Freezing Accounts and Transferring Funds
New York Attorney General Letitia James has penalized Pathward Bank, a national bank, for illegally freezing customers’ accounts and transferring their funds to debt collectors. An investigation by the Office of the Attorney General (OAG) found that Pathward froze hundreds of accounts more than 1,400 times and transferred tens of thousands of dollars to debt collectors.
Violating Exempt Income Protection Act
According to the AG, Pathward violated the state’s Exempt Income Protection Act (EIPA), which prohibits banks from freezing accounts that include certain government benefits, such as Social Security, veterans’ benefits, and unemployment insurance, up to $3,425.
Victims and Reimbursement
The OAG determined that Pathward repeatedly violated the EIPA by instructing third-party servicers to freeze accounts and transfer funds to debt collectors. Many of the frozen accounts had balances under $800, which is well below the EIPA threshold.
Pathward has agreed to pay $79,664 plus interest to 88 affected New Yorkers and a penalty of $627,000. The AG’s office is refunding victims for the funds they lost due to Pathward’s illegal actions.
Bank’s Cooperation and Remediation
James noted that Pathward cooperated with the investigation and voluntarily began to address the illegal practices last year. Pathward Financial had $6.868 billion in assets as of March 2023.
Contacting the Attorney General’s Office
If you suspect that money is being improperly removed from your bank account, you are encouraged to contact the Attorney General’s office immediately.
