National Bank Settles with NY Attorney General for $700K

​On April 17, 202​4, the New York State Attorney General (NY AG) announced that it entered into an Assurance of Discontinuance​ (AOD) with​ a national bank, resolving​ allegations related to the bank’s debt collection practices.  The bank is a nationally chartered bank that issues debit cards, prepaid cards, payroll cards, and gift cards, primarily through third-party servicers, many of whom “market the products to unbanked or underbanked communities who may otherwise have no or no readily available access to banking products​.”

The NY AG alleged that the bank froze or otherwise restrained consumer accounts that were subject to legal process – such as levies – for collection of debt, in violation of New York’s Exempt Income Protection Act (EIPA).  EIPA prohibits banks from freezing consumer accounts that contain certain amounts of protected funds, such as Social Security benefits, veterans’ benefits, disability insurance, unemployment insurance, and protected wages.  According to the NY AG, the bank allegedly instructed its third-party servicers to freeze accounts​ whose balances were well below the threshold​ mandated by EIPA for protected funds.

The national bank cooperated with the NY AG’s investigation and has already begun voluntary remediation efforts.  The AOD provides that the bank will continue these remediation efforts and pay $79,664.67 in restitution to the state and $627,000 in penalties and costs.