California unemployment debit card contractor Bank of America lost “hundreds of millions” of dollars last year as it scrambled to address record jobless claims, rampant fraud and a flood of consumer complaints, a senior bank executive told lawmakers today.

The assertion came at a state hearing hours after a new audit slammed the California Employment Development Department (EDD) for years of mismanagement and technical errors that culminated in a failure to respond to skyrocketing unemployment after Covid-19 lockdowns.

More than an hour into the contentious Assembly budget committee meeting, the bank, which works with the state agency, was directly asked how much it has made on the contract it has held since 2010—a question that both the bank and the state have repeatedly refused to answer when asked by CalMatters.

“With respect to what the bank has earned last year, we’ve actually lost hundreds of millions of dollars on the contract,” said Faiz Ahmad, managing director of transaction services for Bank of America. “We never really mention it because it pales in comparison to the scale of the human cost of the pandemic.”

Bank of America previously told state officials that it has increased customer staffing more than twentyfold, to more than 6,000 people, as it responded to intense anxiety about unemployment fraud in California and other states where it administers unemployment debit cards.

The bank’s decade-old contract with the agency was offered at no direct cost to the state, with the bank instead earning revenue from merchant transaction fees and gaining access to millions of potential customers, a copy of the contract obtained by CalMatters shows.

In the Covid-19 era, however, that deal has been complicated by finger-pointing between the bank and the state about who is to blame for jobless Californians ensnared in fraud crackdowns, some losing their homes or struggling to care for loved ones while unable to access badly needed unemployment benefits.

Bank of America contends that the “vast majority” of fraud was linked to fake applications that the state failed to catch, rather than hacked debit cards.

Meanwhile, state personnel also struggled to answer lawmakers’ questions about how to make claimants’ whole.

“People are still suffering,” newly appointed EDD Director Rita Saenz said. “We still lost the money. There’s no sugar-coating that.”

What happens next is unclear. California Labor Secretary Julie Su on Monday said that the state has confirmed at least $11 billion in unemployment fraud during the pandemic, mostly impacting federal emergency programs started in the spring, with an additional $19 billion under review.

Several lawmakers have proposed new measures to add a direct deposit option for state unemployment payments and further reform the program. Earlier this month, debit card disputes with Bank of America boiled over into a class-action lawsuit over the bank’s alleged failure to secure unemployment claimants’ accounts.

At Tuesday’s hearing, Assemblywoman Wendy Carillo, a Democrat from LA, called some of the bank’s more muted responses “disturbing” after she recounted stories of desperate constituents ending up on the street or threatening to harm themselves.

Around 450,000 unemployment debit cards remain frozen, Bank of America’s Ahmad said. How many may turn out to be legitimate claimants, however, is still unknown.

This article first appeared on CalMatters, a nonprofit and nonpartisan media venture.