San Francisco Chronicle - (Sunday)
Jobless tussle with BofA over fraud
Victims who lost funds treated like criminals, suit says
It was an unpleasant surprise for Jennifer Yick when the Bank of America debit card holding her unemployment benefits was declined by a store. The San Francisco resident knew she had more than $400 in the account.
She logged into the bank website and saw four hefty DoorDash charges — even though she has never used the food delivery service.
“I felt suckerpunched,” she said. “They just drained it.” Then she embarked on a lengthy quest — “the tale of unending phone calls, hours on hold,” she said — to contact Bank of America about the theft.
Scores of jobless people tell similar stories about their unemployment benefits being hijacked from their Bank of America debit card accounts, and then struggling with the bank to get their money returned. A major classaction lawsuit against Bank of America, filed Thursday in U.S. District Court in San Francisco, seeks immediate changes to help those who lose funds, such as making it easier to report theft and not freezing accounts.
“This is a disaster for thousands of unemployed Californians who have lost their only lifeline in this pandemic,” said Brian Danitz, an attorney with the Burlingame firm Cotchett,
Pitre & McCarthy, who is colead counsel on the case, which consolidates nine previous lawsuits.
Bank of America was hired by the California Unemployment Development Department, which administers unemployment, to provide the debit cards. It has issued more than 9 million since the pandemic began.
The bank said in a statement that it works hard “to prevent criminals from getting money and ensur(e) legitimate recipients receive their benefits.”
“We have added thousands of agents to answer phone calls and investigate claims for the areas of the program we are responsible for and, as a result, our average wait time for callers has dropped dramatically,” bank spokesperson William Halldin said. “When fraudulent transactions occur on benefit cards we review those claims and restore money to legitimate recipients.” Faiz Ahmad, Bank of America managing director and head of global transaction services, told lawmakers in January that the bank has lost hundreds of millions of dollars on the California EDD contract, both through fraud losses and “the cost of serving the contract to the highest extent possible.”
Bank officials are keen to emphasize that most unemployment fraud was committed by criminals who submitted bogus unemployment claims using stolen or fake identities. That fraud, which the state said amounts to at least $11 billion, is a separate issue and not tied to Bank of America.
But the incidents of legitimate claimants whose funds were stolen from their cards is specifically covered by the bank’s agreement with California EDD. Its contract calls for claimants to incur zero liability if their funds were stolen. The lawsuit says the bank violated this provision.
Lawmakers say they’ve heard from thousands of constituents whose EDD funds have been stolen. The bank shed some light on the volume of the fraud in a February letter to Assembly Member Wendy Carrillo, DBoyle Heights (Los Angeles County).
“Since the pandemic began, we have reimbursed cardholders hundreds of millions of dollars for claims made where they may have been the victim of an unauthorized transaction or fraud on their card,” wrote Brian Putler, the bank’s head of California government relations. “Monthly (transaction-fraud) claims have ballooned from about one thousand claims in a month to tens of thousands late last year.”
Compounding the issue, Danitz said, is that the bank often freezes accounts once fraud is reported, so even if the victims get a replacement card, they cannot access any remaining funds or future benefits.
“Many EDD debit cardholders who are the victim of thirdparty fraud, and who turn to the bank for help, suddenly find themselves indefinitely deprived of access to all their EDD benefits and treated as if they are the criminals,” the lawsuit said. Both EDD and Bank of America said they are working to streamline verifying identities to unfreeze accounts as quickly as possible when fraud was suspected. People with debit card issues should contact the bank at 18666929374, the number on the back of the cards.
The lawsuit alleges that the bank left the door open for thieves by not outfitting the EDD debit cards with a security chip. That makes the cards vulnerable to devices called credit card skimmers that criminals install on top of legitimate card readers at places such as ATMs and gas pumps. The devices harvest card information from the magnetic stripes.
In Yick’s case, for instance, she bought gas with her card the day before the DoorDash charges appeared on her account. When she filed a report, police thought that was probably how fraudsters gained access to her account. “We have many unanswered questions about what Bank of America has been doing to prevent, investigate and address the fraud,” said Assemblyman David Chiu, DSan Francisco. “Why, when antifraud chip technology became industry standard years ago, was that not part of these debit cards? EDD recipients were secondclass consumer citizens when it came to antifraud technologies.”
Bank of America blamed the lack of chip technology on EDD. In a January Assembly hearing, bank officials said the agency requested cards with magnetic stripes.
“Neither the 2010 nor the 2016 contract required chipenabled cards, but we are currently working with BofA to have chip cards in the near future,” EDD said in an email. Some cardholders whose money was stolen said they had never used the debit cards, raising the prospect that the bank itself was hacked, the lawsuit said.
“This is a big bank and they ought to know how to do this without people being ripped off, and (criminals) figuring out how to access these cards,” said Mary Alexander, a San Francisco attorney involved in the case. “They have known since at least 2008 that you put chips in these cards.”
San Francisco resident Frank Jaworski actually discovered his card being hijacked in real time, but still couldn’t get Bank of America to act. The bartender had a high balance in his unemployment account because he had just received several weeks of benefits.
After the card was declined twice, he tried to access the website and found that his login and password had been changed. An hour of calling connected him to a bank representative who said that $3,480 — pretty much all his money in the world — was being transferred to another bank.
“I insisted that I did not make that transfer, and that they should mark it as fraudulent, and not let it go through,” he said. “The rep said they couldn’t stop it.” Neither that rep nor three others could help him change his login and password for the website, he said.
The next day Jaworski went in person to a Bank of America branch, but couldn’t enter because it was at COVID capacity, then tried calling again and again. (The bank said that its branches cannot handle issues with the debit cards.)
After being locked out of his account for days, he got a replacement card in the mail, changed his login — and discovered that his balance was a whopping 61 cents.
“I’ve gone through all my groceries and have nothing left,” he said in March while still trying to get his money back. “My bills are due.”
After two nerveracking weeks, the bank restored his money.
“It was a tremendous sense of relief, but also an expedient, almost frantic trip to the BofA EDD website to initiate a transfer of every remaining cent to my Patelco credit union account,” he said.
He’s now set up his account to automatically transfer unemployment benefits to his credit union account and plans to make frequent manual checks.
As for Yick, she still hasn’t gotten her money back. She has returned to her work as an Airbnb property manager, so she feels fortunate that she’s not as desperate for funds as many others. Still, she’s angry.
“It’s as if I never existed,” she said. “I want accountability. I want the bank to step up.”