A double whammy for families hit by fraud while struggling to feed their children

The CBS 2 Investigators uncover loopholes in a federal benefits program that hurt struggling families when they're victims of fraud

CHICAGO (CBS) -- Nearly one million people in Cook County rely on the federally-funded Supplemental Nutrition Assistance Program (SNAP). 

Ana Salgado is one of them.

Salgado is a divorced, single mother of four who works as a store manager but does not earn enough to feed her family. From time to time, she relies on SNAP benefits to fill the gaps. At the beginning of a recent month, on the day after her SNAP funds usually become available, she filled her cart with about $200 worth of groceries.

At the checkout she got a surprise. When she went to pay, she recalls the clerk told her, "There's nothing in there. It says $0."

Salgado usually receives about $400 a month. With some unused benefits added to that, she should have had more than $800 on her Link card that day in June. Link is an electronic benefits transfer (EBT) card through which SNAP funds are distributed. The Illinois Link card is used similarly to credit and debit cards but don't have the same fraud protections available.

When Salgado discovered her entire balance had vanished, she was shocked. 

"I was just overwhelmed," Salgado said. "I didn't know what to do."

SNAP FRAUD

Who stole Salgado's benefits?

Fraud experts believe it was an identity thief -- a hacker who somehow gained control over Salgado's Link card and took every cent on it.

"We're hearing more and more reports of large-scale fraud that is being perpetrated on poor households who are having their benefits stolen," said Ellen Vollinger, SNAP director for the Food Research & Action Center (FRAC).

Vollinger believes SNAP ID thieves are using techniques similar to credit card skimmers. 

"There is a very sophisticated operation that is going on," she said. "Surreptitious equipment is being used at locations across the country. Stores often don't realize something's been put in their store or other locations."

How often is SNAP ID theft fraud happening? It's unclear, because this specific kind of fraud is not being tracked. Recipients like Salgado can report fraud on the Illinois Department of Human Services (IDHS) website. IDHS is the state agency tasked with overseeing the Link card and SNAP programs.

When the CBS 2 Investigators asked IDHS for information on numbers of complaints involving this type of fraud, we were referred to the Department of Healthcare and Family Services (IDHFS). That agency denied our public records request for fraud complaints, saying those records are exempt under state law.

In a follow-up email, IDHS confirmed, "These disputes are not tracked separately from disputes overall."

Annual state reports only make note of fraud when it's the vendor/provider or recipient responsible for misusing and abusing the system.

An insider who wants to remain anonymous because of a fear of retaliation alerted us to this new type of fraud: "We had several clients coming in and it would be in specific durations of time, and they would say, 'Hey, I had so much on my Link card and now I have 50 cents.'"

The insider thought the sheer quantity of those reports in their office was unusual: "I would see probably roughly about maybe five to 10 victims that day."

SNAP BENEFITS NOT REPLACED

Our tipster expressed frustration that the only option available to caseworkers is to replace a client's card. The state did provide CBS 2 data about replacement cards issued over time. Reasons for replacing cards include being lost or stolen. Being a victim of fraud is not counted.

Even when a card is replaced, the money is not. 

"I had to break the bad news," the insider said about devastated clients who suddenly discovered all of their money missing. "I knew that it was not going to be replaced."

Salgado was in just such a position. She said she felt like crying when she heard she would not be getting that money back.

"At that moment, I just knew that I wasn't going to have money for groceries for this entire month," she said.

Federal dollars are replaced for other programs like unemployment benefits when scammers are responsible. But federal law prevents reimbursing recipients for stolen SNAP benefits.  

"We do think that there should be a mechanism in place to replace dollars lost to fraud in identity crimes," said Eva Velasquez, President and CEO of the Identity Theft Resource Center (ITRC). ITRC is a nonprofit that helps victims of fraud.

FRAC's Vollinger agrees. 

"Where there are breaches, policymakers are going to have to figure out a way to protect the SNAP customer and make sure that they have the benefits that they need," Vollinger said.

OTHER STATES & CITIES

Other states have been more public and vocal about this new scammer fraud targeting the SNAP and other federal benefit programs than Illinois has.

• April 14, 2022: Maryland issues a press release warning recipients of an increase in stolen funds: "Fraudsters are using illegal electronic devices to 'skim' or 'clone' information from EBT cards. Thieves then use the stolen information to withdraw cash or make purchases without the permission of the rightful benefit recipients." On November 18, 2022, U.S. Rep. Dutch Ruppersberger (D-Maryland) introduced legislation to reimburse victims of SNAP theft.
• August 4, 2022: New York City issues a flyer warning EBT card users of skimming.
• August 19, 2022: Pennsylvania warns SNAP recipients of a potential phishing scam sent via text message "saying that the recipient was approved for $1,000." The state's Department of Human Services spokesperson told us most of those scams have been attempts to extract personal information from victims.
• September 2022: Arizona tells CBS 2 from October 2021 through February 2022 the state saw an increase in credit card skimming that also impacted EBT users. And, as of September 2022, the state continues to see an elevated amount of SNAP fraud on the level of that October-February rate.

SNAP FRAUD SOLUTIONS?

"Congress needs to act," said Thomson Reuters theft expert Amanda D'Amico. "They need to update regulations that govern SNAP benefits and replacement of lost benefits due to identity theft."

The Massachusetts Law Reform Institute (MLRI) filed a class action lawsuit on November 4, 2022. In it, MLRI claims that since summer thieves have stolen more than a million dollars in SNAP benefits from thousands of families. The lawsuit's aim is to force the state to make the EBT cards more secure using chip technology and to restore benefits taken by scammers.

Other efforts involve changing the law as Maryland's Rep. Ruppersberger is trying to do. U.S. Senator Dick Durbin (D-Illinois), is interested in pursuing similar legislation. We reached out to his office this summer, and they provided the following statement via email:

"The SNAP recipients who have been victimized by hackers through no fault of their own should be made whole. Senator Durbin is open to all solutions to make sure SNAP recipients can feed their families and our office has reached out to the U.S. Department of Agriculture and Illinois Department of Human Services to discuss ways to prevent future fraud."

State Rep. Sonya Harper (D-Chicago), from Illinois' 6th District, is also interested in changing the law in Illinois. She tells us she is exploring whether it's possible to use state funds to replace stolen SNAP money. 

She has already taken the first step. 

"I've already put in a bill request to LRB [Legislative Reference Bureau] for us to start tracking this type of fraud in the state of Illinois," Harper said.

Once a dollar figure can be attached to scammer fraud within SNAP, then Rep. Harper can turn her attention to replacing the missing money. 

"That is definitely a request of mine that we figure out how we can reimburse these recipients on time so that they can get their benefits in the month where they have been stolen from them," she said.

IDHS tells us it has taken steps this year in light of other states reporting increased scammer fraud, including participating in several roundtables with the USDA to discuss strategies states are using to combat the increase.

In addition, IDHS switched to a new Link Card provider Fidelity Information Systems (FIS). 

IDHS told us via email, "A significant difference between FIS and other providers, is FIS' EBT Fraud Solutions team engages daily with FIS' global electronic funds (EFT) fraud teams gaining insight into new and emerging fraud schemes that will migrate to the EBT world." 

IDHS also said the new FIS Link cards that were sent to recipients in August have a new feature that allows people to freeze and unfreeze their cards via an app. IDHS touts that feature as an effective way to reduce fraudulent transactions.