States scramble to replace ripped-off SNAP benefits

Last September, when Baltimore resident Tzu Yang went grocery shopping for his intellectually disabled daughter with a food benefits card that he thought was worth about $300, he discovered at the checkout that the card had no value left. The same thing happened in October, November and December.

The benefits meant for Hawlie Yang, age 37 but with the mental capacity of a 5-year-old, were being systematically stolen.

Tzu Yang contacted local authorities but never got the money back. The stolen electronic benefits were used locally and as far away as New York, he discovered. But neither he nor police could find out who filched them, and the state agencies involved provided no help or reimbursement.

They told him there’s no returning of benefits stolen from electronic benefit transfer, or EBT, cards, Yang, a retired businessman, said in a phone interview.

Yang is not alone. All over the country, state agencies and people who receive aid through the Supplemental Nutrition Assistance Program, commonly known as food stamps, are reporting the theft of millions of dollars in benefits. And unlike regular credit or debit cards where refunds are often available when thieves poach funds, EBT cards don’t have those protections. That leaves many victims with no recourse.

Some help may be coming, thanks to a new federal mandate that allows states to use federal money to reimburse SNAP recipients whose benefits were stolen through electronic card fraud. The federal law also calls on states to increase the cards’ security. But advocates for those with low incomes and some lawmakers say the payments are only a half-step toward fixing the problem.

The mandate, included in the $1.7 trillion federal omnibus spending bill signed by President Joe Biden in late December, requires states to replace EBT card benefits that were stolen after Oct. 1, 2022, through September 2024.

States have until the end of February to draw up plans to use federal money they get for the SNAP program to reimburse recipients who were ripped off.

Although federal and state governments jointly fund SNAP, prior to passage of the gigantic bill, states could only use their own funds for reimbursement. As a result, only a handful, including California, the District of Columbia, Michigan, Rhode Island and Wisconsin, reimbursed stolen benefits, according to the American Public Human Services Association. The nonprofit membership organization for state and local human service agencies surveyed states on this issue last fall.

State legislatures are grappling with how to comply, said the association’s senior director Matthew Lyons. “More states are confronting how they are approaching this issue and planning for the omnibus provisions,” he said in a phone interview.

The fraud problem with food benefit cards skyrocketed in the spring and summer last year. News reports and law enforcement agencies said the benefits most likely were stolen with “skimming” devices attached by crooked employees or thieves posing as customers to card processing machines at store checkouts. The skimmers take seconds to install, and law enforcement officials say they are often placed late at night when store employees are distracted. Those devices clone the data encoded on the cards and can also steal PINs.

The new federal law requires states to submit plans by Feb. 27 to make EBT cards more secure. So far, according to an email to Stateline from a U.S. Department of Agriculture spokesperson, no state has yet forwarded a plan to the department. And critics say since the law did not spell out parameters on how to make the cards more tamper-proof, there may still be room for misuse.

“It’s important to address the underlying issue,” said U.S. Democratic Rep. Dutch Ruppersberger of Maryland, who was contacted for help by Yang and others in Maryland.

“We need to make these debit cards more secure in the first place. That’s what we didn’t do [in the omnibus bill],” he said in a phone interview.

Rip-offs skyrocketed to more than $1 million last year in Maryland alone, rising from $92,000 in reported losses in the state in 2021, his office said.

Ruppersberger, who had introduced an earlier bill to address the issue, much of which was incorporated into the omnibus, has introduced legislation to address the security gaps of EBT cards and make the reimbursements retroactive before the October 2022 date. “We need to protect them and make them whole,” he said.

At least two bills are pending in the Maryland legislature that would require closer monitoring of EBT transactions, installation of more tamper-proof chips on cards and restoration of stolen funds.

Ed Bolen, director of SNAP state strategies at the left-leaning research institute Center on Budget and Policy Priorities, said that while the omnibus law may improve some of the problems, the law is “pretty vague” and leaves those who lost their benefits before October 2022 in the lurch.

“It’s definitely unfair” because many victims lost benefits during the summer of 2021 when the fraud took off, he said. “It was those folks’ hardship that drew attention to this, and some of them may be out of luck.”

Massachusetts, he noted, was another state hit hard by the fraud.

In November, just weeks before the federal omnibus bill passed, the Massachusetts Law Reform Institute, a liberal public interest group, filed a class action lawsuit against the state agency that handles the benefits on behalf of SNAP beneficiaries who had their money stolen from their EBT cards.

Betsy Gwin, the attorney for the institute that filed suit, said the federal omnibus bill was a “really, really positive step” that she hopes will help many of the plaintiffs. She also noted that Massachusetts Democratic Gov. Maura Healey included $2 million to address the SNAP thefts in her supplemental budget proposal. The suit is still pending.

While hopeful that the budget item will pass and help her clients, Gwin said, her organization “has a duty to the clients to fight for justice for them.”

This article was first posted on Stateline, an initiative of The Pew Charitable Trusts.