The Covid-19 pandemic caused the highest unemployment rates since the Great Depression, creating a ripe opportunity for scammers to steal Americans’ unemployment benefits. But what may surprise you is that you don’t have to be unemployed to fall victim to unemployment fraud.
According to the FBI, many unemployment insurance victims do not know they have been affected until they file for unemployment insurance benefits—and some may not know until tax season rolls around.
You might find out you’ve been scammed when you receive an IRS Form 1099-G, a tax form that reports your unemployment compensation for the year—despite never having made a claim.
Or you may be notified by your employer that an unemployment claim has been filed while you’re still employed.
With millions of unemployment claims nationwide, fraudulent claims are contributing to major backlogs at state unemployment offices. This is creating delays for people who are legitimately attempting to claim their unemployment benefits and those trying to clear any fraudulent claims from their name.
Whether you are currently claiming unemployment benefits or not, it’s important to know how to handle the situation in the case you fall victim to a scammer.
How The States And Federal Government Are Responding
The U.S. Department of Labor stepped in on Sept. 1, and directed $100 million in funding to combat unemployment fraud across the country. These funds will be used for fraud investigations and to build new identity verification tools to prevent future fraud.
California in particular has been overwhelmed with unemployment claims, with nearly three million cases reported in the week ending Sept. 12. In a press release, California Employment Development Department (EDD) spokesperson Loree Levy said, “We certainly have legitimate PUA [pandemic unemployment assistance] claims in California, but we do suspect that a big part of the unusual recent rise in PUA claims is linked to fraud”. Ten days later, the EDD announced all call center assistance would close to focus on paying outstanding claims and update payment systems.
The shutdown impacted thousands of Californians needing to file new unemployment claims, who were subsequently sent to a temporary webpage to submit their info.
Arizona, Washington, Oklahoma and Montana have faced similar issues. Suzi LeVine, the Washington Employment Security Department Commissioner announced they recovered over $330 million in stolen benefits in May. (It was estimated up to $650 million was stolen.)
In June, Arizona and Montana both announced they were expanding staff to continue monitoring for fraudulent activity.
The Harsh Impact Of Unemployment Fraud
Tampering with someone’s unemployment fraud not only jeopardizes access to needed funding, but could lead to larger issues related to identity theft.
It’s unclear exactly how many people have been affected by skyrocketing unemployment fraud during the pandemic as the Federal Trade Commission (FTC) is still investigating, but the FTC estimates it is affecting “tens of thousands of people” and an estimated $26 billion in payments may fall in the hands of fraudsters.
In the case of unemployment fraud, you do not need to worry about bearing the responsibility of stolen benefits. However, unemployment fraud can be the precursor to much larger issues, regardless of current employment status.
Impact On Unemployed Americans
If your unemployment benefits are stolen, you will not be held liable for those lost funds, and pending an investigation by your state unemployment agency, your unemployment funds will be replenished. Unfortunately, this is not a quick process.
An unemployment fraud investigation can take anywhere from several weeks to several months and backlogs of unemployment claims are mounting across the country. This results in delayed benefits to those most in need.
Sharon Hilliard, executive director of the Employment Development Department, said in an ABC7 report that some people have been waiting up to five months to receive benefits. If you are experiencing extended delays receiving your unemployment benefits, your unemployment account online may provide status updates. If there is no update online, call your local unemployment agency or visit in person, if available—although be prepared to wait in line.
Impact On Employed Americans
Your unemployment benefits will not disappear if you need them in the future. However, you will likely deal with issues to clear your name of any fraud before receiving your benefits.
Gilbert Villareal Mendonca from Hayward, California, was notified on Sept. 3 by his employer that they received a letter from the EDD indicating a scammer filed for unemployment under his name. Villareal Mendonca had no idea how his information was compromised and after he was notified, he attempted to contact the California EDD’s fraud hotline. However, he ran into several roadblocks.
Gilbert tried to contact the EDD to submit the necessary documents, but was met with technical issues. He sent a letter explaining the case, and is now waiting to hear an update. In the meantime, he has enrolled in identity theft protection through his employer.
What To Do If You’re A Victim Of Unemployment Benefit Fraud
The situation can create a huge headache for anyone attempting to claim much needed unemployment benefits. The good news is that you will not lose out on any benefits—but the bad news is it can cause major delays if you are claiming benefits now or in the future.
If you discover you have been a victim of unemployment fraud, here are a few steps to begin rectifying the situation.
1. Report Unemployment Insurance Fraud To Your Employer And State Unemployment Agency
The first step is to contact your unemployment agency to inform them your unemployment benefits have been compromised. Each state has either a phone number and/or online platform to submit claims.
Each state handles unemployment fraud cases differently, but the Federal Trade Commission (FTC) recommends you document all confirmation and case numbers, along with the names of who you speak to at your state unemployment agency.
As many unemployment departments are overwhelmed with identifying fraudulent claims, you may encounter long delays to process your case. You may also be responsible for providing documentation and evidence to support your case, which can be time-consuming and stressful.
If you have a case similar to Gilbert where you are still currently employed but you learn about the fraud before your employer does, alert your employer. Typically, unemployment departments will send a letter to your employer first to verify you are no longer employed before they’ll issue payments.
2. File A Report With The Federal Trade Commission
File a complaint with the FTC online at identitytheft.gov or call 877-ID-THEFT. They can assist with implementing fraud prevention tools, including placing a fraud alert on your credit, pulling credit reports, and closing any fraudulent accounts opened in your name.
3. Contact The Three Major Credit Bureaus
If someone is claiming your unemployment benefits, it is very likely they have your Social Security Number. To minimize the damage they can impose on your financial health, it is best to contact the three credit bureaus (Equifax, Experian and TransUnion) to freeze your credit reports. You can do this over the phone, or online. The bureaus legally must freeze, and unfreeze, your credit reports for free.
Once your reports are frozen, anyone who tries to open an account in your name should be thwarted. But remember: If you want to apply for a loan, or credit card, you need to unfreeze your reports first.