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EDD Fraud: Federal Judge Issues Sweeping Injunction Against Bank of America

SAN FRANCISCO (KPIX 5) -- A federal judge issued a preliminary injunction against Bank of America Tuesday in the wake of widespread fraudulent Employment Development Department (EDD) claims totaling billions of dollars and the suspension of unemployment benefits to the hundreds of thousands of Californians affected.

The injunction compels Bank of America to unfreeze accounts and reopen investigations into stolen benefits issued on prepaid bank debit cards in a fraud epidemic first exposed last fall by KPIX 5. The bank was also ordered to pay provisional credits to EDD claimants and improve its customer service after it failed to handle the flood of customer phone calls and complaints over the lost funds and lack of security measures.

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"I feel violated, cheated, unheard," said Jennifer Yick. The San Francisco based realtor says Bank of America never helped her, after making multiple calls to report fraudulent charges that emptied her account last November.

Hundreds of thousands of benefit recipients reported a slew of problems, including unauthorized transactions on their chipless EDD Bank of America debit cards. "I'm a taxpayer. I paid into the system I'm collecting because I'm out of work and you can't assist me?" said Yick.

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Since last fall, hundreds of others have been reaching out to KPIX 5, desperately asking for help, saying their claims were denied without an investigation, sometimes a day after calling the bank.

In January, Yick found an attorney to file the first class-action lawsuit related to security issues, freezing of accounts, and denials of provisional credit.

"The bank stopped its normal procedures of conducting an investigation and started to use a flawed screening process," said Yick's attorney Brian Danitz with the law firm Cotchett, Petrie and McCarthy.

Two weeks ago, a federal judge ordered the two parties to come to some kind of agreement, even as the legal proceedings continue.

Among the dozen newly-agreed upon items now part of the court ordered injunction: the bank cannot use its current "claim fraud filter" to freeze accounts or to close unauthorized transaction claims and must conduct an investigation beyond that. Any closed claim based solely on results of the previously-used fraud filter has to be reopened within 30 days. The bank now must offer a new option that allows victims to authenticate identity at a local bank branch, or by calling a new dedicated 800 number.

"With this agreement, we are committing to additional measures to help unemployment recipients who have been victimized by fraud receive their benefits as quickly as possible," Bank of America said in a statement to KPIX 5.

In court documents, the bank said the "plaintiffs wide-ranging demands would (instead) help legions of criminals perpetuate fraudulent schemes," because it says most of the fraud claims were filed by criminals in the first place.

"They are trying to find the balance between needing to prevent fraud, which we know has pervaded this case from the beginning and getting money back to the people who deserve it," said Ted Mermin, who teaches consumer protection law at Berkeley School of Law and is the Executive Director of the Berkeley Center for Consumer Law and Economic Justice.

"It is certainly a win for the plaintiffs. It's certainly progress in the case. It means that the court is serious about making sure that bank of America investigates people's claims," said Mermin.

"We were able to get this preliminary injunction so early in the case because after we filed, we did receive publicity about the case from your channel. Because of that we were contacted by hundreds of plaintiffs who wanted to join the case," said Danitz.

*Seven months have passed and Yick says her account still hasn't been credited, but she's not feeling helpless anymore. "I feel like our voice is being heard or being acknowledged," said Yick.

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