Maryland officials approved a new contract Wednesday with the company that manages the state’s electronic payments for food and cash assistance, hopeful that enhanced security features will curb welfare theft in the state.
The contract promises to swiftly implement encrypted chip technology used in credit and debit cards — along with a myriad of other protections — for Marylanders that use the state’s Supplemental Nutrition Assistance Program and other cash assistance.
Encrypted chips would better protect SNAP users from thieves who use “card skimming” to steal benefits.
Maryland’s top spending board voted in favor of a new contract with Conduent, the firm Maryland has hired since 2007 to process electronic benefits for residents who receive food and cash assistance. The company will receive nearly $20 million over the next five years to operate the electronic payments system used by over 400,000 Maryland households who receive benefits or cash assistance.
SNAP is a needs-based program that gives low-income individuals and families financial assistance to purchase food using yellow government-issued Electronic Benefits Transfer cards. But when theft of SNAP benefits skyrocketed across the nation, Maryland was not left out.
More than 33,000 claims of stolen SNAP benefits were reported in Maryland over the last year, according to U.S. Department of Agriculture data. This is puts Maryland behind only New York in the number of claims. Certain states, including California, did not report their data.
Much of the theft comes from “skimming,” where thieves capture data from the magnetic stripe of a credit or debit card. Chips generate a unique code for each purchase made on the card, while a magnetic stripe transmits the card number itself to the card reader.
“Until we have new protections, such as chip and tap technology for families who make ends meet using this independence card … we will not stop or slow benefit theft in Maryland,” said Rafael López, the secretary of Maryland’s Department of Human Services.
In April 2023, Gov. Wes Moore signed a bill that mandated a microchip in all EBT cards issues after Oct. 1, 2023. The implementation — under Conduent’s watch — has been slow. In the meantime, DHS implemented other security features, like fraud alerts and using a cell phone to temporarily lock the card.
López stressed that the higher security that chips offer will not only protect the state’s most vulnerable from getting their benefits stolen but also decrease the burden on taxpayers, who shoulder the cost of reimbursing welfare theft victims. As of this morning, the state has paid $27.1 million in reimbursements, a DHS spokesperson said. Federal government funds, which partially pays for the reimbursements, will sunset this fall.
The item was set to appear in front of the Board of Public Works — composed of the governor, treasurer and comptroller — last month, but a dispute from a company that lost out on the contract delayed it. Fidelity Information Services filed an appeal with the state’s Board of Contract Appeals.
Lawyer Michael Miller urged the Board of Public Works to not approve the contract until FIS can make its case that Conduent’s contract is unlawful in a July 31 hearing.
López warned that not immediately approving the contract could mean a delay of up to two years in when these enhanced security features become a reality. He warned that Maryland residents “will pay the ultimate price in stolen benefits” if the board were to wait until the contract dispute is resolved.
Miller said the Conduent’s offer was unlawful because of a technicality in the procurement process that require bidders to estimate how much they would charge to operate Pandemic Electronic Benefit Transfer benefits under potential future pandemics. Conduent’s offer said it would work with the state to define a new price if there was a pandemic. Miller said this violates a rule that says requests for proposal cannot be conditional.
López fired back at Miller’s claims.
“We would not bring to you — the constitutional officers of Maryland — an unlawful contract to sign,” López said. “We just wouldn’t do it. Saying so doesn’t make it true.”
López urged the trio on the board to approve the contract, promising to roll out chip technology during the first three months of 2025.
The board approved the contract without asking questions.
“There’s a huge risk to the state in not proceeding,” Comptroller Brooke Lierman said.
Correction: This story has been updated to correct the name of the Supplemental Nutrition Assistance Program.
