WASHINGTON — The Consumer Financial Protection Bureau has sued Comerica Bank for failing people receiving federal benefits through the Direct Express program, the bureau said Friday.
The bureau accused Comerica Bank, a subsidiary of Comerica Inc., of deliberately disconnecting millions of customer service calls, charging illegal ATM fees to customers and mishandling fraud complaints.
"The CFPB is suing Comerica Bank for illegally harming disabled and older Americans who count on Social Security and other federal benefits," CFPB Director Rohit Chopra said in a statement. "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 CFPB asked the United States District Court for the Northern District of Texas, where the bank is headquartered, to stop Comerica's allegedly abusive practices, provide refunds and pay fines.
"Direct Express cardholders — including but not limited to older Americans receiving Social Security benefits, disabled Americans receiving Social Security disability insurance payments, and coal workers eligible for federal benefits related to black lung disease — have the benefit loaded onto the prepaid cards issued by Comerica, which they can use to pay for
groceries, gas, and other expenses," the bureau said in its lawsuit. "Since April 1, 2019, however, Comerica has impaired cardholders' ability to protect and access their funds by routinely providing deficient customer service to Direct Express cardholders."
Comerica in a statement said that the bank "has worked hard to serve these important cardholders and to address any issues in this complex program."
"Throughout the CFPB's investigation, we have cooperated by sharing information and data to illustrate the unique nature of this program and the fact that we operate with the oversight of the Fiscal Service," a Comerica spokesperson said. "Despite our good faith efforts to provide this critical context, the CFPB has consistently ignored our arguments and documentation."
"We will continue to vigorously defend our record as the financial agent for the Direct Express program and remain committed to serving our cardholders," Comerica said.
The lawsuit is the latest chapter in a longstanding saga between the CFPB and Comerica. American Banker first reported in 2023 that Comerica Bank officials privately acknowledged significant compliance shortcomings of the Treasury Department's Direct Express program and Comerica's role in it.
A bank executive, in documents obtained by American Banker last year, said that Comerica faced a "serious contract violation" for allowing fraud disputes and data on Direct Express cardholders to be handled out of a vendor's office in Lahore, Pakistan.
In November, Treasury named Bank of New York Mellon to take over the contract operating the Direct Express debit card program.
Earlier that month, Comerica sued the CFPB, saying the bureau's investigation into the company's administration of the program is unlawful. The bank accused the bureau of "pursuing an aggressive and overreaching investigation" of Comerica's role in administering the program.
In the CFPB's lawsuit against Comerica, the bureau accused the bank of cutting corners in its customer service to handle calls from Social Security and other benefits.
"When people had problems with their accounts, it was often impossible to talk to someone who would help," the bureau said. "The CFPB's investigation found that Comerica failed to ensure sufficient staff and even intentionally disconnected more than 24 million calls."
Customers whose calls were not dropped regularly waited several hours to speak with representatives who would help them with unauthorized transactions, charge disputes or lost or stolen cards.
Among the other alleged wrongdoing in the CFPB's lawsuit: Comerica's vendors frequently told consumers that "no error occurred" even when it was determined that enrollment fraud was present. Comerica allegedly failed to investigate incorrect or potentially fraudulent charges roughly 20,000 times when notified by a consumer. The bank also allegedly required thousands of cardholders to close their accounts to stop a preauthorized payment, which resulted in additional fees to regain access to government benefits.
