USDA Replaces $322 Million in Food Stamps Stolen Because It Won’t Upgrade Card Technology

The government contributes to the pervasive fraud and corruption that has long gripped the nation’s massive food stamp program by using ancient technology to load recipients’ electronic benefit transfer (EBT) cards, making them highly vulnerable to theft. Replacing the stolen welfare benefit costs American taxpayers hundreds of millions of dollars in addition to the eye-popping $99.8 billion they already spend to provide 41.7 million poor people with free food. Between October 2022 and December 2024, the U.S. Department of Agriculture’s (USDA) Food and Nutrition Service (FNS) has replaced $322 million in benefits due to fraudulent activity involving card skimming and cloning with an additional $233 million expected to be replaced in fiscal years 2025 and 2026. The problem persists because the USDA, the agency responsible for food stamps, rebranded Supplemental Nutrition Assistance Program (SNAP) under Obama to eliminate the welfare stigma, continues to use an outdated system.

The unbelievable details of this costly government negligence are documented in a lengthy report made public this month by the USDA Inspector General. In the last few years, a multitude of federal audits have exposed rampant fraud in the nation’s food stamp program, but this investigation sticks out because it involves an issue that can easily be resolved by adopting modern technological tools that are widely used and readily available. Instead of adopting chip technology utilized by most credit and debit cards, the government still relies on a 50-year-old magnetic stripe card technology that is highly vulnerable to card cloning fraud. “Criminals can use card skimmers to copy sensitive information from card stripes and transfer this information to blank cards,” the USDA IG report states, adding that the Federal Bureau of Investigation (FBI) says card cloning fraud costs U.S. consumers and financial institutions about a billion dollars annually. “Modernizing EBT, including the introduction of chip cards for SNAP EBT, is an important step towards the protection of SNAP benefits,” the report confirms, adding that chip cards are a more secure payment option that makes it more difficult for fraudsters to copy and steal account information.

So why hasn’t the government made the change to chip technology in food stamp cards? Chips are effective at impeding counterfeit fraud because of tokenization, which replaces sensitive data with a token. When inserted or tapped over a chip-enabled terminal, the chip creates a one-time code to process the transaction. This dynamic makes it significantly harder for fraudsters to clone the card because the transaction code cannot be reused making chip cards a critical control to mitigate schemes involving food stamp fraud transactions. In 2022 Congress ordered the USDA to create a rule forcing states to update their cards though the agency has not done so, according to the audit. As a result, the government has replaced hundreds of millions of dollars in skimmed SNAP benefits in the last few years alone. New York leads the pack with a whopping $50.68 million in skimmed benefits, followed by California ($28.08 million), Maryland ($22.53 million) and Texas ($21.18 million). Other big offenders include Florida ($20.87 million), Ohio ($16.1 million), Alabama ($15.3 million) and New Jersey ($11.5 million). The failure has left the country’s multi-billion-dollar food stamp program in an “ongoing nationwide crisis,” according to the USDA watchdog.

Card skimming is not the program’s only issue. Food stamp fraud is so pervasive that the USDA launched a special system to facilitate the replacement of the welfare benefit when recipients claim it stolen. In the program’s first two years the government doled out a hefty $61.5 million to replace pilfered food stamps in 127,290 cases. That figure has since skyrocketed to a whopping $102,425,077 to replace 226,196 of the 691,604 benefits reported stolen, according to the latest figures published in the SNAP Replacement of Stolen Benefits Dashboard. Last summer the government quietly invested millions of dollars in a special initiative aimed at cracking down on skyrocketing fraud. It is known as Fraud Framework and the USDA spent $5 million to get it going, offering states large cash rewards to bust criminal actors that operate card skimming schemes and food stamp recipients that intentionally commit fraud by violating program rules like falsifying income or identity. A few weeks before announcing the Fraud Framework investment, a veteran USDA employee, who worked in a special division responsible for identifying fraud, was criminally charged for operating what federal prosecutors call “one of the largest food stamp frauds in U.S. history.” The bribery scheme generated over $66 million in unauthorized food stamp transactions, according to the Department of Justice (DOJ).