EDD debit card program rife with fraud, reports of unemployed Californians not getting their money

Editor's Note: This story has been updated to correct the number of complaints BOFA received through the Consumer Financial Protection Bureau.

With rent due, Daryl Stanczack was counting on money from unemployment, but on November 1, he found he was overdrawn.

"You expect to get it," said the Long Beach resident. "You expect to have it there." 

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. 

The bank is responsible for issuing and administering the cards for the state of California.

"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.’"

He's far from alone. In fact, a FOX 11 investigation found the EDD debit card program is rife with scammers, complaints and problems. 

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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.

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."

"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. 

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.

"Is the fact that the state is making money off it impacting their choices?" Saunders asks. "We don't know."

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. 

"We definitely should know how much the consumer is paying in fees." Saunders said. "We should know
if there is a way of reducing those fees."

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.

"When people are getting in and taking people's money, that's not good." Stanczak said. "They have to find a better way."