Bank of America froze SLO County residents’ unemployment benefits because of fraud
Massive amounts of fraud hitting the accounts of people who receive state unemployment benefits through Bank of America debit cards have led to frozen accounts and a stressful holiday season for an untold number of Central Coast residents.
Unlike the rampant fraud plaguing the unemployment insurance system’s enrollment process — in which hundreds millions of dollars have gone to illegitimate recipients, including prison inmates — this latest kink in the California’s Economic Development Department’s (EDD) benefits systems is being compounded by Bank of America’s fraud prevention and customer service departments.
Most EDD beneficiaries receive their weekly unemployment insurance or pandemic unemployment assistance funds via debit cards issued and managed by Bank of America, which is operating the accounts under a contract with California EDD.
But due to hundreds of thousands of fraudulent withdrawals on their debit card accounts, unemployment and state disability insurance recipients have had funds taken from their cards or their cards frozen by the bank, leaving them unable to access their benefits.
Bank of America freezes SLO County residents’ accounts
Two San Luis Obispo County residents told The Tribune that Bank of America froze the debit card accounts through which they receive state unemployment benefits in October — due to fraudulent withdrawals from the Las Vegas area in July.
Although the locals were credited their money back after the fraud, Bank of America rejected their claims months later, leaving them out thousands of dollars as the holidays neared.
Cori Ramsay, a San Luis Obispo hair dresser, said her EDD Bank of America account was hit in July with a series of balance inquiries and ATM withdrawals in specific increments from Las Vegas. After contacting the bank, Ramsay said she was credited back the fraudulent withdrawals.
Then, without notice, the bank debited her account for several hundred dollars more than the funds it had previously returned, overdrafting the account by about $1,600.
All told, Ramsay was out approximately $3,300, according to bank statements reviewed by The Tribune, while she was in the middle of moving homes.
“It made me feel afraid. I felt like I wasn’t going to be able to pay a single bill, and I couldn’t go and find another job because I’m homeschooling my daughter” due to COVID-19, she said. “I thought I was being assisted and that the system was working and that B of A was on my team — they weren’t.”
Ramsay estimated that she called Bank of America four times after the money was removed from her account, spending between two and four hours on hold each time.
San Luis Obispo resident Cassidy Phelan, who shared a similar story, says her EDD account was drained of $3,000 in 12 hours in July by someone at an ATM in Las Vegas. She immediately reported the fraud, and the money was returned to her account by Bank of America 10 days later.
“All was fine until Oct. 2, when every single dollar that had been credited back to me was taken out of my account again, in the exact same increments it was stolen in,” Phelan wrote in an email.
Bank of America directed her to EDD, who directed her back to the bank’s fraud division.
Phelan said she called Bank of America about twice a week during that period, waiting on hold for at least three hours each time, and each time getting a different customer service representative.
“I sometimes am told that it was a ‘glitch in the system’ ... sometimes I’m told that my claim is being escalated, sometimes I’m told that I have opened a new claim, but most of the time I’m told to wait it out,” Phelan wrote. “I have spent almost two months with absolutely no money. Every payment I am receiving from the EDD is only making my account less negative, and I am losing money that I need to survive.”
The Tribune contacted Bank of America about Ramsay and Phelan’s claims on Dec. 9.
On Saturday, both women received full refunds from the bank.
Bill Halldin, a California media relations representative for Bank of America who referred their cases for further review at the request of The Tribune, said that the EDD program is “unfortunately riddled with billions of dollars in fraud.”
“The criminals don’t ever stop — even calling Bank of America and the news media trying to get money from the bank with fake claims,” Halldin said. “We review every claim and restore money promptly to the debit cards of legitimate unemployment recipients. We have added thousands of additional agents to answer phone calls and investigate claims for areas of the program we are responsible for and, as a result, our average wait time for callers has dropped dramatically.”
California lawmakers respond to fraud concerns
By late November, state legislators’ office were being slammed with requests for help from constituents regarding problems with EDD applications and payments.
On Nov. 24, a group of 59 lawmakers in the California State Assembly and California State Senate wrote to Bank of America CEO Brian Moynihan with “a new and significant concern” about frozen Bank of America EDD debit cards.
The lawmakers cited media reports estimating that at least 350,000 Californians were without access to their insurance benefits owed to them — and noted that, according to the EDD, only about 8% of the bank’s debit card cases had been resolved at the time of the letter.
According to the letter, EDD told lawmakers that Bank of America has a proprietary formula to detect fraud and freezes accounts and takes funds when detected.
Even though Bank of America is contracting with EDD, state lawmakers and EDD officials have no means to intervene in their process.
“The only recourse that EDD and our offices can currently provide constituents is to call Bank of America when these problems occur,” the lawmakers’ letter reads. “However, constituents report they are unable to get through to your call centers, or when they do, the issue is not resolved.”
The letter says that many of the lawmakers’ staff have also tried to reach bank officials “to no avail.”
“It is simply unacceptable that Californians entitled to benefits are suddenly not able to obtain them due to a Bank of America determination that is impossible to appeal,” it says.
The letter asked for an explanation for the problem and what the business intends to do about it by Dec. 1.
Bank of America explains unemployment benefits fraud
On Dec. 7, Brian Putler, Bank of America’s director of California government relations, sent a five-page letter in response to the state legislators’ letter, saying the bank is working to “ensure valid claimants have timely access to their benefits against a backdrop of the unprecedented levels of unemployment benefits fraud occurring in California.”
Putler wrote that between March and late November, more than 8.2 million cards had been issued at the direction of EDD with a cumulative amount of $105.1 billion in benefits issued.
“While benefit payments have been received and used by the vast majority of intended recipients without incident, some benefits recipients have experienced issues,” Putler wrote. “Most of the complications appear to result from stolen cards, identity theft, or other types of fraud. ... Given the unprecedented volume of fraud in the program, identifying legitimate claimants from among the high number of fraudulent claimants is time consuming and challenging.”
Should a claim of fraud not be substantiated, the bank will close a claim, and if it has issued any temporary credits pending its investigation, will reverse those credits and debits in the account.
Putler wrote that, in September, EDD directed Bank of America to freeze approximately 345,000 accounts due to concerns over possibly fraudulent activity. Based in part on the relatively low volume of complaints to the bank’s call centers over those frozen accounts, the financial institution estimates that a very small percentage of those accounts may be legitimate, he wrote.
Fraudulent activity in those accounts came to the tune of approximately $2 billion, the letter says.
In addition, Bank of America froze another roughly 62,000 accounts because those accounts triggered various fraud alert indicators, pursuant to the bank’s federal Anti-Money Laundering and Bank Secrecy Act obligations, the letter says.
Putler said that the fraud hitting Bank of America accounts comes as the bank was working with EDD to create more fraud prevention measures.
As a result of those efforts, he wrote, the state agency and the bank identified more than 640,000 accounts for EDD to evaluate as to whether account activity was fraudulent and the associated cards should be frozen or the accounts closed.
Putler wrote that investigation into those accounts revealed widespread fraud, including 76,000 benefits cards sent to recipients in states that don’t border California, as well as numerous cases of multiple cards sent to a single mailing address, cards using the same phone number or email address, and benefits issued to infants or centenarians.
The bank says it also uncovered for EDD cases in which fraudsters not only withdrew initial funds provided by the state, but also received additional credit from Bank of America in the hundreds of millions of dollars after filing false claims of loss themselves, “essentially attempting to double-dip the fraudulent removal of funds.”
Bank of America says it’s now working to streamline the process for EDD to validate legitimate cardholders through verification of identity so that the bank can reactivate their accounts when directed by EDD to do so.
“Once Bank of America receives the requisite information from EDD, we initiate the process to unfreeze the accounts, subject only to a brief review to determine whether Bank of America has any additional information regarding potentially fraudulent activity that should be considered before unfreezing the card,” the letter reads.
Putler said it typically takes two to three business days to reactivate accounts at that point.
He said the bank has unfrozen approximately 54,000 accounts since Sept. 1.
“Given the scale and brazenness of the fraud with which we are dealing, this is a process that we are working with EDD to expedite but which we all recognize can take more time than anyone likes,” Putler wrote.
In response, the bank has expanded its call center and claims staffing to more than 6,150 employees and has proposed to EDD measures outside the scope of their current contract, including establishing a call center dedicated to authenticating frozen accounts, and streamlining communication with law enforcement.
The bank has not, however, established a streamlined customer service website or hotline for EDD recipients contesting frozen accounts.
Central Coast assemblyman calls for a fix
Bank of America’s response doesn’t impress California State Assemblyman Jordan Cunningham, who represents San Luis Obispo and northern Santa Barbara County.
He said that, as of Dec. 9, his office had been contacted by roughly 25 constituents seeking help on their frozen debit accounts.
Cunningham — who has called for a complete overhaul of the EDD — says his office has helped thousands of local residents navigate their unemployment benefits during the COVID-19 pandemic.
But he said the frozen debit card issue has been a different beast.
“We’ve been on top of this, but our attempts to reach Bank of America have not been returned,” Cunningham said, adding that his office has established communication with EDD, a state agency, but banks are private businesses.
“It’s my understanding the bank will freeze the accounts, do an investigation, unfreeze the account — my guess is they’re kind of swamped,” he said. “(Dealing with a bank’s fraud claims process) can be a major pain in good times, and if you’re depending on that money, what are you supposed to do?”
Though he was not among the lawmakers to petition Bank of America, Cunningham said he would have joined in signing the letter had he been aware. As a contractor for the state, he said, it’s the bank’s obligation.
“I suspect Bank of America is going to have a lot of backlash, and maybe they’ll invest resources to get this fixed,” Cunningham said.
The lawmaker called on the bank to “take a little out of your bottom line” and create a dedicated division of staff and a specialized hotline to return funds to legitimate recipients.
In the meantime, Cunningham encouraged anyone experiencing the problem to contact his office at 1304 Broad Street in San Luis Obispo or call 805-549-3381.
