The expansion of unemployment benefits during the pandemic was a lifeline to millions of Americans who lost work. It was also a boon for fraudsters who, as of January 2021, have stolen nearly $40 billion in UI payments, according to the Labor Department.
Many scammers used stolen information to file false unemployment applications. Others took advantage of the antiquated debit cards many states use to distribute unemployment checks, according to a new CNBC investigation. Lots of those cards don't have chips and rely solely on magnetic stripe technology, which allows you to use the card by swiping.
Those stripes are ripe for identity theft and enable the so-called "transaction fraud," experts tell CNBC. The result? If scammers steal your account information after you've swiped, they can clone the card and make cash withdrawals at an ATM or lift money from your account.
Many states have moved away from the system of putting benefits on prepaid debit cards, but others like California — which, as of January, had paid at least $11.4 billion in false claims and officials say the total figure could come to $30 billion — continue to use them.
Reports of fraud related to Covid rose at around the same time that Congress first expanded unemployment benefits at the end of March 2020, and levels have remained high ever since, according to the Federal Trade Commission. In all, consumers lost more than $3.3 billion to fraud in 2020, up from $1.8 billion in 2019.
Credit card fraud in particular is on the rise, with reported incidents more than doubling between the first quarter of 2019 and the last quarter of 2020, according to an analysis of FTC data by Credit Card Insider.
One easy way to prevent fraud: Don't swipe your card. Most credit and debit cards now come with an embedded chip as another layer of fraud protection. To capitalize on that, insert your card into the reader at the register, or tap it if your card supports contactless payment.
Another easy way to protect yourself: Limit the amount of information you share online, especially on social media. Fraudsters can leverage that personal info to great harm.
For example, as vaccines became more widely available in the spring, posting pictures of your vaccine card became a popular meme across platforms like Instagram and TikTok. "They're sharing a key piece of information, and that could possibly lead to a more severe case of identity theft — and that's by sharing their first name, last name, and date of birth," Sandra Guile, director of communications at the International Association of Better Business Bureaus, told Grow.
Video by Mariam Abdallah
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