Credit card customers had filed a class action accusing the bank of signing them for its Credit Protection Plus service without their permission or through deceptive marketing and giving them nothing meaningful in return for the monthly fees they were charged.
Bank of America admitted no wrongdoing in the proposed settlement, but agreed to wind down the service.
In the meantime, the bank agreed to waive or eliminate several restrictions it had imposed before enrollees could receive benefits, including employer verification of involuntary unemployment or disability and waiting periods before the service’s benefits kicks in.
The $20 million will be put into a fund administered by lawyers who brought the action.
Customers who say they were enrolled in the program without their consent or through deceptive advertising will be eligible for up to $50 from the fund, while those who say they were denied the benefits they expected can get up to $100.
Customers will have until February 26, 2013, to submit claim forms to receive a distribution from the fund.
The proposed settlement, which was preliminarily approved by U.S. District Judge Thelton Henderson in San Francisco, limits attorneys’ fees to $6.6 million.
The final settlement approval hearing is scheduled for January 14, 2013.