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Some unemployed Californians say they are fraud victims but bank won't unfreeze their accounts

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California's state unemployment agency is still struggling to deal with a crush of claims during the pandemic - and a staggering amount of fraud. But many unemployed Californians with legitimate claims of fraud tell CBS News they question whether the bank that supplies the debit cards which hold the unemployment funds is really investigating. Anna Werner reports.

Video Transcript

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GAYLE KING: Welcome back to CBS This Morning. As California struggles with a crush of pandemic related debt, we're hearing from people who say they've been victimized by fraudsters, and can't access money when they need it most.

State legislators have demanded answers from Bank of America, which supplies the debit cards that hold unemployment funds for millions of Californians. Now many people question whether the bank is really investigating their fraud claims. Our consumer investigative correspondent Anna Werner has been following this story. Anna, what have you found, because I know you've been investigating?

ANNA WERNER: Thank you, Gayle. Yeah. And after our first story, we asked viewers to email us about their cases, and we found a disturbing pattern. People who say they are fraud victims, who say the bank left them in need, without the money they're entitled to.

Creating beautiful, tasty dishes is something Georgia Moran usually is paid to do as a private chef. But during the pandemic--

GEORGIA MORAN: I lost three bar mitzvahs, two weddings. So that part of my business is gone.

ANNA WERNER: So in June, she applied for California unemployment benefits, which the state pays through Bank of America debit cards like this one. But Moran says when she reviewed her account, she saw someone had taken out over $300 two days in a row. So she called the bank on December 17.

GEORGIA MORAN: When I called to make the claim, the fraud claim, they froze my account that day.

ANNA WERNER: Bank of America told her it would investigate, but then she got this letter, saying her claim had been rejected. The date on the letter, December 17.

They closed your investigation on the same day that you called in. So what does that say to you?

GEORGIA MORAN: It says to me that they didn't investigate it, that they just denied it. And were not going to refund the money.

ANNA WERNER: Not only was the $600 plus not refunded, she says her account is still frozen, with the bank now holding over $8,000 still in her account.

GEORGIA MORAN: I had the feeling like, it's not going to come back to me.

ANNA WERNER: John and Julie Luna say they too lost money, when someone went to various Southern California ATMs and drained John's unemployment account, stealing over $5,000.

JULIE LUNA: Five days in a row, of thousand dollar transactions.

JOHN LUNA: I was out driving somewhere and she called me, hysterical. I couldn't understand her, she was screaming, she was crying, and the only words I could understand was bank and money.

ANNA WERNER: John says Bank of America told him, too, that it would investigate, then sent him a form letter dated just two days later, rejecting his claim.

ANNA WERNER: They're basically saying that we believe you committed the fraud.

JULIE LUNA: Yes. That is exactly how we felt that we were being treated.

ANNA WERNER: We asked people to contact us, and found a pattern. The bank, sending the same letters to people who say they were the victims of fraud, telling them their investigations were closed, which meant if they didn't call the bank back to reopen their case, they would never see the money they say was taken from them.

DAVID CHIU: I think clearly they're not investigating.

ANNA WERNER: David Chiu is a California State assembly member.

DAVID CHIU: That they get a letter 24 hours later, when clearly no investigation has been made, where the bank tells them, you know what? Nothing has happened here, or this is your fault. It would not surprise me if there was a violation of the law here.

ANNA WERNER: But Bank of America told us in a statement, it follows all federal requirements in reviewing every claim and covering losses. It said the ongoing fraud is unprecedented, and that criminals who applied for state benefits frequently withdraw funds off their cards, and then falsely claim these transactions were unauthorized.

And in a hearing last month, bank officials assured California legislators when it comes to legitimate cardholders--

FAIZ AHMAD: We investigate, and we refund or credit the funds back to the account. That's what we do.

ANNA WERNER: But this former bank regulator questions that.

DAVID P. WEBER: It does not sound like Bank of America is making a good faith effort to investigate these claims.

ANNA WERNER: Salisbury University accounting professor David P. Weber used to work as special counsel for enforcement for the Federal Office of the Comptroller of the Currency, the agency that primarily enforces banking regulations.

In your view, is Bank of America breaking the rules here when it comes to these regulations?

DAVID P. WEBER: Yes. It's not reasonable, and I don't think it's a good faith.

ANNA WERNER: For example, he told us what he thinks Bank of America should do when there's alleged fraud at ATMs.

DAVID P. WEBER: They could pull that camera footage and they could see whether the consumer that you spoke to is the person who swiped the card. There is no way in a span of less than 24 hours that they are able to look at that camera footage.

ANNA WERNER: Both Chiu and Weber believe federal regulators should now look at Bank of America's practices.

DAVID P. WEBER: It's unconscionable. The fraudster is getting to keep the money, and then Bank of America is getting to keep its money. And the only person who's suffering are the American families that should have had the money to help protect their family in the middle of a pandemic.

ANNA WERNER: Well, the OCC and Consumer Financial Protection Bureau, the regulators would not comment. Bank of America says it has paid out millions of dollars in claims, and the people who get those letters can call back in to get their cases reopened. They also told us they're working on a list of people that we provided to them. The Lunas, for example, say their money has been refunded. Georgia Moran is still waiting, Tony. Her account's still frozen.

TONY DOKOUPIL: Yeah, well it shouldn't take Anna Werner from CBS looking into it to get the money back to people, but it does help. Anna, thank you very much.