Treasury renews Comerica contract for benefits program hit by fraud

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Comerica Bank won another five-year contract from the Treasury Department to continue operating a prepaid card debit program for Social Security recipients and veterans that has been criticized for poor customer service and fraud.

Treasury’s Bureau of Fiscal Service said Tuesday that the $73 billion-asset Comerica was chosen from multiple bidders, saying the Texas bank provides “the best overall value to the American public.”

A watchdog report last year urged Treasury to withhold compensation from Comerica based on how it handled fraud cases and for past customer service blunders.

“The new agreement with Comerica Bank implements rigorous customer service requirements, requires more reporting, reduces cardholder fees for certain transactions, and lowers the overall cost to the federal government from the previous agreement,” Treasury’s Bureau of Fiscal Service said in a press release.

The program, called Direct Express, provides 4.5 million Americans — a majority of whom do not have a bank account — with prepaid debit cards for receiving monthly Social Security or Veterans benefit payments.

The new contract implements stricter performance measures and financial penalties for noncompliance, a Fiscal Service spokesperson said. In addition, the fee for getting cash out at Walmart stores has been reduced to 85 cents per transaction from $1.50 per transaction under the new contract, the spokesperson said.

Financial terms of the contract were not disclosed and the bureau would not provide further details.

Comerica won the first government contract to oversee the Direct Express program in 2008. The contract was renewed in 2014 despite criticism by the Treasury’s Office of the Inspector General over how the program was being run. Last year, a report from that office recommended that Comerica’s compensation be cut for poor performance.

In 2018, Comerica said it had uncovered fraud in a component of the Direct Express program. In hundreds of cases, recipients funds were dispensed to fraudsters who had previously gained access to cardholder data. The Dallas bank shut down a component of the program in late 2018 after a spate of fraud.

Meanwhile, a Treasury official highlighted the cost savings of the new contract.

“This new agreement builds on the success of the Direct Express program by continuing to focus on the customer while lowering the cost to American taxpayers,” Ronda Kent, chief disbursing officer at Treasury, said in the press release. “For more than 10 years, the Direct Express program has provided unbanked federal beneficiaries with a low-cost, secure payment option, and has done so with a consistently high customer satisfaction rating of 94%.”

Comerica’s customer satisfaction ratings have been a point of concern. The inspector general office said in the report last year that Comerica had skewed the results of an internal scoring system on customer satisfaction by using high scores in one area to offset lower scores in another.

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Card fraud Fraud detection Payment fraud Digital payments Prepaid cards Treasury Department OIG Comerica Bank