Money Network ‘Cut Corners’ Distributing Tax Refunds to Middle Class Californians, Class Action Says

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A proposed class action alleges debit card issuer Money Network Financial pocketed millions in California taxpayer money while leaving many middle class residents either unable to obtain their 2022 Better for Families Act tax refunds or vulnerable to fraud. 

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The 27-page lawsuit says that California’s Franchise Tax Board (FTB) contracted to pay Money Network Financial more than $25.3 million to administer the disbursement of one-time payments of between $200 and $1,050 to taxpayers in the state who met certain criteria under the Better for Families Act, which sought to help offset higher costs linked to inflation for roughly 17.5 million California families. 

As a result of Money Network’s “incompetence and maladministration,” the suit says, many Californians have yet to receive the tax refunds to which they are entitled, while others have received debit cards that are highly vulnerable to scammers. 

Although the contract between California and Money Network stipulated that the latter would issue the funds via debit cards containing an EMV chip, the defendant instead “cut corners” in ways that harmed many economically disrupted Californians, the suit alleges. In particular, the complaint claims many of the debit cards issued by Money Network did not have an EMV chip, an essential security measure for payment cards. 

“[M]any Californians had their [middle class tax refunds] drained from their chip-less Money Network debit cards, sometimes before they ever even received the cards themselves,” the case alleges. 

According to the complaint, the agreement between California and Money Network stipulated, among other provisions, that the state required the use of an EMV chip-enabled card to offer the “maximum protection possible,” and for the defendant to provide “sophisticated fraud prevention services” proven to prevent fraud almost 100 percent of the time. 

The suit contests that Money Network has failed to provide reasonable or adequate, let alone “sophisticated,” fraud prevention services.

“The fraud proliferating around the [middle class tax refund] program means that, in effect, California tax payers have paid Money Network millions of dollars to channel cash from State coffers into the hands of criminals,” the case reads. 

The filing emphasizes that magnetic stripe technology in EMV chip-less debit cards is widely known to be far less secure than EMV chips. In light of this, and the apparent understaffing of the defendant’s customer service lines, the lawsuit contends that Money Network “appears blithely indifferent” to the damage it has caused middle class Californians. 

The case looks to cover all California citizens presently eligible for a tax refund under the Better for Families Act who have not had the benefit of the full middle class tax refund amount to which they are entitled as of August 18, 2023. 

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