New York AG to Bank: Freeze! No More Restraining Protected Consumer Funds

  • New York AG Letitia James entered into an Assurance of Discontinuance with national bank Pathward, N.A., f/k/a MetaBank, to resolve an investigation into Pathward’s handling of customer accounts and settle claims that the bank violated New York’s consumer protection laws and Exempt Income Protection Act (EIPA), which prohibits banks from freezing consumer accounts containing protected funds, such as government benefits and funds below a certain threshold.
  • According to the Assurance of Discontinuance, Pathward allegedly violated the EIPA by either directing or failing to prevent third-party servicers from unlawfully freezing consumers’ accounts more than 1,400 times and remitting those funds to debt collectors, and failed to accurately describe account holders’ rights in account agreements. Pathward did not admit to the allegations in the AOD.
  • Under the terms of the AOD, Pathward will pay $627,000 in civil penalties and costs and more than $79,000 in restitution; ensure that its conduct complies with the EIPA; provide third-party servicers with guidance on complying with the EIPA and legal process; ensure that the servicers’ policies and procedures have been revised accordingly; provide the AG’s office with proposed revisions to the legal process section of standard-form account agreements used by servicers; and be subject to ongoing monitoring and compliance by the AG’s office.