Debit cards were touted as a better alternative than checks for unemployed Californians. But a FOX 11 investigation reveals it's a program rife with fraud, complaints and worst of all, leaving people without their money.
He says he soon learned someone had duplicated his Employment Development Department (EDD) debit card and stole his benefits payment. But what surprised him even more was Bank of America's response.
I got to the bank and they're, ‘Yeah, this happens all the time, ’ he said. I'm like, ‘Wow, if this happens all the time they should change it, make it better.’
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He's far from alone. In fact, a FOX 11 investigation found the EDD debit card program is rife with scammers, complaints and problems.
This past July, the federal Consumer Financial Protection Bureau (CFPB) fined Bank of America $225 million over the bank's botched disbursement of unemployment benefits in multiple states during the height of the pandemic.
But our investigation has found innocent people are still being left in the lurch. Enter the search terms BofA and EDD in the CFPB website and you'll see complaints from about a dozen states.
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In recent weeks, beneficiaries have complained that their funds have been frozen for a year or that they had thousands transferred out of their account. Bank of America says it froze accounts due to widespread fraud, but in a letter to California lawmakers, the finance giant admitted at one point as many as 488, 000 accounts in California were frozen.
Among them were legitimate beneficiaries who tell FOX 11 they were left without their money at a time when businesses were shuttered and they needed their money the most.
In a statement to FOX11 Bank of America said, As California’s unemployment program faced tens of billions of dollars in fraud, Bank of America’s goal always was to ensure legitimate recipients could access their benefits. Bank of America partnered with the state to identify and fight fraud throughout the pandemic, identifying hundreds of thousands of suspicious cards and assisting the state in protecting billions of dollars.
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We need more clarity about what banks can and cannot do in terms of freezing your money if there's a problem, says Lauren Saunders, the associate director of the National Consumer Law Center in Washington, D.C.
The advocacy group takes on big banks as part of its mission to protect consumers. She says the state should have given beneficiaries should have a choice on how they get their payments.
The state of California rolled out the program back in 2010, partnering with Bank of America. The EDD argued many beneficiaries didn't have bank accounts and so the EDD debit card was better than sending checks.
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Bank of America would issue the cards at no cost to the state and in exchange, California would get a share of the profits. Most of the fees come from merchants, who pay up anytime a customer uses the card, but Bank of America would also collect interest on the funds in people's accounts.
We wanted to know how much the agreement has brought in for the state. The EDD's own documents show that it has collected almost $200 million from the agreement. The amounts were modest in the first year, bringing in hundreds of thousands of dollars a month. But then, during the pandemic, those numbers jumped to six million in just one month. In fact, 2020 was a profitable year for the state, raking in $47 million from the cards.
No one from the EDD agreed to go on camera, and when we asked for specifics on how the profit share is calculated, the EDD press office said they needed to check with their attorneys, then didn't get back to us.
Bank Of America Edd
We don't know how much came from consumer fees, but last year Bank of America told California lawmakers that it had brought in $687 million, but had spent $927 million. The Bank added it had lost $240 million between January of 2011 and the same month in 2021 in part due to criminals and fraud.
The bank now wants out of the EDD card business, but California said, no. The state exercised an option in the contract to keep the program going.
As for Stanczack, he got his money refunded, but wishes he'd been given a choice on how to get his money. He now has a new card and just interviewed for a job in his field of commercial plumbing, which he hopes will mean he won't have to worry about EDD scammers stealing his money again.SAN FRANCISCO (KPIX 5) -- Something very scary is happening to thousands of unemployed Californians who receive their government benefits through a Bank of America debit card - their accounts are getting drained by fraudsters.
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Bank of America has an exclusive contract with the State of California to handle Employment Development Department (EDD) benefits through special debit cards. About a month ago, we started hearing from people who have lost thousands of dollars they desperately need.
My heart dropped. I was scared, you know, said Tatiana Solorzano, still traumatized by a hack attack that happened a month ago. I thought they were going to do it again!
Solorzano, a single mother, receives her unemployment benefits through a Bank of America debit card and says a few weeks ago, there was a strange transaction on her account from another bank showing just zeros.
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It happened the second day, then again the third day. Once it was the third day they were finally able to hit my account for $1, 003, said Solorzano. Rent was due October 2nd, you know, I was like, 'Oh my God, that money got pulled out right when my rent is due!'
Others we spoke to had the same thing happen. I went to the bank to withdraw money from my EDD account and it said I had reached my daily limit, said Brandon Birkhofer. He told us the fraudsters pulled money out of his account five days in a row - he's out $5, 000.
Then there's Heather. She found out her debit card was compromised through a text message from Bank of America ... asking me if I had used my card in Las Vegas. Obviously I didn't, so I replied no, said she said.
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Bank of America turned down our request for an interview but told us it is working closely with EDD in an aggressive effort to fight fraud. EDD didn't want to talk to us either but confirmed it knows of 350, 000 people whose EDD debit card accounts have been frozen due to suspected fraud.
The most likely scenario is that there was a data breach, said Steve Morang, a certified fraud examiner with San Francisco-based accounting firm Frank, Rimerman and Company.
The fraudsters were able to capture the data of those cards, of those people, their accounts, the card numbers, and any other information they needed, in order to produce a duplicate card, said Morang.
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He suspects a large criminal enterprise is behind the fraud attack, that appears to have involved ATMs all over Southern California and Nevada. This is a massive operation, because these are physical cards that have to be printed, and then somebody has to go to those ATMs everywhere, said Morang.
He says the fraudsters can buy your secret pin number on the dark web. And he says the EDD cards make stealing your information especially easy, because unlike regular debit cards, they don't have a chip.
By having the chip, you have your information that's on the card encrypted in the chip and it makes it more difficult to duplicate the cards, said Morang. Whereas the magnetic strip, that's 30-, 40-year-old technology.
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Bank of America gets paid from the state to take care of this, so the fact that we don't have a chip it just signals to me that we are not as important as their other clients, said Goertzen.
The victims we spoke to say filing a fraud claim with Bank of America made them feel like second-class citizens, because unlike regular bank customers they had to go through a separate department.
I was on the phone for seven-and-a-half hours, disconnected every time. You get to the point where you are just exhausted, said Heather.
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Even worse, just days after finally filing their fraud claims came letters from Bank of America that appeared to deny them, saying, Your claim has been closed because we believe your account has been the subject of fraud or suspicious activity.
That's not fair, because they really didn't look into my case, said Solorzano. It was the little bit of money that I did have left, that I was saving, it's all that I have.
Since KPIX 5 submitted the names of 11 fraud victims to Bank of America the bank has applied credits to five of them, including everyone interviewed in this report. A spokesperson told us other claims will be assessed on a case-by-case basis.
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Interestingly, when we asked Bank of America why the EDD debit cards don't have chips a spokesperson suggested we ask EDD. We are still waiting for a
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