Help! My Social Security Funds Were Drained by Fraudulent Charges on my Direct Express Card

PHOTO: Identity theft is the top complaint in the U.S. according to a FTC report.

Dear ABC News Fixer: My complaint is with Direct Express, the card the government uses to issue my Social Security disability checks. On Dec. 31, a deposit of $648 was made to me to and placed on the card of my representative payee. My payee and I tried to access the funds at 10 o'clock the next morning, and there was nothing but $28 left on the card.

We called Direct Express and they said the money was still there, but transactions were pending at AT&T ($400), GameStop ($200) and at iTunes for the rest. I am 64 years old and I don't use these businesses.

We told them we didn't authorize the transactions and that it was identity theft. Direct Express told us they would have to put the transactions through and we would have to dispute it within five days. Every time we call to dispute it, we are given the runaround. They say they will transfer us to the second level of service and then the phone goes dead. Meanwhile, I can't pay my rent or bills.

- James Searcy, Chicago, Ill.

Got a consumer problem? The ABC News Fixer may be able to help. Click here to submit your problem online. Letters are edited for length and clarity.

Dear James: Well, this sure was a fine way to start the new year. You told the ABC News Fixer that you and your payee are careful with the debit card and do not share the PIN with others, so it was a surprise when these costly phone, video game and music purchases hit your account just after the deposit went in. Worse, you said, was the frustrating experience of not being able to reverse the fraud while it was still pending.

We got in touch with Comerica, the bank that administers the Direct Express program for the U.S. Treasury. Wayne Mielke, VP of corporate communications at Comerica, promised they'd look into it right away.

And they were able to fix this: First they canceled the compromised card, and you and your payee faxed them a formal dispute. The whole thing took a couple weeks, but they finally returned the missing money minus some fees for a replacement card and expedited delivery, resulting in a refund of $614. You told us you're now back on track with your bills.

As for what happened, Mielke said privacy rules prevented him from divulging those details. You said you and your payee never got an explanation, either. Mielke did confirm to the ABC News Fixer that the account is subject to Regulation E, which offers protection to consumers whose accounts are compromised. Under that federal rule, a debit card holder who reports fraud within two days can't be held liable for more than $50 in losses. If they report the fraud within 60 days, they can be liable for up to $500 – though Direct Express cardholders get 90 days, thanks to an extension negotiated by the Treasury Department. After that, consumers can be on the hook for unlimited losses.

Direct Express users have some additional protections through MasterCard, depending on how the fraud was committed.

These cards are meant to make things simpler for recipients of Social Security, SSI disability payments and certain other federal payments – and easier and cheaper for the government, which doesn't have to mail all those paper checks. Recipients who don't have a bank or credit union account can get one of these prepaid debit cards with their federal benefits automatically appearing each month. The cards can be used at ATMs and at merchants that accept Debit MasterCard, to pay online bills or to buy U.S. Postal Service money orders. There is no credit check or minimum balance requirement.

If they plan carefully, Direct Express users can avoid fees for withdrawing money. But as your problem illustrates, it's important to check your balance daily and know your rights when it comes to fraud. If anything happens, report it immediately. Then, get a police report and keep careful notes for the fraud investigation.

- The ABC News Fixer

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