California unemployment debit card contractor Bank of America lost “hundreds of millions” of dollars last year as it scrambled to address record jobless claims, rampant fraud and a flood of consumer complaints, a senior bank executive told lawmakers today.
The assertion came at a state hearing hours after a new audit slammed the California Employment Development Department (EDD) for years of mismanagement and technical errors that culminated in a failure to respond to skyrocketing unemployment after Covid-19 lockdowns.
More than an hour into the contentious Assembly budget committee meeting, the bank, which works with the state agency, was directly asked how much it has made on the contract it has held since 2010—a question that both the bank and the state have repeatedly refused to answer when asked by CalMatters.
“With respect to what the bank has earned last year, we’ve actually lost hundreds of millions of dollars on the contract,” said Faiz Ahmad, managing director of transaction services for Bank of America. “We never really mention it because it pales in comparison to the scale of the human cost of the pandemic.”
Bank of America previously told state officials that it has increased customer staffing more than twentyfold, to more than 6,000 people, as it responded to intense anxiety about unemployment fraud in California and other states where it administers unemployment debit cards.
The bank’s decade-old contract with the agency was offered at no direct cost to the state, with the bank instead earning revenue from merchant transaction fees and gaining access to millions of potential customers, a copy of the contract obtained by CalMatters shows.
In the Covid-19 era, however, that deal has been complicated by finger-pointing between the bank and the state about who is to blame for jobless Californians ensnared in fraud crackdowns, some losing their homes or struggling to care for loved ones while unable to access badly needed unemployment benefits.
Bank of America contends that the “vast majority” of fraud was linked to fake applications that the state failed to catch, rather than hacked debit cards.
Meanwhile, state personnel also struggled to answer lawmakers’ questions about how to make claimants’ whole.
“People are still suffering,” newly appointed EDD Director Rita Saenz said. “We still lost the money. There’s no sugar-coating that.”
What happens next is unclear. California Labor Secretary Julie Su on Monday said that the state has confirmed at least $11 billion in unemployment fraud during the pandemic, mostly impacting federal emergency programs started in the spring, with an additional $19 billion under review.
Several lawmakers have proposed new measures to add a direct deposit option for state unemployment payments and further reform the program. Earlier this month, debit card disputes with Bank of America boiled over into a class-action lawsuit over the bank’s alleged failure to secure unemployment claimants’ accounts.
At Tuesday’s hearing, Assemblywoman Wendy Carillo, a Democrat from LA, called some of the bank’s more muted responses “disturbing” after she recounted stories of desperate constituents ending up on the street or threatening to harm themselves.
Around 450,000 unemployment debit cards remain frozen, Bank of America’s Ahmad said. How many may turn out to be legitimate claimants, however, is still unknown.
This article first appeared on CalMatters, a nonprofit and nonpartisan media venture.
It’s so sad to see the BankAmerica/Bank of America name tarnished this way; however, those of us in the know realize this is just NationsBank masquerading as the B of A it acquired in a merger. NationsBank executives out of Charlotte were wise enough back then to “adopt” the B of A name.
Still, this latest episode has A.P. Giannini turning in his grave yet again. This is not the Bank of Italy. This is not B of A.
I suspect few or no people have sympathy for B of A.
As for Mr. O’Connor’s comment, note even the sophisticated “BA” logo was replaced by the dumbed-down gimmicky, TACKY fake-3D flag symbol.
Charlotte itself continues to grow (becoming the South’s shinier, new second city replacing Nashville in many’s eyes as early as the 1990s, making the Wall Street Journal for Yankees moving there, etc.) and in a way it didn’t surprise some of us that something in Charlotte took over something in San Francisco, which we knew was obvious with NationsBank. It was still remarkable to us and a big disappointment to those of us Bay Area natives, in particular.
> California Labor Secretary Julie Su on Monday said that the state has confirmed at least $11 billion in unemployment fraud during the pandemic, mostly impacting federal emergency programs started in the spring, with an additional $19 billion under review.
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We’re fining people for not wearing masks or social distancing. We’re forcing business to go out of business because of COVID-19.
Shouldn’t someone be held accountable for allowing or enabling $30 billion in COVID-19 related fraud?
I suggest arresting the Governor and every member of the state legislature and throwing them in jail and seizing their assets. And, include immediate family members and mistresses, too.
Let’s not forget that EDD’s deficiencies were reported since their inept response during the Great Recession. Hope the Newsom Recall initiative gathers sufficient signatures.
Unlikely that Newsom will face criminal charges like Michigan’s ex-governor over the Flint water crisis, but one can hope.
More glaring ineptitude by California’s incompetent and inefficient state government. A simple, sensible task like cross-checking state prison and county jail rosters against claimant applications failed to be ordered and generous debit cards were freely distributed to virtually anyone who applied. Those responsible, including the Governor, should be held fully accountable. $30 billion is a ton of money.
I vote Sam Liccardo for Governor once Newsome is removed.
A backbone is a prerequisite for the job, so he’s not qualified. Brains are too, so Newsom has to go.