Scammer may have snagged your California Middle Class Tax Refund

Jay Ryan waited months for his Middle Class Tax Refund (MCTR) to arrive. 

“I just thought it was late. It’s the state, they’re running behind, I just didn’t receive it yet,” he said.

Ryan never got his payment, but he did get a 1099 form so Uncle Sam could collect taxes on his MCTR. Residents weren’t required to pay taxes on the MCTR. The I-Team asked the state why it mailed 1099s, and it said it did so before the IRS decided the payment was tax exempt. 

Ryan called Money Network, the company the California hired to run the program. 

“I found out a debit card was sent to me in October,” he said.

Ryan said Money Network told him his card had been used at a convenience store ATM 25 miles from his home. He knew scammers must have swiped his card. 

“If it was stolen out of the mail, of course it was used. That’s why criminals steal cards,” he said.

Ryan said he filed a claim with Money Network, but it was denied. 

The NBC4 I-Team heard from other residents who also say they never received their MCTR debit card. And others, like Mario Loayza, said when they did receive the card, all the money was gone. Loayza told the I-Team that when his card arrived months ago, the $1,000 payment had already been spent at various retailers, including $800 at Nordstrom. 

“I thought, ‘What the hell’s going on?’ They have good taste, anyway,” he said.

Loayza said he eventually got reimbursed after he filed a complaint with the Consumer Financial Protection Bureau. 

Experts told the I-Team it’s easy for scammers to steal money from the cards because many contain a magnetic stripe, instead of the harder-to-hack chip. 

The I-Team asked the state how much fraud has been reported, but it doesn’t have a clue. The state said it’s not tracking fraud complaints.

Assemblymember Tom Lackey is fed up. 

“It’s like political groundhog day. Here we go again,” he said.

Lackey said the state should have learned its lesson; during the pandemic, crooks stole an estimated $20 billion from EDD debit cards. Experts said it’s largely because those cards didn’t contain chips, either. 

Lackey said the state should use a more secure payment method. He also thinks Money Network should eat the cost of any fraud, instead of pocketing the $25 million the state paid it to run the program. 

“When there are very few consequences for fumbles, this is the behavior you get. If you have consequences, people react. It changes, it shapes behavior,” he said.

The state auditor is looking into the program, too. It told the I-Team it will wrap up its report later this year. 

In an email response to the I-Team’s questions, the state said most cards didn’t contain chips because of supply chain issues. 

It also said it’s not tracking fraud because its goal is to resolve a customer’s inquiry, instead. But it did say Money Network is responsible for replacing any cards due to fraud.

So how many cards have been replaced? The state wouldn’t tell NBC4, saying it’s industry best practices not to comment on fraud levels. But it did say Money Network continues to perform under the terms of the contract, and it will be compensated accordingly, the full $25 million.

The I-Team also tried to reach Money Network for a comment but didn’t get a response. 

“The sad thing about this was that it’s so preventable and foreseeable. The fact that the state just threw these into the mail in the hopes they’d be delivered, it’s just unbelievable. I don’t know what to say. It’s a joke,” said Ryan.