North Carolina-based Bank of America Corporation (BAC - Free Report) has been charged with a proposed class action lawsuit, whereby it is accused of extorting excessive fees from thousands of Arizona prison ex-inmates.
The lawsuit has been filed in federal court in Phoenix and accuses the bank of exploiting "one of the most vulnerable groups imaginable." The group consists of people coming out of Arizona prison, who were issued debit cards at the time of their release, as they had no job or a place to live in.
Per the lawsuit, more than 19,000 inmates are released each year by the Arizona Department of Corrections. The Bank of America has an exclusive right to issue the cards to Arizona inmates and can impose whatever terms it wants. Ultimately, the prisoners are left with no choice than to resort to fee-laden cards to obtain their own money from inmate accounts. The prepaid cards are the only source for the inmates to get back their confiscated money when they were arrested or the money they earn through work programs.
According to lead counsel for the ex-prisoners, Richard Golomb, the fees were based on a debit card contract that the ex-inmates “never agreed to and never signed.” Both the representatives of Bank of America and the Arizona Department of Corrections were unavailable to comment on the matter.
The lawsuit further accuses the bank of charging such fees, which the ordinary customers would not have to pay. The covered inmates were sometimes charged with a fee for just inquiring about their account balance or had to pay $15 to withdraw money at a bank’s teller window.
In addition, the charges highlight the fact that the issued debit cards took advantage of a loophole in the federal regulations meant to protect the rights of other customers. Also, per the U.S. Electronic Funds Transfer Act and related regulations, companies cannot force individuals to receive wages on prepaid debit cards. The rule does not apply to one-time payments to ex-inmates, except in the case of "recurring" payments.
Notably, Bank of America is the latest bank to face lawsuit associated with prepaid cards issued to prisoners. Earlier, in Aug 2016, JPMorgan Chase & Co (JPM - Free Report) had faced a similar class action for exploiting the U.S. Bureau of Prisons’ ex-inmates in relation to issue of debit cards. JPMorgan had agreed to pay $446,822 in settlement.
Currently, Bank of America carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Other stocks that warrant a look in the same space include Northern Trust Corp. (NTRS - Free Report) and The Bank of New York Mellon Corp. (BK - Free Report) , each holding a Zacks Rank #2. Notably, both the stocks have a decent earnings surprise history, recording an average positive earnings surprise of 4.02% and 6.9%, respectively.
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