Federal agency files lawsuit against Comerica bank, alleging systematic mishandling of federal benefits for recipients
In a series of developments, Comerica Bank is currently embroiled in a legal battle over the management of the Direct Express program, which delivers government benefits to around 3.4 million Americans, the majority of whom are unbanked.
The Consumer Financial Protection Bureau (CFPB) has sued Comerica Bank, alleging that the bank systematically failed 3.4 million cardholders who received federal benefits. The lawsuit accuses Comerica of wrongfully retaining millions of dollars in interest and investment income that should have been paid to the program participants, potentially violating contractual obligations tied to managing the Direct Express prepaid debit card program.
The CFPB investigation into Comerica's handling of the Direct Express program began in 2021. In July, Comerica was notified by the Treasury that another bank would be administering the Direct Express program.
The bank has faced criticism and allegations of mismanagement, including purported violations related to outsourcing fraud complaints, which may breach terms set by the government contract for the program. Callers who attempted to report fraud faced long wait times, with some calls intentionally dropped and others facing excessively long wait times, often several hours.
Comerica has claimed it has cooperated with the CFPB, sharing information and data, but the CFPB has consistently ignored their arguments and documentation. The bank maintains its commitment to serving cardholders in the Direct Express program.
Class action lawsuits accusing Comerica Bank of mishandling these funds are ongoing. A recent $18.25 million settlement in a similar case involving payment systems highlights the scale of financial penalties these types of allegations can entail, though no specific finalized penalty for Comerica in this Direct Express case was detailed in the search results.
In summary, Comerica Bank faces regulatory and legal challenges regarding the Direct Express program, primarily involving wrongful retention of interest and investment income, mismanagement of the program, and possible breach of contractual obligations around fraud complaint handling. The bank is facing pending class action litigation seeking restitution and damages, and it has lost the lucrative Direct Express contract due to these issues. No exact penalty amount has been finalized publicly yet.
[1] CFPB sues Comerica Bank over Direct Express program [2] Comerica Bank under investigation for Direct Express program mismanagement [3] Comerica Bank accused of mishandling Direct Express program [4] Comerica Bank loses Direct Express contract amidst allegations of mismanagement
[1] Comerica Bank's business practices are under scrutiny, as the Consumer Financial Protection Bureau has sued the bank over mismanagement of the Direct Express program, accused of retaining millions in interest and investment income that should have gone to program participants.
[2] The financial aspect of the Direct Express program has come under question, with Comerica Bank facing allegations of mishandling funds, potentially leading to breaches of contractual obligations and financial penalties.
