Direct Express
Comerica Bank v. CFPB
Date: Dec. 6, 2024
Issue: Whether Comerica Bank mismanaged the U.S. Department of the Treasury’s Bureau of the Fiscal Service’s Direct Express program, which distributed benefits via debit cards.
Case Summary: Following Comerica Bank’s lawsuit against the CFPB over its investigation into the bank’s management of the Direct Express benefits program, CFPB countersued Comerica, accusing the bank of mishandling the government benefit card program.
Fiscal Service created the Direct Express program to provide recipients of federal benefits with consumer-friendly debit card accounts through which they can receive and use benefit payments. In 2008, Fiscal Service conducted a competitive selection process and chose Comerica to be the service provider for Direct Express. Comerica has remained the service provider for Direct Express throughout the program’s existence. Fiscal Service has exercised oversight and control over the program since its inception.
In 2021, CFPB launched its investigation of Comerica’s administration of Direct Express by issuing a Civil Investigative Demand (CID). Comerica asserted that it incurred significant legal fees and expended substantial resources by providing the requested information in its CIDs. Afterward, CFPB informed Comerica it was considering legal action, including bringing a claim alleging Comerica’s customer service practices in connection with Direct Express constituted an unfair or abusive act or practice (UDAAP).
In November, Comerica Bank sued the CFPB in Texas federal court, alleging the bureau exceeded its authority under the Consumer Financial Protection Act and Dodd-Frank Act by investigating the Direct Express program. In its complaint, Comerica claimed CFPB’s allegation that its customer service deficiencies are UDAAPs and its allegation that it did not have proper fraud controls exceeds the CFPB’s statutory authority under the CFPA. Comerica also argued CFPB’s current funding method violates the Appropriations Clause and the Dodd-Frank Act. Finally, Comerica argued that the CFPB’s enforcement activity violated its constitutional due process rights. Comerica maintained that due process requires the CFPB to provide fair notice before attempting to regulate specific categories of activities. The company asserted that the CFPB’s threat to initiate enforcement actions based on new interpretations of UDAAPs infringed on its due process rights, as it lacked fair notice of the bureau’s adoption of such broad and flawed interpretations of the CFPA.
As a result of its investigation, CFPB sued Comerica alleging it violated the CFPA by: failing to provide consumers with a reasonable way to obtain effective and timely assistance; forcing consumers to close their accounts and request new cards, causing them to lose access to their accounts; failing to provide consumers with accurate and complete information; and charging cardholders ATM withdrawal fees they did not owe. CFPB also claimed Comerica violated the Electronic Fund Transfer Act (EFTA) by failing to honor timely submitted stop-payment requests and failing to timely investigate notices of error.
Finally, CFPB claimed Comerica violated Regulation E of the EFTA by failing to: notify cardholders that provisional credit was made final; provide notification of the date and amount of the debiting of previously issued provisional credit; notify consumers it will honor checks, drafts, and preauthorized transfers for five business days after debiting previously issued provisional credit without charging overdraft fees; and provide on periodic statements a telephone number and address to be used for inquiries or notices of error.
Bottom Line: Comerica’s answer to CFPB’s complaint is due Feb. 4, 2025.
Documents: Complaint
