Sen. Elizabeth Warren (D-Mass.) is urging officials at the Department of the Treasury and Department of Veterans Affairs to respond and react to allegations that Social Security beneficiaries were the victims of fraud through their use of the Direct Express program, a government program administered by Comerica Bank.

Warren detailed her concerns, and the results of an investigation she spearheaded, in letters to Treasury Secretary Steven Mnuchin and Bureau of the Fiscal Service Commissioner Kimberly McCoy that were delivered Thursday. The letters were sent as the Treasury Department seeks applications to rebid the agreement Comerica Bank currently holds as the Direct Express program operator.

Comerica is a financial services company headquartered in Dallas, Texas, with reported total assets of $71 billion as of Sept. 30, 2018.

Since 2008, the Treasury Department has partnered with Comerica and other financial agents to distribute monthly federal benefit payments, via prepaid debit cards and electronic payments, on behalf of the Social Security Administration, the VA, and at least five other federal agencies. Roughly 4.5 million Americans are served by the program.

Warren opened the investigation after a constituent in Massachusetts reported Comerica left the account of her family member vulnerable to fraud and failed to reimburse him for stolen benefits in a timely manner. The Direct Express program, Warren claims, is “plagued by incidents of criminals impersonating beneficiaries and draining their accounts.”

Comerica has publicly confirmed numerous instances where fraudsters obtained card numbers, addresses, and PIN numbers, allowing them to take advantage of the company's Cardless Benefit Access Service, which was shut down in August 2018 in response to fraudulent abuses. While Comerica claims these schemes affected “only a few hundred cardholders,” the company has “not been transparent as to how the security breaches occurred or how many individuals were affected in the fraud schemes,” Warren claims. Reports indicate victims were not notified of the fraud scheme, spent months disputing fraudulent charges, or were charged fees to reissue and activate new cards after fraud was discovered.

Warren opened her investigation in October, after she sent letters to Comerica, the Social Security Administration, and VA seeking details about data security problems. Among the findings:

  • Hundreds of individuals were affected by fraud in the Direct Express program. According to information provided by Comerica, in the one year after the feature was introduced to all Direct Express cardholders in August 2017, there were 480 cases of fraud. The total amount of confirmed fraud is almost $460,000, an average of nearly $1,000 stolen per affected individual.
  • The Social Security Administration, VA officials, and the public were not informed of fraud affecting their program beneficiaries by Comerica. Officials at the Social Security Administration and the VA learned of the fraud only after public reports brought it to their attention.
  • Comerica had insufficient procedures to prevent criminals from impersonating beneficiaries and stealing their benefits.
  • Comerica was not the victim of a cyber-security breach. Instead, criminals were able to obtain personally identifiable information about beneficiaries from previous breaches and other sources. Comerica's antifraud systems were “not robust enough to prevent this fraud.”

In her letter to Comerica CEO Ralph Babb Jr., Warren raised concerns about “the company's security vulnerabilities, mismanaged responses to the security breaches, misleading and cruel customer service response tactics, and lack of transparency about the breaches and subsequent fraud schemes.”

“These are highly disturbing reports, particularly regarding a company that is receiving taxpayer dollars to effectively provide essential services for vulnerable families,” she wrote. “Americans deserve information about the breaches, what you are doing to help those impacted, and how you are going to protect federal benefit recipients from future fraud.”

Since 2015, there have been 131 complaints on the Consumer Financial Protection Bureau’s Consumer Complaint Database and 526 complaints filed with the Better Business Bureau related to Direct Express.

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