California is rolling out new EBT cards that investigators say are coming years too late and still has tech that makes them criminally vulnerable.
The state of California is rolling out something most of us probably already have in our wallets: plastic cards with a security chip. You know, the ones that allow you to insert or tap to pay at the register. But the goal is security, not convenience.
The California Department of Social Services hopes the new cards keep thieves from dipping into the accounts of 3.2 million Californians who rely on its benefit programs to keep a roof over their heads and food on the table.
As of this month, 405,515 people in San Diego County are part of the CalFresh program and will be issued the new cards by June. In a news release, the county claims this update makes welfare money “much less accessible to thieves and more difficult to steal ...”
But fraud investigators who work inside California’s county welfare offices said the card probably won’t make much of a dent. They said the state should have rolled out a security chip and tap-to-pay years ago, and that these new cards still contain technology outdated by several decades.
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Over the last two full calendar years, San Diego County officials say criminals stole at least $34.6 million from EBT cards. Taxpayers then paid that money again, to reimburse the needy families they targeted.
Greg Mahony and Shawn Ferris have a combined 75 years of experience investigating cases like these. They asked NBC 7 Investigates not to identify their county employers so they could speak freely. They spoke with us as members of the California Welfare Fraud Investigators Association. Mahony is its president, and Ferris its vice president.
“... what I see is a rush to get out a chip card as fast as possible, and that will stop all the fraud," Mahony said. “And I've been raising my hand for years telling them: It is much more than that.”
Investigations
Thefts tied to European organized crime operations
Sophisticated transnational crime rings have snatched a sizeable amount of California’s benefit dollars. Recently, federal and international law enforcement agents have made high-profile arrests and prosecutions of Romanian nationals.
“That’s the real bad part of this,” Ferris told NBC 7. “It’s not like it’s money that’s even staying in our country that’s being stolen.”
Last year, the United States Attorney’s Office in San Diego brought seven foreign nationals to justice they said stole $181 million in state welfare dollars using unauthorized ATM withdrawals over the course of nearly three years. They included six Romanians and one Italian. Each pleaded guilty, with about half sentenced to prison time.
“It’s actually much larger than anyone is imagining,” Mahony said.
Just last month, Romanian agents with the Directorate for Investigating Organized Crime and Terrorism served dozens of warrants across two Romanian cities, taking 11 people into custody. The FBI said the crime ring “profited handsomely” by targeting California welfare families and draining their EBT cards.
Investigators say the state isn’t doing enough to prevent thefts
“The state of California has no idea what the fraud rate is,” Ferris told NBC 7.
Ferris's group has hounded the California Department of Social Services for years to better track welfare theft. Right now, the state only counts how much money it reimburses theft victims, which police say is far less than what thieves stole. That’s not the only factor that makes how the state calculates EBT theft artificially lower than reality:
- Reimbursements are capped at no more than two months of what a recipient receives, even if thieves stole more money than that
- ATM withdrawals flagged by county offices as suspicious aren’t included
- Stolen benefit money recovered by law enforcement isn’t included
- Reimbursements to EBT cardholders who falsely reported theft aren't included
- EBT theft claims denied for reimbursement aren't included
- Unreported EBT card theft isn't included
“If they can ever get a handle on how much is being lost, they’re going to look terrible,” Mahony said. “And is that a reason they’re not tracking fraud? I don’t know, but it sure sounds suspect to me.”
The California Department of Social Services declined to comment when asked for a response to criticism that it does not properly track EBT theft or welfare fraud.
As early as 2018, Mahony says he and fellow police officers met with CDSS. They warned the state its benefit cards were too easy a target. Mahony said a top CDSS official agreed but California issued them anyway. Then, three years ago, Mahony said he went back to CDSS and urged the state to at least add a security chip.
“The first response I recall getting is, ‘It’s too expensive to do,’ ” Mahony said. “ 'We cannot spend the money. It’s too expensive to do.' "
Eventually the state came around. California budgeted $76.5 million in state and federal money to transition to chip and tap cards, between 2023 and 2024. It said that includes EBT system automation, new card printing equipment and mass card replacement.
But now that the state is finally doing it, Mahony said, criminals are already light years ahead.
Chip cards make transactions happen without transmitting credit card numbers to vendors and their machines. However, the new chipped EBT cards still contain a major vulnerability: the magnetic strip on the back, which are still unprotected against skimmer devices. When a swipe happens, the device can see account balances, card numbers and even PIN codes.
“They are 20 years behind in the technology they’re putting on these new cards,” Mahony told NBC 7. “And to me, that is just a waste of money.”
California officials have defended keeping the strip on the back of its EBT cards by pointing to federal welfare card restrictions. Those rules require California’s EBT card to comply with a lot of retailer checkouts, including those that might not accept chips. However, investigators say those federal standards should be considered a bare minimum standard – a standard they say the state needs to exceed by investing in helping retailers update their checkouts and/or innovating a more secure way to swipe.
The California Department of Social Services rejected NBC 7's request for an on-camera interview, but in a statement, a spokesman said, in part, “CDSS takes the issue of benefit theft seriously and has been working to address the situation since we first became aware of it.”
Its entire response can be read at the bottom of this article.
“It is our tax money we’re watching go out the door,” Mahony said. “It is our tax money getting stolen. We’re investigating crimes where we’re affected too. So we get irritated. We see the loss. And then when we get an attitude back that says, We can’t do anything about it – that’s your job and responsibility to do so. That’s a failing at the social service level.”
The group of county welfare investigators said the fraud problem is bigger than the EBT cards. Investigators say the state needs to better manage who can get a card in the first place. They say that starts by bringing back face-to-face meetings and requiring a form of ID to apply. Neither is required right now in California.
“Our goal is not really to make it more difficult or take away opportunities for people to get the benefits,” Ferris said. “Our goal is really to make sure benefits get to the right people.”
The impact on Californians who rely on these benefits
Any disruption to the flow of benefits can be catastrophic. NBC 7 Investigates spoke with several people who have been victims of EBT theft in San Diego County.
“This card means a lot to me because it’s literally kept me alive,” one woman said.
She stopped by the county’s benefits office in Kearny Mesa after money disappeared out of her account.
“$34 left on my card,” she said. “So, yeah, we’ll make do with what we can and survive.”
While she trusted the county would reimburse her, she knew the money wouldn’t come instantly.
Mahony said it typically takes about 10 days to refund an EBT theft victim. But with counties reporting more than $20 million stolen a year, that cash flow can take much longer.
“We could be out for six weeks! Eight weeks! Now your rent is due, you have no rent money, and now you’re getting evicted,” Mahony told NBC 7. “I don’t have an answer for them other than: Go to your local church, tell them your problem to see if they can help you because the county cannot.”
“Once you talk to somebody who’s lost everything and isn’t sure where they're going to get their next meal, despite all the obstacles, that’s why you do it,” Ferris said. “Somebody has to fight back.”
Statement from the California Department of Social Services
The California Department of Social Services takes the issue of benefit theft seriously and has been working to address the situation since we first became aware of it.
In California, the administration of many safety net benefits occurs at the county level. This includes food benefits (CalFresh, which is our version of Supplemental Nutrition Assistance Program) and cash benefits (CalWORKs, which is our version of Temporary Assistance for Needy Families).
EBT cardholders in California are currently receiving new chip and tap EBT cards in the mail. More than 3.2 million chip and tap EBT cards are set to be distributed between now and June 2025.
The CDSS encourages cardholders to update their mailing address information through the BenefitsCal website. Cardholders can also receive a new EBT card by visiting a local county office. All existing benefits will transfer automatically to the new EBT card and user PINs will stay the same. Old EBT cards can still be used at this time; however, they will be deactivated 180 days after the new EBT card is issued.
Counties – who administer benefits – continue to actively reimburse victims of theft to ensure that Californians have access to important benefits. Counties work to replace electronically stolen benefits eligible for reimbursement within 10 business days. Depending on the specific details of each claim, the process can take longer, in which case the client should be notified by the county. Funding for reimbursements comes from the State.
Any cardholder who suspects that they may have been a victim of theft should also immediately contact their local county office. Cardholders can also contact the EBT Customer Service Line at (877) 328-9677 to cancel their EBT card and request a new one.
