Direct Deposit Waste, Fraud and Abuse

Waste, fraud and abuse associated with the direct deposit of Social Security benefits costs taxpayers millions of dollars in misdirected and stolen benefits, as well as the diversion of staffing resources that are required to track and replace such benefits for the intended recipients. Most of that waste, fraud and abuse could be prevented simply by requiring Social Security Administration (SSA) employees to verify beneficiaries’ identity and bank account title as part of the direct deposit enrollment process, either in person or telephonically. Background Information As of May 1, 2011, all new applicants for Social Security benefits were required to have direct deposit. On March 1, 2013, all long-term Social Security beneficiaries were required to have direct deposit. If a new beneficiary does not have a bank account, s/he is required to enroll in the government’s Direct Express program. The Direct Express card is a pre-paid debit card issued by Dallas-based Comerica Bank acting as a financial agent of the U.S. Department of Treasury. However, Comerica Bank has advised SSA employees that the administration of the card is contracted to a separate company, Direct Express. Comerica Bank receives the electronic funds transfer from the Department of Treasury and then forwards it to Direct Express. Enrollment in and issuance of the card is from Direct Express, not Comerica Bank. SSA employees must call Direct Express using the general customer service phone number. The automated prompts do not provide an option for customer service. In order to speak with a customer service agent, you need to select the “Lost or Stolen Card” prompt. However, getting to this prompt is extremely difficult. Direct Express will disconnect you if you do not select the correct sequence of prompt entries. Direct Express also does not have enough employees to adequately staff the phone lines for the volume of calls they receive. This results in SSA employees being placed on hold for unacceptably long wait times. SSA employees do not have the same problem reaching traditional financial institutions’ ACH departments. Scope of the Problem

SSA informed employees in a policy instruction dated August 25, 1010 that the agency had “received reports that some unauthorized changes have been made to Direct Express card accounts.” SSA employees were instructed to send an email to their regional office if they determined that a beneficiary’s Direct Express account needed to be “flagged.” OIG stated that in May 2011 it began receiving multiple allegations that Social Security benefits were being improperly diverted to Direct Express.1

In October 2011, SSA created a site to centralize Direct Express reclamation cases. SSA’s ten regional offices were instructed to input these cases into the Direct Express Cases SharePoint site. The Office of Public Service and Operations Support (OPSOS) would monitor the cases for completion.

Yet Theresa Gruber, SSA’s Assistant Deputy Commissioner, in her written testimony before the September 12, 2012 Congressional Subcommittee hearing on the Direct Deposit of Social Security Benefits, failed to disclose the fact that SSA is having so many problems with the Direct Express card program that it implemented a consolidated tracking system to monitor and resolve the nonreceipt cases. In October 2011, the SSA Office of the Inspector General (OIG) began tracking allegations of unauthorized changes to direct deposit information and redirected beneficiary payments to other accounts.2 1 Controls over the Enrollment Process with the Direct Express® Debit Card Program (Limited Distribution) (A-15-12-21273).

2 Written testimony of Patrick P. O’Carroll, Jr. Inspector General, SSA, Sept. 12, 2012 Hearing on the Direct Deposit of Social Security Benefits. There are a number of other pre-paid cards that beneficiaries can choose in addition to Direct Express. Once pre-paid cards became widely used for Social Security benefits, a new fraud scheme appeared. Identity thieves figured out that with limited information they could sign up for one of the prepaid cards and fraudulently redirect someone’s benefit payment onto an untraceable prepaid card. Due to the fraud, the Administration created a policy that only “acceptable” prepaid cards are allowed to receive Social Security benefits (Section GN 02402.030 E of SSA’s Program Operations Manual). However, SSA will not provide a list of either acceptable or unacceptable prepaid cards to the employees. Employees do not know if SSA has blocked unacceptable prepaid cards from being set up under any of the automated enrollment processes. The first automated process is the Quick$tart Automated Enrollment process. This service allows Financial Institutions to transmit direct deposit signup information to SSA electronically, thereby avoiding the need to contact SSA's toll free 800 number staff or field offices. The second process is the direct deposit feature on SSA’s website. The current version is under the “my Social Security” account feature.

Identity thieves are using SSA’s automated enrollment processes and the pre-paid cards to steal SSA benefits. SSA has stated the percent of fraud is within an acceptable level. However, we know most of the fraud could be eliminated simply by requiring SSA employees to verify beneficiaries’ identity and bank account title as part of the direct deposit enrollment process, either in person or telephonically.

Third parties are also using the Quick$tart Automated Enrollment process to redirect benefits away from representative payees and into third party bank accounts. The Union is astonished that SSA would design an automated system that does not even verify the identity of the person requesting the direct deposit enrollment or match the payee’s name against the bank account title. Under SSA policy, payee bank account titles must reflect the beneficiary’s ownership of the funds and the payee’s relationship as a fiduciary (financial agent.). However, SSA sends electronic funds transfers made out in a representative payee’s name to third party bank accounts. Worse still, the financial institutions are not returning the money to SSA. Financial institutions have told SSA employees they only look at the account number. If SSA sends the benefits to a wrong account, it’s SSA’s fault. A financial institution would never allow a third party to cash a Social Security check that is made out in a representative payee’s name. So why are financial institutions allowed to post SSA electronic fund transfers to accounts that do not contain the name of the representative payee?

Recommendations

Our Union encourages Congress to ask GAO for an audit on ease of access to Direct Express’ customer service department by SSA employees investigating non-receipt of benefits. Our Union encourages Congress to ask SSA OIG to audit the work years spent on direct deposit waste, fraud and abuse cases.

Lastly, our Union strongly encourages Congress to hold hearings investigating the role automation plays in direct deposit waste, fraud and abuse cases.