Bank of America told our sister station ABC7 News exclusively it wants to get out of the contract as soon as possible. It just shows no one wants any more of the torture of the past year, but the EDD had the sole option to renew this contract and it did, to the chagrin of lawmakers and the bank itself.
It means Bank of America will continue delivering unemployment benefits on EDD debit cards for up to two more years despite rampant fraud, frozen accounts and a class action lawsuit.
Plenty of state lawmakers and EDD cardholders are none too happy about it. They wanted changes in the contract or a different bank, but the EDD decided to renew the contract, without any changes, for up to two years. The EDD says it was the right move for now, but promises change in the future.
Steve Daly was shocked to find a thief had drained all $16,000 from his EDD debit card. Instead of reimbursing him, Bank of America froze his account.
"I found out about the hack when there was no money in my account," he said. "It was a nightmare. Nobody knew what was going on."
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Annmarie Garvey realized someone ran up $14,000 on her EDD account even before she got her debit card in the mail. The bank restored her money only to take it all back out, then froze her account too.
"I'm the victim and I'm being treated like the criminal," she said.
They are among thousands of fraud victims who say Bank of America made it impossible to get their benefits restored.
State lawmakers blasted EDD for renewing the exclusive contract with Bank of America to provide EDD debit cards, despite the widespread turmoil and fraud.
But as it turns out, Bank of America is equally dismayed. Just today, the bank told ABC7 News it wants out of the contract, saying: "We have advised the state that we would like to exit this business as soon as possible."
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The deal with EDD has brought plenty of grief to the bank as well. BofA claims it lost $200 million to criminals making phony claims of fraud on EDD debit cards, which they falsely obtained.
"Bank of America and EDD, unfortunately, left our constituents hanging at the worst possible time," said State Assemblymember David Chiu, D-San Francisco.
"What they have done is renewed a contract that has made Californians' life so miserable," said State Senator Jim Patterson, R-Fresno.
Now the bank is facing a class action lawsuit, which claims Bank of America failed to prevent fraud or even put security chips on debit cards, then automatically denied claims without investigation.
A judge ruled the bank likely broke federal law by rejecting claims and freezing accounts using only an automated fraud filter.
"This is a bureaucracy that has to face the music sooner or later," said Patterson.
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Bank of America says it received 230,000 claims of debit card fraud from last October to March. It denied more than half the claims, but says anyone can ask for a new review.
The EDD says the contract renewal gives Bank of America the time it needs to manage millions of ongoing accounts. It's also working with the bank to add security chips to the cards for the first time.
The bank said today it will meet its obligations, even as it wants out of the business.
The contract still includes a major financial perk for both the bank and the EDD.
Under the agreement, they share transaction fees generated every time someone swipes an EDD debit card. Those revenues skyrocketed during the pandemic. The EDD raked in more than $47 million from last March until this April, nearly five times more than in 2019.
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The bank did not disclose its share of the earnings.
"We were all surprised to learn that it's Californians who have to pay Bank of America to access their money," said Chiu.
"A split of state money fees collected with your contractor, that just smells," Patterson said.
We've found many cardholders so frustrated they are now having the EDD mail paper checks instead.
The EDD says it's also planning to offer an option for direct deposit of benefits into personal bank accounts, avoiding debit cards entirely.