How Card Skimming Disproportionately Affects Those Who Need It Most – Krebs on Security
When people banking in the United States lose money because their payment card has been skimmed at an ATM, gas pump, or grocery store checkout terminal, they may face hassles or delays in recovering lost funds, but these are almost always repaired by their financial institution. . Yet one class of Americans — those who receive food assistance benefits through state-issued prepaid debit cards — are particularly vulnerable to losses from skimming scams and typically have little recourse to address them.
In recent months, authorities in several U.S. states have reported a rapid increase in skimming losses related to individuals receiving assistance through Electronic Benefits Transfer (EBT), which allows a nutrition assistance program participant (SNAP) to pay for food using SNAP benefits. .
When a participant uses a SNAP cash card at an authorized retail store, their SNAP EBT account is debited to reimburse the store for the food purchased. EBT is used in all 50 states, the District of Columbia, Puerto Rico, the Virgin Islands, and Guam.
EBT cards work like regular debit cards, in that they can be used with a personal identification number (PIN) to pay for goods at participating stores and to withdraw cash from an ATM.
However, EBT cards differ from debit cards issued to most Americans in two important ways. First, most states don’t equip EBT cards with smart chip technology, which can make payment cards much more difficult and expensive for thieves to clone.
Alas, it’s no coincidence that all states reporting recent spikes in EBT account fraud – including California, Connecticut, Maryland, Pennsylvania, Tennessee, and Virginia currently appear to be issuing chipless cards. to their EBT recipients.
In September, California authorities arrested three men suspected of being part of a skimming team specifically targeting EBT cards and balances. The men allegedly installed deep skimmers and stole PIN codes using tiny hidden cameras.
“The arrests are the result of a joint investigation by the Sheriff’s Office and Bank of America Corporate Security,” reads a September 2022 article by The Sacramento Bee. “The investigation focused on illegal skimming, specifically the high-volume ATM withdrawal streak near the start of each month when e-benefits transfer accounts are funded by California.”
Armed with the victim’s PIN as well as data from the stolen card, thieves can clone the card onto anything with a magnetic stripe and use it in ATMs to withdraw cash or as an instrument of payment in any establishment accepting EBT cards.
While it may be shocking that California – one of America’s wealthiest states – still treats EBT recipients like second-class citizens by issuing them chipless debit cards, California behaves like most other states in this respect.
More critical, however, is the second difference between SNAP cards and regular debit cards: recipients of SNAP benefits have little or no hope of recovering their funds when their EBT cards are copied by card skimming devices. and used for fraudulent purposes.
This is because under SNAP, federal law prohibits states from replacing SNAP benefits with federal funds. And although some of these EBT cards bear the Visa or MasterCard logos, it is not up to these companies to replace the funds in case of fraud.
Victims are encouraged to report the theft to both their state agency and local law enforcement, but many victims say they rarely receive updates on their cases from police and, if they hear from the state, it’s usually the agency that tells them they found no evidence. of fraud.
It depends Brenna Smithjournalist at The Baltimore Banner who recently wrote about the case of a mother of three from Maryland who lost nearly $3,000 in SNAP benefits thanks to a skimmer set up at a local 7-Eleven. Maryland [Department of Human Services] Spokeswoman Katherine Morris told the banner that there was evidence of a “national EBT card cloning program”.
The woman featured in Smith’s story contacted every retailer where her EBT card was used to buy thousands of dollars worth of formula. Two of these retailers agreed to share CCTV footage of people making the purchases at the exact timestamps specified in their EBT account history: the videos clearly showed that it was the same fraudster making both purchases with a cloned copy of his EBT card.
Even after the police officer handling the victim’s case confirmed finding a skimmer set up in the 7-Eleven store she frequented, her claim – which was denied – still languishes in appeals months later. .
The Center for Law and Social Policy (CLASP) recently published Five Ways State Agencies Can Support EBT Users at Risk of Skimming. CLASP says that while it’s true that states can’t use federal funds to replace benefits unless the loss is due to a “system error,” states could use their own funds.
“This will ensure families don’t have to go without food, gas money or their rent for the month,” CLASP wrote.
This would help resolve the symptoms of card skimming, but not a root cause. Hardly anyone is suggesting the obvious, which is to equip EBT cards with the same security technology that’s offered to virtually every other participant in the US banking system.
There are several reasons why most state-issued EBT cards do not include chips. For starters, no one is saying they have to. In addition, it is somewhat more expensive to produce smart cards than conventional magnetic stripe cards, and many state assistance programs are chronically underfunded. Finally, there is no vocal (or at least well-heeled) electorate advocating for change.