On a fall day in October 2009, Evelyn Carpio's wallet never left her side.
Yet criminals somehow managed to steal $720 from the card Carpio's family uses to obtain cash welfare assistance from California.
This kind of remote financial crime -- a practice known as financial information "skimming" -- is a real problem in the United States, according to federal officials. In 2009 alone, criminals stole $443 million though a combination of skimming, identity theft, and other types of financial crime investigated by federal officials. But for victims like Carpio, whose money was stolen from an electronic benefits transfer card (EBT) rather than a credit or debit card, getting that money back has also proved difficult. In Carpio's case, nearly two years passed before the state returned her stolen welfare benefits.
When it comes to stolen credit or debit cards, the rules are straightforward: Federal law requires banks to rapidly return, refund or remove all but $50 of any unauthorized or fraudulent activity on any card reported lost or stolen. If fraudulent charges are made on a debit card that was never lost or physically stolen, banks cannot hold the customer responsible for a single dollar. No such protections exist for EBT card users, even as government agencies across the country are moving to distribute a growing share of public assistance on EBT and other cards.
That lack of security places many of the country's poorest families at serious risk of financial upheaval.
Last week, Carpio filed suit against the California Department of Social Services in state court. She is not seeking compensation. Instead, Carpio aims to make the state replace welfare benefits stolen from an EBT card within five days of filing a police report and other required documents. Right now, California law requires DSS to replace lost or stolen welfare checks within five days if victims file a police report and meet other requirements. But cash welfare assistance is no longer distributed by check to the vast majority of poor families. They are instead issued via EBT card or direct deposit. So the law either needs an update or a new interpretation that includes EBT cards, advocates and Carpio's lawyers say.
"I realize now that I was really naive. I thought that once I proved what happened, brought them all the proof they asked for, DSS would just replace what was stolen," said Carpio, 34, a single working mother of five. "But that's not what happened at all."
Michael Weston, a spokesperson for the California Department of Social Services, declined to comment on Carpio's suit or the issues it raises.
Skimmers usually tamper with devices such as ATMs by installing cameras, software and other devices that record account information, PIN numbers or card data, according to the Secret Service. The agency is best known for protecting the President but also investigates certain types of large-scale financial crime.
In the late 1990s, when the federal government began to encourage states to provide food stamps and cash welfare assistance on EBT cards, states lobbied federal banking regulators to exempt EBT cards from laws that help debit and credit card holders who become victims of theft or fraud. The move to distribute public benefits electronically has created a multi-million dollar business opportunity for banks and other companies that secure contracts to provide EBT cards and ATM networks where the cards can be used.
The cards have also been regarded as a fiscally-responsible decision for states. State agencies have saved millions on check mailing and printing costs and, public officials say, the cards help to prevent fraud.
For EBT cardholders, the problem is that the public is often far more interested in welfare fraud committed by the poor than crimes perpetrated against them, advocates for low-income families say.
"What we have is a situation where cards used by the poorest people -- people for whom the loss of a couple of hundred dollars can have very, very serious consequences -- have zero protection," said Lauren Saunders, managing attorney for the National Consumer Law Center.
This week, Congress is expected to pass some version of a bill that will limit the places where EBT cards can be used, a direct response to concerns expressed by politicians such as Florida Governor Rick Scott and presidential candidate Newt Gingrich that welfare recipients frequently use public benefits on salacious non-necessities, luxury items, gambling and lifestyles where work isn't valued.
The federal bill, part of the unemployment benefits extension package, will require states to prevent EBT cards from functioning inside strip clubs, casinos and liquor stores. States that do not comply face federal penalties. Some states, including California, have already put such restrictions in place.
Last year, California restricted EBT card use in these locations after The Los Angles Times revealed that welfare recipients in California had pulled $4.8 million off of EBT cards in casinos over the course of nearly three and a half years. In that same period, low-income California residents pulled roughly $12,000 out of ATMs stationed at strip clubs. But half of these transactions took place in rural areas where access to ATMs is often limited, according to a data analysis by The Western Center on Law and Poverty.
"If we are going to implement regulation to say where people can't use their benefits, at the very least we should also make sure that those benefits are protected from theft," said Jessica Bartholow, a legislative advocate at the Western Center on Law and Poverty, a California organization that advocates for low-income families and researches policy matters related to poverty.
The U.S. Department of Health and Human Services does not track or measure EBT card-related theft nor does it direct or monitor the way that states react when money is reported stolen from these cards. Welfare programs are administered by the states so, they decide how thefts are handled, said Kenneth Wolfe, a spokesperson for the agency.
Anyone using an ATM or point of sale device at a store register should exercise extreme caution, said Max Milien, a spokesperson for the Secret Service. That means covering the keypad while using it, avoiding any device that appears to have been compromised, and canceling transactions at terminals that ask for a pin number more than once, Milien said. Account statements and balances should be checked regularly and ATMs with unusual signage should be avoided, said Milien.
The Secret Service also does not track the number of EBT cards that have been compromised by skimmers, but the cards are subject to many of the same risks as other types of cards, Milien said.
Vanessa Lee, a lawyer with Neighborhood Legal Services, a California nonprofit agency that represents low-income families in a variety of cases, filed the suit on Carpio's behalf to try to force California to apply the existing state law governing lost or stolen checks to thefts involving EBT cards.
"We're simply asking that the law be consistently interpreted within the context that welfare benefits are actually paid," said Lee. "In this case, the state didn’t even replace her card, even though it had clearly been compromised, until it stopped working months later because it was accidentally demagnetized."
In 2009 after Carpio discovered that money was missing from her benefits card, she filed a police report. County-level welfare officials also asked her to file an affidavit. In it, she swore that she had nothing to do with the crime and did not know the people who took her benefits. Welfare office staff even asked Carpio to obtain photos of the criminals using her account information at a bank ATM about 20 miles from her Van Nuys, Calif home. She did so with the help of the police, but her request to have her stolen benefits replaced was still denied.
After several appeals, California replaced Carpio's benefits in May. But in the interim, Carpio had to borrow money from her sister to pay her utilities, cover her rent and other basic needs. Carpio had to pay back her sister as soon as her own tax return arrived. Carpio's sister also needed the money.
"It wasn't an easy thing to just manage," said Carpio. "It was really a struggle."