Comerica Bank has agreed to settle a class action lawsuit regarding fraud perpetrated against the Treasury Department's Direct Express public benefits debit card program, which Comerica has managed since 2008, for $1.2 million, according to court filings.
Bloomberg News
Comerica Bank has agreed to a proposed $1.2 million settlement to resolve a class-action lawsuit alleging the bank denied refunds to prepaid cardholders who claimed their government benefits were stolen from a Treasury Department program.
The proposed settlement would end a five-year court battle against $79.4 billion-asset Comerica, which has faced allegations that it mishandled fraud claims, failed to reimburse customers and did not properly oversee third-party vendors of the Treasury Department's Direct Express program. The majority of the 4.5 million Americans using Direct Express do not have a bank account and receive monthly Social Security, Veterans and other benefits electronically on prepaid debit cards.
In the past month, beneficiaries have been sent postcards in the mail announcing the proposed settlement of the lawsuit, which is still pending in the United States District Court for the Western District of Texas. The settlement covers current and former Direct Express cardholders who submitted fraud claims between February 12, 2018, and September 28, 2022.
In 2019, eight beneficiaries sued Comerica and its third-party call center operator, Conduent Inc., alleging money was stolen from their Direct Express accounts and that the companies refused to issue refunds. A federal judge certified the class in 2022. Comerica and Conduent also administer various federal and state assistance programs.
Comerica and Conduent — a large conglomerate and call center operator based in Florham Park, N.J. — denied any wrongdoing. Even so, the two companies did not track fraud claims and were unable to identify and provide the court with the names of beneficiaries who had filed fraud claims over a four-and-a-half-year period, according to the 97-page proposed settlement.
"Defendants expressly reserve their position that Direct Express customers with claims as alleged in this case cannot be identified without an intense file-by-file review and overwhelming individual inquiry," the proposed settlement states.
Comerica won the first government contract to oversee the Direct Express program in 2008. The contract was renewed in 2014 and in 2020. In 2019, the Treasury's Office of the Inspector General initiated an audit of Direct Express including a review of corrective actions to be taken by the Bureau of Fiscal Service. The audit still has not been published or publicly released five years later.
In 2018, when allegations of fraud first surfaced, a Comerica executive told American Banker that the bank had discontinued a service offered to beneficiaries who had lost their cards but still needed to access their money. The executive claimed that the so-called Cardless Benefit Access Service had been exploited by criminals.
Last year, Comerica Chairman and CEO Curt Farmer and Chief Financial Officer James Herzog were sued by shareholders who allege the executives made materially false and misleading statements about the Dallas bank's oversight of Direct Express.
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