SAN FRANCISCO (KGO) -- We've reported how EDD has paid scammers at least a billion dollars in phony unemployment claims.
Now, a stunning development. Bank of America has revealed it paid EDD fraudsters hundreds of millions of dollars too. The scammers had made false claims of fraudulent use of their EDD debit cards...it was fraudsters claiming fraud.
Now Bank of America is trying to claw back that money from criminals - but it's also taking money from honest workers with legitimate claims.
This all came out after state lawmakers demanded to know why Bank of America is draining EDD accounts.
The bank didn't really answer - but revealed scammers ripped off the bank as well, and it's trying to reel the money back in. Unfortunately, it's taking innocent workers' benefits too.
"It's unfair; when you lose your job, you're frantically trying to keep money together and then they take it away from you." Katharine Hauser lost her job at the YMCA when the pandemic hit. Unemployment kept her going - until her EDD account got hacked.
"I was about to buy burritos at Gordon's Taqueria..." Hauser begins. To her surprise, her debit card was declined. And her account was empty.
"I had $4,000 and it was gone like that," she says.
She believes someone skimmed her card at a gas station and ran up charges in Texas.
"$1,000 increments at a Target in Houston, Texas, then they went to a CVS," she explains.
Bank of America gave her back the $4,000 and after an investigation, BofA said the credits were "permanent."
But were they?
"That said they found fraudulent stuff on my part, so they were taking it back out. I don't know how they could say that when they said the credit was permanent," says Hauser.
Bank of America suddenly pulled $700 out of her account. A letter said there was "suspicious activity" on the card.
Hauser says the bank told her "she" was under investigation.
"She said if you have filed a claim for fraud on your card you will be thrown into the mix of people who are actually committing fraud, which really made me angry because I was not committing fraud and I was thrown in a bucket with people who had," Hauser says.
It's happened to workers across California.
Bank of America said it is reversing credits on some EDD accounts as part of a crackdown on fraud.
Workers say they are unfairly lumped in with scammers.
Ann-Marie Garvey found thieves ran up $14,000 in charges on her EDD account - including $2,000 at Saks Fifth Avenue - before she even got her debit card in the mail.
"I'm the victim and I'm being treated like a criminal. It's total B.S.," says Garvey.
Bank of America immediately replaced the money. But two months later, the bank took all $14,000 dollars back out, leaving her with nothing to live on.
"I don't believe they treat their bank customers this way, they shouldn't treat the California unemployed this way as well. This is money people need critically for food, staples, to survive," said California Assemblyman Phil Ting.
59 state lawmakers fired off a letter to Bank of America's CEO demanding to know why the bank is draining legitimate accounts.
"There has been tremendous fraud and there are a ton of honest Californians who have been denied benefits, and it's not clear to us whether any of this is being addressed," says Assemblyman David Chiu.
Lawmakers said the bank response was vague. BofA wrote:
"Identifying legitimate claimants from among the fraudulent claimants is time-consuming and challenging."
The letter also said some criminals were actually "double-dipping": they received EDD benefits and also filed false claims of fraud on their cards. BofA said:
"Criminals received credit from Bank of America in the hundreds of millions of dollars after filing false claims of loss... essentially attempting to double-dip."
Now, the bank is reversing the phony credits - but it appears thousands of legitimate claims are being thrown out too. Like Ann-Marie Garvey's, and Katharine Hauser's.
"It's a terrible feeling to be stolen from, to be the victim and then to be told you're the perpetrator. It's not a good feeling at all," says Hauser.
After we intervened, BofA did give Hauser her money back. Ann-Marie is now getting her benefits by check instead of trusting the bank. Lawmakers are still seeking better answers.
Take a look at more stories and videos by Michael Finney and 7 On Your Side.
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