Bank of America Unemployment Lawsuit: Class Action and CFPB Penalty

The Bank of America unemployment lawsuit is a federal class action in California accusing the bank of mishandling pandemic-era unemployment benefits paid out on its prepaid EDD debit cards, including denying fraud claims through a flawed automated filter, freezing accounts without investigation, issuing cards without chip security, and making customer service nearly unreachable. Consolidated as In re Bank of America California Unemployment Benefits Litigation in the Southern District of California, the case covers roughly 109,000 Californians across five certified classes and remains active as of mid-2026, with a final pretrial conference set for June 5, 2026 and no settlement in place.

What the Lawsuit Says Bank of America Did

From 2010 until the contract’s termination in 2024, Bank of America held an exclusive deal with the California Employment Development Department to distribute unemployment, disability, and Paid Family Leave benefits on prepaid debit cards. California was one of only three states without a direct deposit option, so recipients had no realistic alternative.¹

When the pandemic hit, the state paid out $109 billion in benefits between March and November 2020, and fraud exploded alongside legitimate claims.² The bank later said it lost $200 million to criminals filing fraudulent claims on EDD cards.¹ The plaintiffs’ central complaint is that the bank’s response to that fraud swept in real cardholders whose benefits had actually been stolen.

At the heart of the case is an automated system the bank rolled out in the fall of 2020, called the Claim Fraud Filter. According to the plaintiffs and later the Consumer Financial Protection Bureau, the filter was used to summarily deny every cardholder claim involving an unauthorized ATM transaction without the individualized investigation federal law requires under the Electronic Fund Transfer Act and Regulation E. The bank also applied the filter retroactively, clawing back credits from cardholders whose claims had already been investigated and paid, and used it to trigger mass account freezes that locked people out of their benefits entirely.³

Between October 2020 and March 2021, Bank of America received 230,000 claims of debit card fraud and denied more than half of them.¹ Cardholders trying to report stolen funds reported hours-long hold times and disconnected calls; one claimant said nearly $7,000 was drained through unauthorized transactions across multiple states and internationally.²

The suit also alleges the cards themselves were insecure. Bank of America issued them with magnetic stripes only, without the EMV microchips that had become the industry standard, leaving accounts open to counterfeiting and skimming at ATMs.⁴

Bank of America denies all allegations of wrongdoing.⁵

Who Is Covered by the Class Action

On June 16, 2025, Judge Gonzalo P. Curiel issued a 98-page order certifying five classes, with a publicly redacted version filed on June 24, 2025.⁶ The classes only cover cardholders who received California EDD benefits, and each one is tied to a specific practice and time window:

Claim Denial Class: cardholders who reported unauthorized ATM transactions between September 28, 2020, and June 8, 2021, and whose claims were denied based solely on the Claim Fraud Filter.
Credit Rescission Class: cardholders who had already received permanent credit for an unauthorized transaction claim but had that credit taken back during the same period based on the filter.
Account Freeze Class: cardholders whose accounts were frozen between September 28, 2020, and March 17, 2021, based solely on the filter.
Customer Service Class: members of the Claim Denial or Credit Rescission classes who called the bank’s customer service line between September 13 and November 21, 2020, and were routed to the claims call center.
EMV Chip Class: members of the Claim Denial or Credit Rescission classes whose debit cards lacked an EMV chip before June 9, 2021.

Each class excludes cardholders whose accounts were frozen because of EDD disqualification, law enforcement action, or an independent fraud investigation by the bank.⁷ Plaintiffs are seeking statutory, treble, and punitive damages under the EFTA, the California Consumer Privacy Act, the California Unfair Competition Law, due process, and common law claims including negligence and breach of fiduciary duty.⁴

The deadline for class members to opt out passed on December 2, 2025.⁷ If you fell within one of the class definitions and did nothing by that date, you remain in the case.

Where the Case Stands in 2026

The case has not settled. The court has been explicit that it has not ruled on whether Bank of America violated any law and has not decided whether class members will receive any additional money.⁵ Because there is no settlement, there is no claims process and no per-person payout to report.

After class certification, Bank of America tried to appeal under Federal Rule of Civil Procedure 23(f) and asked the district court to stay the case while that petition was pending. Judge Curiel denied the stay in August 2025. In October 2025 the bank filed motions to exclude testimony from four of the plaintiffs’ expert witnesses; those motions were still pending as of the last docket activity.⁸

A mandatory settlement conference before Magistrate Judge Michael S. Berg on March 30, 2026 did not resolve the case. The final pretrial conference before Judge Curiel was scheduled for June 5, 2026.⁸

An earlier preliminary injunction had forced the bank to stop using the Claim Fraud Filter, reopen previously denied claims, provide provisional credit within 10 business days, and staff dedicated toll-free phone lines to answer calls within five minutes on average.⁹ That injunction dissolved on June 1, 2024 after Bank of America and the EDD mutually terminated their contract.⁷ California moved its debit card services to a new provider, Money Network, and told cardholders to use or transfer any remaining Bank of America card balances by April 15, 2024.¹⁰

The $225 Million CFPB and OCC Penalty Is Separate

On July 14, 2022, Bank of America entered into consent orders with the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency over the same conduct. The CFPB found the bank had engaged in unfair and abusive practices by relying solely on the flawed fraud filter, retroactively denying already-paid claims, impeding error reporting, and failing to conduct timely investigations.³

Total penalties came to $225 million: $100 million from the CFPB and $125 million from the OCC. Beyond the fines, the bank was ordered to repay withheld funds and provide each affected individual a lump-sum payment for consequential harm, with the CFPB estimating total redress in the “hundreds of millions of dollars.” Those regulatory payments reached cardholders across 12 states, including Arizona, Iowa, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Nevada, New Jersey, North Carolina, and South Carolina, in addition to California.¹¹

Some California class members have already received compensation through the remediation plan the consent orders required. Those payments are separate from the class action, which seeks additional damages the regulatory orders did not address.⁷

If You Had a Bank of America EDD Card Outside California

The certified class action covers California EDD cardholders only. Cardholders in other states are outside the class, though a separate proposed class action, Mohamed v. Bank of America N.A., involves Maryland pandemic unemployment benefits. The plaintiff, Yagoub Mohamed, alleged the bank failed to reimburse more than $14,000 in stolen funds as required by the EFTA. A district court initially dismissed the case, holding that pandemic unemployment payments were “qualified disaster relief payments” exempt from EFTA coverage. In February 2024, a Fourth Circuit panel unanimously reversed, holding that the prepaid cards were “government benefit accounts” under Regulation E because the state, not the bank, established the accounts.¹² The case was sent back to the District of Maryland and remains active as of early 2026, with a renewed motion to dismiss pending on state-law claims.¹³

1
ABC7 News. BofA EDD Debit Card Fraud News California Unemployment
2
CalMatters. How Bank of America Helped Fuel California’s Unemployment Meltdown
3
Consumer Financial Protection Bureau. Bank of America Enforcement Action
4
Cotchett, Pitre & McCarthy. Federal Court Certifies Five California Classes in Pandemic Unemployment Benefits Case Against Bank of America
5
BofA Cal Unemployment Benefits Class Action. In re Bank of America California Unemployment Benefits Litigation
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Altshuler Berzon. Federal District Court Certifies Five California Classes in Pandemic Unemployment Insurance Benefits Case Against Bank of America
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BofA Cal Unemployment Benefits Class Action. Frequently Asked Questions
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CourtListener. In re Bank of America California Unemployment Benefits Litigation Docket
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ClassAction.org. Yick v. Bank of America Preliminary Injunction
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California Employment Development Department. EDD Switches Debit Card Service to Money Network
11
The New York Times. Bank of America Fined Unemployment
12
ABA Banking Journal. Fourth Circuit Revives COVID Benefits Lawsuit Against Bank of America
13
CourtListener. Mohamed v. Bank of America Docket