NY Attorney General Penalizes Bank for Freezing Customer Accounts
In a recent investigation, the New York Attorney General, Letitia James, has penalized a national bank for freezing its customers’ accounts and transferring the funds to debt collectors. The bank, Pathward Bank, based in South Dakota, was found to have illegally sent tens of thousands of dollars from New Yorkers’ accounts to debt collectors and froze over 1,400 clients’ accounts.
Violations of Exempt Income Protection Act
- The investigation by the Office of the Attorney General (OAG) revealed that Pathward Bank violated New York’s Exempt Income Protection Act (EIPA).
- The EIPA prohibits banks from freezing accounts that contain certain government benefits like Social Security, veterans’ benefits, disability insurance, and unemployment insurance, up to $3,425.
AG Letitia James’s Response
- Attorney General James expressed concern over the bank’s actions, stating that vulnerable New Yorkers had their money taken out of their accounts by an institution they trusted.
- She emphasized that Pathward’s illegal actions deprived New Yorkers of their hard-earned wages and essential government benefits.
Remediation and Compensation
- Pathward Bank has agreed to pay a sum of $79,664 plus interest to 88 affected New Yorkers and a penalty of $627,000 for the violations.
- Despite the violations, Pathward cooperated with the investigation and began to rectify its illegal practices voluntarily.
Financial Impact and Assets
- As of March 2023, Pathward Financial had $6.868 billion in assets, indicating the significant financial impact of the penalties imposed by the New York Attorney General.
Hot Take: Upholding Customer Rights and Accountability
It is crucial for financial institutions to adhere to regulations that protect customers’ rights and prevent unauthorized access to their funds. The actions taken by the New York Attorney General against Pathward Bank highlight the importance of accountability and transparency in the banking sector.
Sources:
– New York Attorney General’s Office
– Pathward Financial Assets
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