• Thu. Nov 24th, 2022

California Middle Class Tax Refund debit cards that ship without chips

Many Californians continue to wait for the Middle Class Tax Refund, a refund of monies owed to them as a result of California’s budget surplus. The reimbursement, also known as inflation relief payments, began as a gas price relief mechanism to be paid out by the DMV. Then the governor and the legislature reached a compromise and the payments would be remitted by the state’s franchise tax agency. Some Californians received the money under the FTB’s system by direct deposit. (Click here for an overview of who qualifies for which payment.) However, between 10 and 13 million of the payments would be sent using a debit card. FTB contracted this and eventually hired Money Network, a New York bank, to process the payments. As of November 11, more than 2.5 million debit cards have been issued. | RELATED | Received a California Middle Class Tax Refund Debit Card? Here’s how to use them, avoid fees. KCRA 3 Investigates detailed in their documentary Easy Money: Fraud, Fortune and Failures how organized crime rings used skimmers to steal the magnetic stripe data from unemployment debit cards. Then, in March, KCRA 3 also detailed how similar organized crime rings were targeting Cal Works and Cal Fresh cards — the debit cards used for those who receive welfare. They have one thing in common: there is no anti-fraud chip technology on them, making it easy for a skimming device – with the camera installed – to obtain both the electronic data and the PIN. Then the ring empties the account of all his money. At one point, the CalWorks system was losing up to $3 million a month. These cards are still not equipped with a chip. Then came the Middle Class Tax Refund. The FTB redacted portions of that contract, but it specifically states, “The state must require the use of an EMV (Europay, MasterCard, and Visa) chip-enabled card to provide the highest level of protection.” That’s on page one of the contract, RELATED | Read the redacted contract here With an addendum outlining the bank’s requirements, the contract also states that Money Network offers “Platinum-level (maximum) fraud protection and customer and customer service support.” Pictures of the debit cards on the FTB’s website and on a special website that explains how the cards are activated, mctrpayment.com, show pictures of the debit cards with the chips. Still, several viewers have emailed photos of their MCTR debit cards to KCRA, which do not show the fraud prevention chip. When asked why the debit cards supplied to Californians do not have this basic fraud prevention mechanism in place, a spokesman for FTB said, “We are aware of the nationwide fraud concerns related to programs of this type. In partnership with Money Network, we are taking every step possible to ensure that California and California citizens are protected,” the FTB representative continued that “while considering the need to deliver debit cards as quickly as possible while addressing fraud prevention issues and “To address the supply chain, FTB has optimized the use of chip and chipless cards. This hybrid approach allowed the cards to be distributed months earlier than the use of chip-only debit cards.” Disbursement began in late October. The FTB also says the section dealing with the use of chip and non-chip debit cards in the contract was redacted “due to proprietary information outlining security measures,” FTB said. We have asked the FTB for clarification as to why this section on the use of maps was redacted without a chip and why the contract specifically states that they must have a chip, only to disregard that in a later section when in fact they do Redaction shows. FTB says that “Money Network’s fraud controls are in place at the issuance, dispatch, activation and use of the debit card, providing platinum-level fraud protection.” Nonetheless, past experience in other departments such as EDD and CalWorks has shown that chipless card fraud prevention technology can be easily skimmed and cloned. We have reached out to the FTB and Money Network for answers on how they will respond to the possibility of skimmed cards and fraud, but they have not responded to our additional questions as of this writing.| MORE | California Inflation Aid: Is Your Private Information Sold to Marketing Companies?

Many Californians continue to wait for the Middle Class Tax Refund, a refund of monies owed to them as a result of California’s budget surplus.

The reimbursement, also known as inflation relief payments, began as a gas price relief mechanism to be paid out by the DMV. Then the governor and the legislature reached a compromise and the payments would be dispatched by the state’s franchise tax agency.

Some Californians would receive the money under the FTB’s system through direct deposit. (Click here for an overview of who qualifies for which payment.)

However, between 10 and 13 million of the payments would be sent using a debit card. FTB contracted this and eventually hired Money Network, a New York bank, to process the payments.

As of November 11, more than 2.5 million debit cards have been issued.

| RELATED | Received a California Middle Class Tax Refund Debit Card? How to use it, avoid fees

However, concerns about debit card use predate the state’s decision to issue refunds to residents.

KCRA 3 Investigates detailed in their documentary Easy Money: Fraud, Fortune and Failures how organized crime rings used skimmers to steal the magnetic stripe data from unemployment debit cards.

Then, in March, KCRA 3 also detailed how similar organized crime rings were targeting Cal Works and Cal Fresh cards — the debit cards used for those who receive welfare.

What they have in common is that they contain no anti-fraud chip technology, so a skimming device – with the camera installed – can easily obtain both the electronic data and the PIN. Then the ring empties the account of all his money.

At one point, the CalWorks system was losing as much as $3 million per month. These cards are not yet equipped with a chip.

Then came the Middle Class Tax Refund.

KCRA 3 Investigates obtained a copy of the agreement between the Franchise Tax Board and Money Network. The FTB redacted parts of this contract, but it specifically states: “The state must require the use of an EMV (Europay, MasterCard and Visa) chip-enabled card in order to offer the highest level of protection.” This is written on page one of the contract assent .

Page 1 of the contract

| RELATED | Read the edited contract here

In an addendum outlining the bank’s requirements, the contract also states that Money Network will provide “Platinum-level (maximum) fraud protection and customer and customer service support.”

Pictures of the debit cards on FTB’s website and on a special website that explains how to activate the cards, mctrpayment.com, show pictures of the debit cards with the chips.

However, several viewers have emailed photos of their MCTR debit cards to KCRA, which do not show the fraud prevention chip.

Here is a version of the debit card with the viewer's personal information x20;information removed.

Hearst property

Here is a version of the debit card with the viewer’s personal information removed.

When asked why the debit cards supplied to Californians do not have this basic fraud prevention mechanism in place, a spokesman for FTB said, “We are aware of fraud concerns across the country related to programs of this nature. In partnership with Money Network, we are taking every step we can to ensure that California and California citizens are protected.”

The FTB representative further said: “Given the need to deliver debit cards as quickly as possible while addressing anti-fraud and supply chain issues, FTB has streamlined the use of chip and chipless cards. This hybrid approach allowed cards to be distributed months earlier than using chip-only debit cards.”

The tax refunds paid out by the FTB were announced in June. Payout began in late October.

The FTB also says the section dealing with the use of chip and non-chip debit cards in the contract was redacted “due to proprietary information outlining security measures.”

“Money Network is in full compliance with the terms of the agreement,” FTB said.

fraud editors

We have asked the FTB for clarification as to why this section on using cards without a chip has been redacted and why the contract specifically states that they must have a chip, only to disregard this in a later section when in fact that is the case is editorial shows.

FTB says that “Money Network’s fraud controls are in place at the issuance, dispatch, activation and use of the debit card, providing platinum-level fraud protection.”

However, past experience in other departments such as EDD and CalWorks has shown that non-chip technology cards can be easily skimmed and cloned to prevent fraud.

We have reached out to FTB and the Money Network for answers on how they will respond to the possibility of skimmed cards and fraud, but they have not responded to our additional questions at the time of this writing.

| MORE | California Inflation Aid: Is Your Private Information Sold to Marketing Companies?

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