Stop Thief!

The Bizarre Evaporating Food Stamp Phenomenon

August 1, 2007

Author: Cathy Roberts

During the spring of 2006, legal services advocates in New York City encountered a baffling phenomenon which came to be known among public benefits listserv users as the “bizarre evaporating food stamp” issue.  Although the mystery has not been completely solved (to our knowledge the scammers have not yet been caught, nor have the victims received any restored benefits for the months they did not receive food stamps), we can tell you how and why the phenomenon has been occurring.  We can also update you on specific steps that have been taken to provide better security to food stamp households.

Here’s how the scam works:

In a typical situation, “Jane,” a food stamp recipient, attempts to access her household’s monthly benefits, only to find out that there are no food stamps left in the account – they have mysteriously disappeared.

Jane reports the theft of benefits to her local food stamp office.  Her worker tells her that nothing can be done to replace the missing benefits, but changing the PIN number should prevent this from happening in the future.  Jane dutifully changes her PIN number, but the next month the same thing happens again – the food stamp benefits disappear from her account before she has a chance to access them.

Jane returns to the food stamp office.  This time, HRA closes down her old food stamp account completely, and assigns her a new account number, benefit card and PIN number.  The worker tells Jane that she should be able to access her benefits the following month on her household’s normal issuance date.  However, when Jane goes to the grocery store that morning, the benefits once again have “evaporated.”  Finally, Jane is referred to HRA’s Bureau of Fraud Investigation (BFI) and given a special temporary card, which stops the unauthorized withdrawals from recurring.  However, the temporary card is valid for just a couple of months.

It turned out that Jane is not alone.  Other recipients have been victimized by this particular scam, and their cases share some common themes.  First, the thefts (accessing of benefits) usually occur immediately after the benefits are put into the EBT account by HRA, just a few minutes after midnight on the household’s normal issuance date.  Second, the benefits are redeemed as “keyed” rather than “swiped” transactions – meaning that the household’s food stamp account number is manually keyed in instead of the normal process of having the household swipe their benefit card at the point of sale.  Additionally, some victims have had their wallets (including their benefit card and all their identification) stolen in the past.  Others have unwittingly given their account number and other personal information over the phone to someone claiming to be a government employee and needing the account info “to make sure your food stamp account is working properly.”

Thanks to sleuths like attorney Joe Davidson from Legal Services of the Bronx, it was discovered that not only had the scammers somehow gained access to the affected households’ original food stamp account, but they were also able to figure out the household’s new account information because all renumbered accounts were assigned in a predictable sequence.  In other words, if you had the old account number, it was easy to figure out what the new account number would be.  And once the new account was opened, the scammer could simply call the customer service hotline and obtain a new PIN number on this new account (by claiming that they had simply forgotten their PIN).  These nefarious individuals now had both the new account number and a new PIN number, and they also knew which day of the month the household’s next monthly allotment would be put into the EBT account.  They then trot off to a retailer who allows them to access the EBT account without an actual benefit card, via a keyed transaction, and drain the household’s account.

To combat this phenomenon, OTDA has taken the following steps:

(1) improving card security through a restricted or “locked” PIN.  A locked PIN cannot be changed via the EBT customer service hotline.  Instead, the household must appear in person at the food stamp office and present proper identification in order to change their PIN.  Locking the PIN has proven to be most effective in stopping the “bizarre evaporating benefits” phenomenon for individual households.  06 ADM-14 explains the restricted PIN procedures and contains a copy of the PIN restriction request form.

(2) adding some additional language to the EBT customer helpline to remind households NEVER to give out their personal account information on the phone to anyone.

(3) referring all these cases to BFI and USDA for investigation, with the aim of tracking down the culprits.

(4) exploring the possibility of changing its case renumbering system, so that a random – rather than predictable -- case number would be assigned after a household reports that their card (or benefits) have been lost or stolen.

OTDA has also shared that the scammers are targeting retailers as well as recipients, and as a result, USDA has sent a warning notice to the retail community. (See http://www.fns.usda.gov/fsp/retailers/pdfs/EBT_Scams.pdf)

While all of the above-listed initiatives are extremely positive, none of them addresses the issue of getting restored benefits for victimized households.  OTDA has taken the position that there is no authority in the federal regulations (7 CFR 274.6) to issue replacement food stamp benefits in these circumstances.

The Empire Justice Center and other advocacy organizations are monitoring this situation, and we will keep you abreast of any new developments.  In the meantime, if you are working with a household who has been victimized by this scam, you should advise them to immediately get a PIN lock on their account.