Rampant fraud has led the state of California to hire a new provider for its unemployment debit cards. The Money Network, owned by Fiserv, has taken over the account from Bank of America (BoA), which did not have fraud prevention chips in its cards or allow for direct deposit. According to a report from KCRA TV in Sacramento, California’s Employment Development Department (EDD) paid out more than $32 billion to fraudsters.
At one point, the fraud got so bad that BoA had to stop making new credit cards for its own customers due to the high volume of EDD cards it needed to send out. The bank was also the subject of a class-action lawsuit filed by a San Francisco real estate agent in 2021. She claimed she received a debit card after becoming unemployed, but that unauthorized transactions on her card eventually emptied the account.
California Governor Gavin Newsom assembled a task force of experts to examine the problem. They recommended using direct deposit, chip technology and tap-to-pay as means of streamlining the process and combating fraud. Money Network, which already had the contract for California’s Middle Class Tax Refund, won the contract through a competitive bidding process. In awarding the contract, EDD praised Money Network for its “enhanced customer support, and a 24/7 help center with staff who speak multiple languages,” as well as its capacity for providing direct deposit.
BoA Responds
Bank of America has downplayed its role in the fraud claims. “The vast majority of unemployment fraud is committed by those filing false applications,” the bank claimed in a statement. “When fraudulent transactions occur on benefit cards, we review those claims and restore money to legitimate recipients.”
But the bank had also decided to stop providing unemployment services. “We have advised the state that we would like to exit this business as soon as possible,” BoA said in the summer of 2021. Its agreement with EDD gave the state the “sole option” to renew its two-year contract, which it had done as recently as June 2023.
Money Network is taking over full responsibility for the benefits on February 15, and the BoA cards will remain active until April 2024. Direct deposit, according to EDD, will finally be available to California’s unemployed sometime next year. EDD will pay Money Network an estimated $32.3 million over the next five years to cover the costs of the direct deposit transactions.
