The last time California’s unemployment system was pushed to the brink, a decade ago during the Great Recession, $300 billion financial behemoth Bank of America was enlisted to help the state modernize benefit payments with a new electronic debit card system. Other states moved to prepaid debit cards, too, but most also offered alternatives like direct deposit to workers’ own bank accounts.
Last fall, jobless Californians started to come forward with stories about their state-issued Bank of America unemployment debit cards suddenly being cut off or drained of thousands of dollars. CalMatters obtained the state’s contract with the bank and detailed how the deal had led to legitimate claimants being swept up in fraud crackdowns and unable to access badly needed funds.
In February, CalMatters obtained more public records showing how both the bank and the state were poised to profit from the spike in unemployment claims during the pandemic. Under a little-known agreement to split revenue on merchant fees whenever unemployment debit cards were used to buy something, the Employment Development Department raked in $22.5 million from March-October last year alone. The state says it “does not track” the bank’s revenue. Bank of America declined to comment on how much it made, beyond telling state lawmakers that it lost “hundreds of millions of dollars” on the contract last year.