Bank of America faces another proposed class action that claims the financial institution has lacked urgency in securing unemployment benefits for Californians amid the COVID-19 pandemic.
The 28-page lawsuit is at least the third to stress that the Visa debit cards issued to California residents via the state’s Employment Development Department’s (EDD) contract with Bank of America are equipped with “outdated, easy-to-hack magnetic strips” in place of more secure EMV chips. According to the complaint, Bank of America’s “lackadaisical approach” to safeguarding unemployment benefits has “proven to be catastrophic” as the EDD’s debit cards became the target of “widespread fraud” last year, with Californians’ unemployment benefits stolen by way of authorized transactions.
Although Bank of America could have prevented the fraud by securing the EDD unemployment benefits debit cards with EMV chips, as it does with all other debit cards, the defendant failed to do so, the suit alleges. Last October, Bank of America, in an effort to address “rampant” fraud, froze the accounts of “roughly 350,000 EDD cardholders” and reversed credits given to others for fraudulent withdrawals, which created for many a negative balance in their EDD card accounts, the lawsuit says.
This conduct on the part of Bank of America has “effectively deprived EDD cardholders of unemployment insurance benefits to which they’re entitled and on which they heavily rely,” the complaint argues, stating that many EDD cardholders “remain unable to access their unemployment insurance benefits to date,” months after Bank of America initially froze their accounts.
Highlighted in the case is Bank of America’s “zero liability” policy with regard to EDD cardholders’ use of their debit cards. In the event of fraud, theft or loss, Bank of America’s account agreement with the EDD stipulates that cardholders are entitled to certain protections granted under federal law, i.e. Regulation E, the suit says. The case relays, however, that Bank of America’s zero liability policy for EDD cardholders states, in pertinent part, that federal law “… may limit your liability for unauthorized transactions on your account, but you may still be liable in some circumstances. Under the Bank of America ‘zero liability’ policy, you may incur no liability for unauthorized use of your Card up to the amount of the unauthorized transaction, provided you notify us within a reasonable time thereafter.” A “reasonable time” in which to report fraud, the lawsuit says, is determined by Bank of America at its sole discretion based on certain circumstances “… but will not be less than the [2 business day] time frame specified under the Electronic Funds Transfer Act of Regulation E.”
Thus, an EDD cardholder who may be liable for fraud, theft or loss under Regulation E “would likely not incur any liability under Bank of America’s Zero Liability Policy” as long as the bank is timely notified, the complaint specifies.
Despite the foregoing, Bank of America’s use of outdated magnetic strips for its EDD benefits cards, instead of small, metallic EMV computer chips, which provide greater security, makes the cards an easy target for hackers, the lawsuit says:
“All a hacker would need to create a duplicate card, which could then be sold on the black market, is data from a single purchase made using the card and the cardholder’s personal identification number.”
The case claims that while Bank of America is well aware that EMV chips provide greater card security, and decided to equip all credit and debit cards with them as far back as 2014, the defendant declined to do so for EDD cards. The decision ultimately came back to bite the bank and Californians receiving unemployment benefits amid the COVID-19 pandemic, the suit says:
“In mid-2020, between hundreds and thousands of dollars’ worth of unemployment insurance benefits were fraudulently stolen from EDD cardholders through a host of unauthorized transactions. These unauthorized transactions included unauthorized ATM withdrawals and unauthorized purchases on food delivery apps, such as DoorDash and Postmates, and at major retailers, like Target and CVS. In some instances, EDD cardholders reported never having even used their BoA EDD Cards.”
As the lawsuit tells it, Bank of America “bears direct responsibility for this fraud.” Adding insult to injury, the case continues, Bank of America cardholders victimized by fraud, despite the defendant’s promise of 24-hour customer service, were met with “long delays, dropped calls, and illusive answers” in their attempts to resolve the problem, according to the suit.
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