

Burns mentioned they will transfer ahead with these claims and others, together with that the financial institution was a state actor that violated cardholders’ constitutional proper to due course of by freezing accounts with out discover.

The choose dismissed claims that the financial institution violated California’s Unfair Competitors Legislation and that it breached its contract with the state.

Final 12 months, Financial institution of America paid $225 million to 2 U.S. regulators to settle claims that its fraud detection program improperly froze 1000’s of advantages accounts in 2020 and 2021.

California estimated in 2021 that it had paid greater than $111 billion in unemployment insurance coverage advantages through the pandemic, with greater than $10.4 billion in claims suspected to be fraudulent.

The case is In re Financial institution of America California Unemployment Advantages Litigation, No. 21-02992, U.S. District Courtroom, Southern District of California.

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