Direct Express Fraud Failure Plagues Beneficiaries

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The financial institution responsible for administering the Direct Express prepaid debit card program – which disburses federal Social Security, disability and veterans benefits – has been accused of systemic failure as it relates to preventing fraud and reimbursing victims of fraudulent charges. That’s according to multiple sources who say the company’s business practices work against cardholders who are trying to recover stolen funds. For them, even full compliance with the bank’s burdensome requirements often fails to result in refunds for those whose cards have been compromised. 

As a result, some beneficiaries have had to sue the company to recover a fraction of the government payments stolen from them – while others have no remedy whatsoever for these losses. 

A window recently closed on one opportunity to recover a fraction of these stolen funds. In July of this year, a $1.2 million class action settlement (.pdf) resolved a lawsuit over the mishandling of refunds from February 12, 2018 – September 28, 2022. Class members who submitted claims by a September deadline were eligible for a percentage of the settlement – which amounted to a fraction of their actual losses.

Unless another similar lawsuit is filed, people like 76-year-old JoAnn Chaney of Irmo, S.C. may not be able to recover even a fraction of the funds fraudulently spent from their accounts. 

By the time Chaney discovered fraudulent charges on her card in August, they had been occurring for more than a year – and the numerous small charges added up to more than $1,100. Chaney said it was obvious the purchases were not made by her. For example, there were charges from Google that occurred each month on the same day money was posted to her Direct Express prepaid debit card. Someone was fraudulently buying or playing games on Google using Chaney’s social security benefits.

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During her first phone call with Direct Express on August 8, 2024, Chaney spent two hours on hold before reaching a customer service representative who agreed these were obviously not purchases initiated by her. The representative then transferred her to the fraud department – or as Chaney refers to it, “the dead end street.” 

“So sure enough, that’s when the trouble started – when we were transferred to the fraud department,” Chaney said. “They said that they would send a form out to me in the mail and I would have to have it completed by August 23.” 

Her daughter questioned both the timeline and the process. She asked how long it would take for her money to be refunded and was told it would be “between 45 and 90 days.” A request for the form to be emailed instead of snail mailed was denied. Chaney never received the required form in the mail, so she sent Direct Express an email detailing the fraudulent charges. Her refund was denied because the appropriate form was not received by the deadline.

Chaney called Comerica Bank but was told she would need to contact the Social Security Administration to resolve the dispute. She went to the local Social Security office for assistance and found herself standing in line with ten people – eight of whom were there for the same reason.

Their issue? Fraudulent charges on their Direct Express debit cards. This gave Chaney her first glimpse into the potential enormity of the problem…

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THE SCOPE…

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As of February 2024, 4.5 million Americans were receiving an estimated $3.3 billion monthly on Direct Express prepaid debit cards.

Contributing to cardholders’ confusion over customer service and dispute resolution, there are multiple entities involved with the program. 

Direct Express is a brand developed by the U.S.Treasury nearly two decades ago when the government made the shift from paper checks to electronic processing of benefits. Direct Express cards are licensed through Mastercard. Since the inception of the program in 2008, Comerica – headquartered in Dallas, Texas – has served as the financial agent for the government. Comerica issues cards to beneficiaries on behalf of the government and is responsible for the administration of the prepaid debit card program – including fraud prevention and dispute resolution. Comerica vendors like Conduent perform various functions related to the administration of the program. Conduent (formerly a division of Xerox before spinning off as a separate company) runs the call center for the program and processes claim disputes. 

Needless to say, with so many entities involved in the process it is challenging for cardholders to identify the responsible party. Often, individuals like Chaney are bounced around from one entity or department to another without ever talking to someone who can assist them. Based on the information provided to FITSNews by cardholders, employees of the Social Security Administration are also unclear as to who is responsible for managing these claims – and where individuals can go for help in getting them resolved. 

Change is on the horizon for the program, though. 

Comerica told investors this summer the Treasury informed its leaders that a new financial institution would be taking over the contract in 2025. According to American Banker, Bank of New York will be the new vendor.

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In the meantime, beneficiaries like Chaney are trying to recover losses that fell thru the cracks. Many are afraid to speak up, but not Chaney.  

“I’m not afraid to come forward because I’ve worked 54 years,” Chaney said. “I’m a retired nurse. That money is mine that I worked for. And it’s not an entitlement, it’s mine… and I want it. If it takes me three years, I want it. But I know there’s people out there now for a fact that’s going through the very same thing.”

Chaney told her friend – Irmo town council member Phyllis Coleman – about the difficulties she encountered.

“How dare the government not address this and address this quickly?” Coleman said.

Together, Chaney and Coleman decided to reach out to the media.

The Better Business Bureau has received hundreds of customer reviews through their website about Direct Express. Many of the complaints mention the extraordinarily long wait times that exacerbate tensions over unresolved issues. Trying to contact the company is such a hassle that Kwame Kuadey of Social Security Edge created a YouTube video with suggestions for getting the company’s attention.

Here were some suggestions…

1. Call early in the morning or late at night. You should expect to be on hold for a long time no matter when you call.
2. Write a letter to Direct Express, send it by certified mail.
3. Contact your member of the U.S. Congress.
4. Submit an online complaint or review with the Better Business Bureau.
5. Take to social media. Direct Express is not on socials, but the Treasury Department Bureau of Fiscal Services and Comerica Bank are.
6. Contact a reporter.

The problems with Direct Express are not new – nor are they news to the powers that be. The Office of Inspector General (OIG) released an audit (.pdf) of Direct Express cardholder disputes in September 2024.  The audit was a response to cardholder complaints received by the agency. It examined the fraud dispute process, but not the final determinations.

OIG previously called out the company in 2014, 2017, 2019, and 2020 for failing to comply with the government contract requirements as it pertains to fraud prevention, the handling of fraud disputes, and lack of oversight for vendors – including a vendor handling sensitive information through a Pakistani office. 

In January 2019, after launching her own investigation into Comerica’s practices, U.S. senator Elizabeth Warren formally notified the Treasury Department that the bank’s lack of protections had left cardholders vulnerable to fraud. Warren’s investigation (.pdf) found that in one month alone – August 2017 – there were 480 cases of fraud totaling $459,998.75 – or an average of nearly $1,000 per affected cardholder.

Warren’s investigation also revealed that cardholders who called Comerica’s fraud department were subjected to extraordinarily long wait times. She also found the refund process involved a paper form that must be mailed out to cardholders and returned on a stringent deadline – with failure to comply serving as one of many excuses for denying claims.

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RELATED | SWEEPING FEDERAL FRAUD INVESTIGATION

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Between the class action settlement in July 2024 and the new contract in January 2025, there are no assurances that problems with fraudulent charges on DirectExpress cards will be resolved. Despite the many complaints, the dispute resolution process has not improved – neither has fraud prevention.

While Chaney looks for avenues to pursue a refund of the fraudulent charges applied to her account, the only way she has found to stop additional charges from coming out of her account has been to withdraw the balance as soon as the payment shows up on her prepaid card. 

FITSNews reached out to the U.S. Treasury Department and Social Security Administration in search of advice for cardholders. 

“The Bureau of the Fiscal Service is committed to working with our financial agent to mitigate fraud in the Direct Express program,” said a spokesperson. “While we are aware of occasional instances of fraud and work with our financial agent to address these as they are reported to us, thanks to the many cardholder protections, the fraud rate for the program is lower than similar prepaid debit card programs. Cardholders with fraud concerns can contact the 24/7 Customer Service line.”

Needless to say, that response did not answer our questions. The people who shared their stories with FITSNews reported the fraud. They saw no relief and no basic measures were taken to protect their prepaid debit cards. Their complaints mirror those that appear in the class action lawsuit settled last summer. But, that remedy doesn’t apply to them – and by the time there’s a new contract early next year, who knows how much more money will have been lost.

At this point no one has been willing to help them recover their losses…

To follow up, we also asked for the data that supports a conclusion that the fraud rate is “lower than similarly prepaid debit card programs.” No data was provided, but the Social Security Administration offered some additional guidance. 

“The Treasury Department manages the Direct Express Program and we recommend any questions should be addressed by them,” said Patti Patterson, regional communications director. “However, if anyone needs assistance with their Social Security benefits they can contact Social Security at 1-800-772-1213 and they can report any fraud with Social Security benefits to the Office of Inspector General at 1-800-269-0271.”

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ABOUT THE AUTHOR …

Callie Lyons is a journalist, researcher and author. Her 2007 book ‘Stain-Resistant, Nonstick, Waterproof and Lethal’ was the first to cover forever chemicals and their impact on communities – a story later told in the movie ‘Dark Waters.’ Her investigative work has been featured in media outlets, publications, and documentaries all over the world. Lyons also appears in ‘Citizen Sleuth’ – a 2023 documentary exploring the genre of true crime.

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