Security & Fraud

Warren Seeks Better Fraud Protection For Gov’t Prepaid Programs

Sen. Elizabeth Warren, D-Mass., has asked the Treasury Department to boost fraud protection in the Direct Express prepaid program after hundreds of federal benefits recipients were victims of fraud.

Direct Express, which allows Americans without bank accounts to access their federal benefit payments via prepaid debit cards, is currently administered by Texas-based Comerica Bank. The program’s contract is scheduled to be rebid in 2020.

“The fraud detection and reimbursement process in the Direct Express program needs to be examined with close scrutiny,” Warren wrote in the letter to Treasury Secretary Steven Mnuchin, which was obtained by American Banker.

Comerica disperses roughly $3 billion in Social Security and disability payments to 4.5 million Americans through the Direct Express program. Last August, Comerica closed part of the program — Cardless Benefit Access Service — after fraudsters were able to drain the accounts of beneficiaries through security flaws.

“Criminals have found a way around the controls that we put in place to safeguard cardholders,” Comerica senior vice president and director of government electronic solutions Nora Arpin said at the time.

“Comerica maintains that all 480 cardholders affected by the fraud schemes have received full reimbursement, but claims from my constituents and victims continue to raise questions,” Warren wrote in a six-page letter, which was also sent to Commissioner Kim McCoy of the Bureau of Fiscal Service. “Victims maintain that Direct Express never contacted them about the fraud, and there are hundreds of complaints on the Consumer Financial Protection Bureau’s Complaint Database and the Better Business Bureau’s website alleging unprofessional customer service and difficulties in the fraud reporting and reimbursement process.”

“The systems set up to prevent fraud under the Cardless Benefit Access program were not robust enough to prevent fraud when criminals obtained [private identifiable information] from other sources,” Warren added. “While no program is entirely fraud-proof, it is possible that a better-designed program could, and would in the future, reduce the risks of this type of fraud.”

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