Court filing

14C1 — In re Bank of America California Unemployment Benefits Litigation (Dkt. 591-35, S.D. Cal. No. 3:21-md-02992)

Filed October 17, 2025 in In re Bank of America California Unemployment Benefits Litigation; one of 1415 filings from this case.

Record facts

Court	U.S. District Court for the Southern District of California
Filed	2025-10-17

U.S. District Court for the Southern District of California · No. 3:21-md-02992-GPC-MSB · Doc. 591-35 · 2025-10-17 · Docket on CourtListener

Full text

DX 14.C.1
REDACTED VERSION OF
DOCUMENT SOUGHT TO
BE SEALED PURSUANT TO
STIPULATED
PROTECTIVE ORDER
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CONTAINS CONFIDENTIAL MATERIAL
1
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
IN RE BANK OF AMERICA CALIFORNIA
UNEMPLOYMENT BENEFITS
LITIGATION
Case No. 3:21-md-02992-GPC-MSB
EXPERT REPORT OF JANE CLONINGER
March 4, 2025
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CONTAINS CONFIDENTIAL MATERIAL

TABLE OF CONTENTS
I. ASSIGNMENT ........................................................................................................................... 1
II. SUMMARY OF EXPERT QUALIFICATIONS ....................................................................... 2
III. HOURLY RATE ...................................................................................................................... 4
IV. FACTS AND DATA CONSIDERED ...................................................................................... 4
V. SUMMARY OF OPINIONS ..................................................................................................... 5
VI. STATEMENT OF OPINIONS AND BASIS FOR OPINIONS .............................................. 7
A. Mag-Stripe Only Cards Are Highly Vulnerable to Skimming and
Card-Present Counterfeit Fraud .............................................................................................. 7
B. EMV Chips Are Extremely Effective at Preventing Card-Present Counterfeit Fraud .......... 14
C. By At Least 2019, EMV Chips Were the Industry Standard for Credit and
Debit Card Security................................................................................................................ 21
D. The Bank’s Failure to Include EMV Chips in its EDD Debit Cards Resulted
in Cards with Below Industry Standard Security .................................................................. 28
E. The Bank’s Decision to Not Include EMV Chips in EDD Debit Cards in Early
2020 Was Inconsistent with Other Participants in the Payments Industry ........................... 29
F. It Was Highly Foreseeable that the Bank’s Failure to Include EMV Chips in EDD
Debit Cards Would Lead to Counterfeit Fraud Targeting EDD Debit Cardholders
During the Pandemic, Because Fraud Migrates to the Weakest Link .................................. 38
G. The Bank’s Decision Not to Issue EMV Chip Cards to EDD Debit Cardholders
Led to an Increase in Skimming Attacks Targeting California EDD Cards ......................... 44
H. EMV Chip Cards Would Have Prevented All or Nearly All of the Unauthorized
ATM Withdrawals and Other Unauthorized Card-Present Transactions Class
Members Experienced .......................................................................................................... 46
I. Any Financial Institution in the Bank’s Situation Would Have Known that Many
EDD Cardholders Who Reported Unauthorized PIN-Enabled ATM Withdrawals
Were True Victims of Counterfeit Fraud ............................................................................... 49
VII. CONCLUSION ..................................................................................................................... 52

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CONTAINS CONFIDENTIAL MATERIAL

I.
ASSIGNMENT
1.
I have been retained as an expert in this matter by co-lead counsel for Plaintiffs,
Cotchett, Pitre & McCarthy, LLP and Altshuler Berzon LLP (collectively, “Plaintiffs’ Counsel”).
2.
Plaintiffs’ Counsel have informed me that from 2011 to approximately February
15, 2024, the Bank had an exclusive contract with California’s Employment Development
Department (“EDD”) to distribute unemployment insurance (“UI”), disability insurance, and
paid family leave benefits to Californians through Bank-issued prepaid debit cards (“EDD debit
cards”).1 Prior to July 2021, all EDD debit cards were “mag-stripe only” debit cards that did not
contain an “EMV” chip (terms explained below).2
3.
Plaintiffs’ Counsel asked me to provide my expert opinion with respect to certain
issues relevant to this litigation, including but not limited to:
a. Whether Bank of America’s (the “Bank’s”) failure to embed EMV chips in its
EDD debit cards between March 2020 and June 2021 was consistent with industry
standards for debit card security;
b. Whether the Bank’s failure to include EMV chips in its EDD debit cards between
March 2020 and June 2021 foreseeably rendered those cards vulnerable to card
skimming attacks and card-present counterfeit card fraud, including unauthorized
withdrawals at Automated Teller Machines (“ATMs”);
c. Whether EMV chips would have prevented the unauthorized ATM withdrawals
and other card-present transactions that class members experienced;

1 Depo. Tr. of the Bank’s Rule 30(b)(6) Designee Robert Chestnut (“Chestnut Tr.”) 54:19-24,
75:8-13, 76:3-7, 129:2-13.
2 Depo. Tr. of the Bank’s Rule 30(b)(6) Designee William Matthew Martin (“Martin Tr.”) 65:4-
14.
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d. Whether the Bank’s failure to equip EDD cards with EMV chips subjected class
members to an increased risk of unauthorized access and exfiltration, theft, or
disclosure of the cardholder’s personal information; and
e.
f. Whether, between late September 2020 and June 2021, it would have been
reasonable for the Bank to assume that all or almost all EDD debit cardholders
who reported an unauthorized ATM withdrawal were likely fraudsters making
false reports, rather than actual victims of counterfeit card fraud.
II.
SUMMARY OF EXPERT QUALIFICATIONS
4.
I have over 35 years of experience working in financial services, specifically in
the payments industry, which coordinates the exchange of money for goods between customers,
businesses, and financial institutions. My primary focus within the payments sector has been on
product innovation for credit and debit cards, including EMV chips, contactless and mobile
payments.
5.
From 1982 to 1985, I worked for First Interstate Bancorp in its strategic planning
group. In 1985, I joined Edgar, Dunn & Company, a consulting firm with particular expertise in
the payments sector. In 2017, I joined Accenture, a large global technology and strategy
consulting firm, as a Senior Managing Director in its payments industry practice. I largely
retired in February 2019 but continue to work as an independent consultant.
6.
In those capacities, I have gained expertise in the economic and operational
aspects of the payments industry. I have assisted clients in preparing product roadmaps, strategic
plans, and business cases (justifications for proposed projects based on expected commercial
benefit) for new products and technology investments, including EMV chips. I have completed
numerous client projects involving multiple payment methods such as credit, debit, prepaid, and
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person-to-person payments. My consulting experience includes advising clients on the use of
mobile payments and contactless cards and conversion to EMV chip cards.
7.
Between approximately 2004 and 2015, my focus was on the business
implications of EMV chip technology. I worked with Interac (Canada’s debit network) to
develop the business case for EMV migration for the debit in Canada. I also worked with
MasterCard and Visa in the U.S. to develop industry-wide business cases for both debit and
credit cards in the U.S. My work involved creating models that captured the costs (including
chip and card production costs, point of sale terminal, and ATM upgrade or replacement costs,
and expenses related to changes to software) and the benefits (primarily reduction of card-
present counterfeit fraud) for each of the major constituents of the payments landscape: issuers,
acquirers, ATM operators, merchants, networks, and processors.3 I also developed fraud

3 An issuer is a financial institution that provides payment cards, credit, debit or pre-paid, to their
consumer customers. Issuer responsibilities include marketing their card products, underwriting
the credit risk of each applicant, processing cardholder purchase requests, and managing the
cardholder account (e.g. maintaining a record of transactions, payments, balance outstanding,
etc.).
An acquirer is a financial institution that provides processing and settlement services to
merchants/businesses. Acquirers enter into contracts with merchants to provide payment
processing services. They maintain the merchant’s account record (including individual
transaction details), submit daily settlement to the network, and process the incoming receipt of
funds to ensure that they are accounted appropriately. Acquirers are also responsible for
underwriting each of their merchant customers.
An ATM operator is the Financial Institution or independent operator responsible for the
management of the ATM, including providing services such as loading cash, ATM maintenance,
ATM ownership and leasing.
Merchants provide goods and services to cardholders and submit card transactions to their
acquirer for payment. Merchants are the customers of the acquirers.
Networks, also known as brands, card networks, or payment schemes, provide the infrastructure,
rules, and standards necessary to process payments. They connect all the players, oversee the
payment processing activity, monitor the settlement of transactions, and regulate and manage the
corresponding compliance policies. The network has commercial relationships only with the
issuer and the acquirer. In this case the network is Visa.

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forecasts for the status quo (no EMV chips) and for the transition to the use of EMV chips for
each business case. My work informed my clients’ decisions regarding EMV conversion.
8.
I have spoken at numerous industry conferences on topics related to payment card
innovation including EMV chip technology as well as other developments related to adoption of
contactless and mobile payments.
9.
I have an MBA from UCLA’s Anderson School of Management in Los Angeles
and a BS in Economics from University of Tennessee in Knoxville.
10.
A true and correct copy of my current curriculum vitae (CV), which includes a list
of all publications I have authored or co-authored in the last 10 years, is attached as Appendix A.
I have not testified as an expert at trial or by deposition in the last four years.
III.
HOURLY RATE
11.
I am being compensated at a rate of $450 per hour for my work in this matter. My
compensation is not contingent on the nature of my opinions or on the outcome of this litigation.
IV.
FACTS AND DATA CONSIDERED
12.
In preparing this report and forming the opinions expressed herein, I considered
documents, testimony, and information produced in discovery in this litigation as well as
publicly available documents and information and my general knowledge, training, and
experience from over 30 years in the payments industry. The specific materials I considered are
cited in this report and in the attached Appendix B.
13.
My work on this case is ongoing, and I may review additional materials or
conduct further analysis. I reserve the right to update, refine, or revise my opinions as
appropriate including if additional information becomes available to me.

Processors manage the systems that process card transactions on behalf of their customers, either
issuers or acquirers. They handle the technical aspects of authorizing, clearing and settling
transactions between acquirers and issuers, and manage the corresponding compliance.
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V.
SUMMARY OF OPINIONS
14.
Based on my general knowledge, training, and over 35 years of industry
experience, my review and analysis of documents produced by the Bank in this litigation and
documents publicly available, and my review of the deposition testimony of the Bank’s Rule
30(b)(6) designees, it is my opinion that:

a. Payment cards that have only a magnetic stripe to hold cardholder information
and not an EMV chip (“mag-stripe only cards”), including the Bank’s EDD debit
cards at issue in this litigation, are highly vulnerable to card skimming and card-
present counterfeit fraud.
b. The EMV standards, released in 1996, were designed to prevent card-present
counterfeit fraud related to mag-stripe only cards, and EMV chips are highly
effective at preventing card-present counterfeit fraud.
c. By at least 2019, the use of EMV chips was an industry-standard security measure
throughout the U.S. debit card market, including for debit cards used for the
administration of government benefits.
d. The Bank’s failure to include EMV chips in its EDD debit cards was inconsistent
with industry standard practices and caused those cards to be less secure and more
vulnerable to skimming and card-present counterfeit card fraud (including
unauthorized ATM withdrawals) than are debit cards with embedded EMV chips.
e. The Bank’s failure to include EMV chips in its EDD debit cards created an
inferior level of card security for EDD debit cardholders compared to the level of
card security the Bank provided to its non-prepaid consumer and business credit
and debit cardholders, to whom the Bank issued EMV chip cards from 2014
onward.
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f. Given the well-known fact that criminals probe for security weaknesses and
exploit vulnerabilities they identify, and that by 2020 it was well documented that
fraud had begun to concentrate on mag-stripe only cards, it was highly
foreseeable that card-present counterfeit fraud (including unauthorized ATM
withdrawals) targeting EMV chip-less Bank-issued EDD debit cards would
continue to increase during 2020. Because prepaid cards with high load values
and low security are particularly attractive to criminals and because the COVID-
19 pandemic was projected to result in a large increase of the EDD debit card
load, it was also highly foreseeable that fraud targeting EDD cards would
continue to increase during the pandemic.
g. Skimming and card-present counterfeit fraud targeting California EDD cards
increased as a result of the Bank’s failure to issue EMV-chip-enabled cards and
greatly increased the likelihood of unauthorized access, use, and disclosure of
class member personal information.
h. Card skimming results in the unauthorized access and exfiltration, theft, or
disclosure of the cardholder’s personal information.
i. Card skimming is the best explanation for the type of fraud class members
experienced on their EDD cards in 2020-2021.
j. The addition of EMV chips to the Bank’s EDD debit cards would have prevented
virtually all the card-present counterfeit fraud (including unauthorized ATM
withdrawals) that class members experienced.
k. Any major financial institution in the Bank’s situation in 2020-21 would have
known that many EDD debit cardholders who reported unauthorized ATM
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withdrawals during the pandemic were true victims of card skimming and/or card-
present counterfeit card fraud.

VI.
STATEMENT OF OPINIONS AND BASIS FOR OPINIONS

A.
Mag-Stripe Only Cards Are Highly Vulnerable to Skimming and Card-
Present Counterfeit Fraud.
15.
Prior to July 2021, all Bank-issued EDD debit cards were mag-stripe only debit
cards.4
16.
IBM created the first mag-stripe card in the 1960s.5 IBM essentially attached
magnetic recording tape, invented in Germany in the 1920s, to a card, which was originally used
for entry control.6 In 1970, American Express was the first to use mag-stripe cards for payments,
using the magnetic recording tape to store personal information regarding the cardholder,
including the cardholder’s name, and credit card number, and data relevant to the payment, such
as the card expiration date.
17.
Mag-stripe payment cards typically have three tracks on the mag-stripe. Tracks 1
and 2 are used to store data specified by the card brand (e.g., Visa) in pre-specified formats,
while Track 3 is used primarily for additional information specified by the issuer.7 The data on
the three tracks does not change from one transaction to the next and is easily readable.8 The

4 Martin Tr. 65:8-14.
5 See The Magnetic Stripe, IBM, https://www.ibm.com/history/magnetic-
stripe#:~:text=Parry%20helped%20develop%20the%20Universal,It%20worked (last accessed
Aug. 7, 2024).
6 See Vicki Hyman, Swiping Left on Magnetic Stripes, VISA Newsroom (Aug. 12, 2021),
https://www.mastercard.com/news/perspectives/2021/magnetic-stripe/.
7 See Jerome Svigals, The Long Life and Imminent Death of the Mag-Stripe Card, IEEE
Spectrum (May 30, 2012), https://spectrum.ieee.org/the-long-life-and-imminent-death-of-the-
magstripe-card.
8 See id.
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Motley Fool, a private investment advisory firm for individuals, has described the process as
follows:9
Cards […] store all pertinent data on the magnetic stripe on the back of the
card, including the cardholder's name, credit card number, expiration date,
and CVV number. Once the information is written on this stripe, however,
it is forever static, meaning it will never change.
18.
Card-present counterfeit fraud occurs when criminals use a cloned card to make
purchases or ATM withdrawals that are charged to the real cardholder’s account. Criminals
obtain the card data through various scams, including a process called “skimming.” Skimming
occurs when criminals surreptitiously install a device capable of reading the information on a
magnetic stripe on an ATM’s card reader and a pinhole camera or PIN pad overlay to capture the
cardholder’s Personal Identification Number (“PIN”) alongside their card data. The individuals
later retrieve and use the stolen data to manufacture and use counterfeit or “cloned” cards.
19.
As part of most skimming operations, pinhole cameras or PIN pad overlays
capture the PIN as the unsuspecting cardholder enters it into the payment terminal or ATM.
Using data from the mag stripe and the PIN together, the criminal can manufacture counterfeit
cards to then make unauthorized purchases or ATM withdrawals.
20.
The following graphic from the FBI identifies several common skimming devices
and where they would typically be placed on an ATM:10

9 Matthew Cochrane, Why U.S. Counterfeit Credit Card Fraud Is Down 75%, Motley Fool (Sept.
17, 2018, 5:11 PM), https://www.fool.com/investing/2018/09/16/why-us-counterfeit-credit-card-
fraud-is-down-75.aspx.
10 Taking a Trip to the ATM, Beware of ‘Skimmers’, FBI News (July 14, 2011),
https://www.fbi.gov/news/stories/atm-skimming.
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FBI Overview of ATM Skimming
21.
Pinhole cameras (Item 1 on the FBI’s Overview of ATM Skimming) are very
small and are often disguised in side panels or trim pieces attached to the ATM. Below is an
example of what a pinhole camera looks like:11

11 Photos: How to Detect Skimming Devices on ATM’s [sic], CBS21 News (March 15, 2018,
10:50 AM), https://local21news.com/news/local/photos-how-to-detect-skimming-devices-on-
atms.
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Pinhole Camera Example:
22.
Item 2 on the FBI’s Overview of ATM Skimming describes a skimmer, the device
that reads the mag stripe and captures the card details for the criminal to gather later after
collecting details from many cards.12 Below is an example of a card skimmer, installed and
partially opened: 13
ATM Card Skimmer, Installed and Partially Opened

12 See Taking a Trip to the ATM, Beware of ‘Skimmers’, FBI News (July 14, 2011),
https://www.fbi.gov/news/stories/atm-skimming.
13 See Brian Krebs, Why I Always Tug on the ATM, Krebson Security (March 31, 2017),
https://krebsonsecurity.com/2017/03/why-i-always-tug-on-the-atm/.
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Appearance of skimmer from outside
ATM.
The skimmer overlay when
removed.
23.
A PIN pad overlay (Item 3 on the FBI’s Overview of ATM Skimming above)14 is
an alternative to using a pinhole camera. It is inserted over the real PIN pad and captures the
PIN number using the sensors on the back side of the device. Below is an example of a PIN pad
overlay.15
Example of Pin Pad Overlay
24.
The skimmers, PIN pad overlays, and pinhole cameras are very realistic, making
them very hard to spot. The picture below depicts an ATM that is compromised compared to one
that has not been compromised, showing how hard it may be to spot the skimming and PIN
capture devices: 16

14 Taking a Trip to the ATM?: Beware of ‘Skimmers’, FBI News (July 14, 2011),
https://www.fbi.gov/news/stories/atm-skimming.
15 Understanding Card Skimmers and How to Protect Yourself, Los Angeles County Consumer &
Business Affairs (April 17, 2023), https://dcba.lacounty.gov/newsroom/understanding-card-
skimmers-and-how-to-protect-yourself/ (attributing the photo to Sean Cooper, What You Need to
Know About Card Skimming, Engadget (July 28, 2014), https://www.engadget.com/2014-07-28-
credit-card-skimming-explainer.html).
16 ATM Skimming Gets a Tech Upgrade, PYMTS (Sept. 18, 2017),
https://www.pymnts.com/news/security-and-risk/2017/atm-skimming-gets-a-tech-upgrade/.
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Card Skimmer on ATM

25.
Once the criminal has implanted the skimmer and PIN pad overlay or camera, the
skimmer records the information from the mag-stripe while the PIN pad overlay or camera
captures the PIN.17 The criminal can then use this information to create a counterfeit card, which
functions the same as the original mag-stripe only card and can be used in conjunction with the
stolen PIN to make fraudulent card-present transactions, including unauthorized ATM
withdrawals.18
26.
Counterfeit fraud due to skimming has long been a well-known problem
throughout the payment services industry and law enforcement. Skimmers have been used since
as early as December 2002,19 but “ATM skimming really began to take off globally in 2010 with
the large-scale production of skimming devices, especially the wireless variety.”20 When “3-D
printing came along in 2011, high-quality skimming devices became even simpler to produce,

17 See Taking a Trip to the ATM?: Beware of ‘Skimmers’, FBI News (July 14, 2011),
https://www.fbi.gov/news/stories/atm-skimming.
18 See What Is Credit Card Fraud?, Equifax, https://www.equifax.com/personal/education/credit-
cards/articles/-/learn/credit-card-fraud/.
19 Sue Chan, Is Your Credit Card Being Skimmed?, CBS News (Dec. 6, 2002, 3:46 PM),
https://www.cbsnews.com/news/is-your-credit-card-being-skimmed/.
20 Yossi Geller, ATM Fraud: The Evolution of An Epidemic, ATM Marketplace (Dec. 13, 2016),
https://www.atmmarketplace.com/articles/atm-fraud-the-evolution-of-an-epidemic/.
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with razor-thin Bluetooth-compatible versions replacing clunky overlays.”21 ATM Marketplace,
an ATM industry news and information website, reported in 2016: “ATM skimming is a growing
epidemic that shows no sign of slowing.”22 Fair Isaac Corporation (“FICO”) reported a six-fold
increase in compromises of ATMs and merchant devices in the United States in 2015 and
predicted continuing increases: “As the last few years have proven, skimming technology and
knowhow have improved and are more accessible to the general population, so we will continue
to see increases in compromises and the speed at which they occur.”23
27.
Counterfeit fraud is a significant problem. In 2015, the Nilson Report, a
payments industry newsletter, estimated total U.S. counterfeit fraud to be $3.89 billion.24 This
number includes data stolen from multiple points of compromise including skimming as well as
data breaches.25 The FBI has estimated that skimming alone “costs financial institutions and
consumers more than $1 billion each year.”26
28.
Through skimming, criminals gain access to all information stored on the
magnetic stripe, including the cardholder’s unencrypted personal information, such as name and
card number. Skimming thus presents one well-documented means of unauthorized access and
theft of unencrypted personal information. Counterfeit fraud resulting from skimming is,

21 Id.
22 Id.
23 FICO Reports a 70 Percent Rise in Debit Cards Compromised at U.S. ATMs and Merchants in
2016, Fraud Protection & Compliance, FICO (Mar. 29, 2017),
https://www.fico.com/en/newsroom/fico-reports-70-percent-rise-debit-cards-compromised-u-s-
atms-and-merchants-2016.
24 Global Card Fraud Losses Reach $16.31 Billion – Will Exceed $35 Billion in 2020 According
to The Nilson Report, Business Wire (Aug. 4, 2015, 7:49 PM),
https://www.businesswire.com/news/home/20150804007054/en/Global-Card-Fraud-Losses-
Reach-16.31-Billion#.VgDIZRFViko; Card Fraud Losses Reach $16.31 Billion, Nilson Report
(August 2015), https://nilsonreport.com/articles/card-fraud-losses-reach-16-31-billion/.
25 Card Fraud Losses Reach $16.31 Billion, Nilson Report (August 2015),
https://nilsonreport.com/articles/card-fraud-losses-reach-16-31-billion/.
26 How We Can Help You, Skimming, FBI, https://www.fbi.gov/how-we-can-help-you/scams-
and-safety/common-scams-and-crimes/skimming (last visited Aug. 1, 2024).
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similarly, a well-documented means of using personal data, and requires disclosure of such data
to carry out any transaction (to communicate with the issuer to verify the transaction), including
an ATM withdrawal.

B.
EMV Chips Are Extremely Effective at Preventing Card-Present Counterfeit
Fraud.
29.
EMV chip cards prevent card-present counterfeit fraud by employing an
embedded EMV chip that creates a dynamic, as opposed to static code, often called a dynamic
CVV code, that is unique to each transaction.27 As described below, EMV chips themselves,
which are required to generate a dynamic CVV code, are next to impossible to counterfeit. As a
result, the personal data transmitted in EMV chip transactions, unlike that on static mag-stripe-
only cards, cannot be used to make counterfeit cards capable of carrying out normal transactions.
30.
An EMV chip uses information provided by the point of sale (“POS”) terminal
(for example the terminal ID/location or amount of purchase) as well as data from the card (for
example, the cardholder name, account number, or expiration date) to create an encrypted code
(the dynamic CVV code) that is unique to each transaction. The dynamic CVV code is then
included in the authorization request created by the card.28
31.
When the issuer receives the electronic request for authorization from the
terminal, the issuer can immediately confirm based on its own records and the codes provided
whether the card has an embedded EMV chip, and whether the data in the authorization request

27 The term “EMV” is derived from the names of the original collaborators who developed the
EMV standards governing all EMV chips—EuroPay, MasterCard and Visa (EuroPay later
merged with MasterCard). EMVCo is the organization responsible for managing the EMV
standards as well as other global payment security standards. EMVCo is governed by the
payment networks and payment industry participants. See generally The Role of the EMV®
Specifications, EMVCo (Mar. 18, 2020), https://www.emvco.com/knowledge-hub/the-role-of-
the-emv-specifications-2/.
28 See generally EMV At a Glance, EMVCo (2022), https://www.emvco.com/wp-
content/uploads/2022/09/EMV%C2%AE-Chip-At-A-Glance-EMVCo-eBook.pdf; A Guide to
EMV Chip Technology, EMVCo (Nov. 2014), https://www.fisglobal.com/-
/media/fisglobal/WorldPay/Docs/Insights/A-Guide-to-EMV-Chip-Technology.pdf.
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came from that chip or from the mag-stripe. If the correct dynamic CVV code is not presented,
the transaction can either be declined or subject to additional and extremely strict security rules
specific to “fallback transactions,” which I explain in more detail below. Again, as described
below, an issuer is incentivized to decline such transactions to avoid losses associated with any
potential fraud related to fallback transactions.29
32.
The correct dynamic CVV code cannot be successfully created without a
legitimate EMV chip. And EMV chips are next to impossible to clone because they contain
private keys that are never transmitted and thus cannot be compromised (extracted or copied).30
EMV technology thus largely protects against the creation of functional counterfeit cards, and
thereby protects against the use of data captured in a skimming attack to facilitate counterfeit
fraud.
33.
EMV chip cards still include the traditional mag stripe, and criminals can skim the
mag stripe data (discussed above) to create a mag stripe-only version of the EMV card. Notably,
EMV technology was not designed to prevent the capture of mag-stripe data – it was designed to
disrupt the use of that data via card cloning or counterfeit.
34.
As a result, it is possible to create a counterfeit mag-stripe only version of an
EMV chip card, but that card cannot be used to make a normal transaction in any terminal that
has a chip reader (which includes virtually all ATMs and the vast majority of point of sale
terminals). The mag stripe on an EMV chip card contains a service code that indicates that the
card has an EMV chip. If a counterfeit mag-stripe only version of an EMV chip card is swiped
so that the EMV capable terminal reads the mag stripe, the mag stripe on the card transmits that
code to the terminal to indicate that a chip has been embedded on the card. If the transaction

29 See infra ¶ 37 (describing liability shift rules).
30 U.S. Payments Forum, Debunking EMV Myths, at 6 (2019),
https://www.uspaymentsforum.org/wp-content/uploads/2019/03/Debunking-EMV-Myths-March-
2019.pdf (“EMV chip cards, [sic] have multiple measures to prevent external access and copying
of its keys. Without the chip’s cryptographic keys, it’s not possible to create a functioning
counterfeit version of a chip card to be used through the contact or contactless interfaces.”).
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proceeds using the mag stripe, no correct CVV code will be transmitted, and the only transaction
that is possible is a “fallback” transaction.31
35.
A “fallback transaction” occurs when, instead of declining a transaction, the ATM
or POS terminal allows the cardholder to “fallback” and use the mag-stripe of a detected chip
card to make the transaction. When allowing a fallback transaction, the ATM or POS terminal
will typically send a code within the authorization request to the card issuer notifying the issuer
that a mag-stripe transaction has been requested with a chip card. If they do not include the
fallback code, the liability for any fraudulent fallback transactions falls on the merchant or ATM
operator.32
36.
Fallback transactions are generally limited by significant security measures over
which card issuers exercise control. The issuer can require additional security checks, decline a
fallback transaction, or approve a transaction with or without withdrawal limits. If the merchant
or ATM operator provides this fallback notice code to the issuer and the issuer authorizes the
fallback transaction, then liability for the fallback transaction, if it proves to be fraudulent, falls
on the issuer.
37.
The number of fallback transactions was a concern during the initial years of
EMV deployment, largely due to problems with implementation. As a result, 75% of card
issuers rolled out new policies to “decline authorization of high-dollar fallback purchases,” while
others focused on merchants with abnormally high fallback rates and other methods to control

31 Mag stripes on chip enabled cards contain a service code that indicates that a chip is on the
card. If that chip card is swiped so that the mag stripe is used instead of the chip, the chip
enabled terminal may reject the transaction and request that the cardholder resubmit using the
chip instead of the mag stripe. In some instances, for example when the chip is unreadable,
issuers may allow a transaction to proceed with mag-stripe only data.
32 EMV Implementation Guidance: Fallback Transactions, US Payments Forum 1 (2016),
https://www.uspaymentsforum.org/wp-content/uploads/2017/03/Fallback-Transaction-Guidance-
FINAL-Dec-2016.pdf; Ann Davidson, Fraud & Fallback: What You Need to Know About
Skimming Attacks, Credit Union Times (Sept. 16, 2024),
https://www.cutimes.com/2024/09/16/fraud-fallback-what-you-need-to-know-about-skimming-
attacks/?slreturn=20241116-43702.
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the use of fallbacks.33 However, by 2017, fallback transactions represented less than 2% of
overall purchase authorizations and fraud related to those transactions was falling rapidly as a
result of industry mitigation efforts, including the use of fallback rules.34 In addition to issuer-
specific fallback rules, both Visa and MasterCard impose transaction fees to penalize frequent
fallback transactions. If fallback transactions at a given ATM exceed 2.5% for Visa or 3.0% for
Mastercard, the networks impose penalty fees.35 The penalty fees imposed by the networks
provide merchants and ATM operators with an economic incentive to ensure that their equipment
is properly functioning and to investigate any increases in fallback rates.
38.
In 2018, fraud data showed that fallback fraud represented only 11.5% of
counterfeit fraud, down from more than 20% in 2017, and only 3.2% of overall credit card fraud,
down from 4.5% in 2017, declines of 45% and 30% year over year.36
39.
Fraudulent transactions carried out through “fallback” mechanisms are, in sum,
infrequent as a result of strict limitations by issuers and the industry. As a result, fallback
transaction fraud has not limited the extreme efficacy of EMV chips at preventing card-present
counterfeit fraud in any significant way.
40.
For these reasons, “shimming” attacks that attempt to steal personal information
from the EMV chip itself are also unable to generate a successful clone of an EMV card that can

33 Credit Card “Fallback” Fraud Declines Significantly as Banks Implement New Policies,
Auriemma Roundtables: Industry Analysis (Nov. 7, 2018), https://roundtables.us/credit-card-
fallback-fraud-declines-significantly-as-banks-implement-new-policies/.
34 Id.; Ann Davidson, Fraud & Fallback: What You Need to Know About Skimming Attacks,
Credit Union Times (Sept. 16, 2024), https://www.cutimes.com/2024/09/16/fraud-fallback-what-
you-need-to-know-about-skimming-attacks/?slreturn=20241116-43702 (“Both chip cards and
readers undergo rigorous testing and certification, making fallback incidents exceptionally
rare.”).

35 Id.
36 Credit Card “Fallback” Fraud Declines Significantly as Banks Implement New Policies,
Auriemma Roundtables: Industry Analysis (Nov. 7, 2018), https://roundtables.us/credit-
card- fallback-fraud-declines-significantly-as-banks-implement-new-policies/.
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be used to carry out fraudulent ATM withdrawals or other transactions. Shimmers are paper-thin
devices that are inserted into the chip card reader. Fraud rings place a shimmer inside the chip
card reader to record the information transmitted between the chip and the ATM or POS terminal.
Shimming devices capture the one-time dynamic code (making it fixed and static, not dynamic
and ever-changing) and other cardholder data that an EMV chip card transmits to an ATM or
POS terminal during that particular transaction. Fraudsters then copy the chip data, including the
previously used one-time chip code, onto the magnetic stripe of a counterfeit card. Shimmers do
not enable the dynamic-functioning EMV chip itself to be cloned and thus cannot generate the
correct dynamic CVV code for subsequent transactions.
41.
In 2016, NCR Corporation, one of the largest ATM manufacturers, described
shimming in an alert to customers and wrote: “The only way for this attack to be successful is if a
[bank card] issuer neglects to check the CVV when authorizing a transaction.”37 The alert
continued: “All issuers MUST make these basic checks to prevent this category of fraud. Card
Shimming is not a vulnerability with a chip card, nor with an ATM, and therefore it is not
necessary to add protection mechanisms against this form of attack to the ATM.”38
42.
Generally, because EMV chips cannot be successfully counterfeited and are
required to create the correct dynamic CVV, card-present counterfeit fraud can be effectively
prevented by including EMV chips on credit, debit and ATM cards. As Javelin Consulting
reports: “Chip cards have proven to lower fraud at the point of sale as they effectively eliminate

37 KrebsOnSecurity, ATM ‘Shimmers’ Target Chip-Based Cards (Jan. 27, 2017),
https://krebsonsecurity.com/2017/01/atm-shimmers-target-chip-based-cards/ (emphasis added).

38 Id. (emphasis added); see also U.S. Payments Forum, Debunking EMV Myths, at 6 (2019),
https://www.uspaymentsforum.org/wp-content/uploads/2019/03/Debunking-EMV-Myths-March-
2019.pdf (noting that without an EMV “chip’s cryptographic keys, it’s not possible to create a
functioning counterfeit version of a chip card to be used through the contact or contactless
interfaces” as “[i]ssuers applying appropriate security controls easily determine counterfeit
attempts and block such transactions, rendering [mag-stripe only counterfeit] cards useless.”).

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counterfeiting. They cryptographically prevent criminals from forging the plastic and using those
fake cards at merchant locations.”39
43.
In April 2018, a study by the ATM Industry Association found that “[t]he vast
majority (91 percent) of U.S. ATMs are now EMV-capable, and fully 86 percent accept chip-on-
chip transactions.”40 Thus, by early 2018, most ATMs in the United States required the use of an
EMV chip at an ATM when an EMV chip is present on the card, and even more were to be
certified and tested to do so shortly.
44.
As EMV technology became widespread, use of EMV chips has successfully and
significantly reduced fraud around the world, as the examples in the chart below show:
Country
Time
Counterfeit Fraud Change
Comments
UK
Debit & Credit

Full
Implementation
(>90%)41
2008 -
2019
↓90%42
“Counterfeit card losses totaled
£16.3 million in 2018, a decrease
of 33 per cent compared to 2017
and 90 per cent lower than the
peak reported in 2008 (£169.8
million).”43

39 From Application to Transaction: Card Fraud Trends, Threats, and Tactics, JAVELIN at 6
(April 2018), https://javelinstrategy.com/sites/default/files/files/reports/18-5006J-FM-
From%20Application%20to%20Transaction-FIS.pdf (emphasis added).
40 Nearly All US ATMs Now EMV-Capable, Study Finds, ATM Marketplace (April 6, 2018),
https://www.atmmarketplace.com/news/nearly-all-us-atms-now-emv-capable-study-finds/. The
five percent gap between EMV-capable and ATMs prepare to accept chip-on-chip transactions
“represents the lag in certification and testing” required to ready an EMV-capable ATM for chip-
on-chip transactions.” ATM Industry Association, 2018 ATMIA EMV Migration Survey:
Executive Summary (2018), available at https://www.atmmarketplace.com/.
41 Alex Rolfe, US Market Hits 1 Billion EMV Chip Cards Milestone, Payments Cards & Mobile
(June 1, 2020), https://www.paymentscardsandmobile.com/us-market-hits-1-billion-emv-chip-
cards-milestone/.
42 Fraud the Facts 2019, UK Finance at 17 (2019),
https://www.ukfinance.org.uk/system/files/Fraud%20The%20Facts%202019%20-
%20FINAL%20ONLINE.pdf.
43 Id.
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Country
Time
Counterfeit Fraud Change
Comments
Canada
Debit

Full
Implementation
(>90%)44
2008 -
2015
↓92%45
Canada began its chip-and-PIN
conversion in 2008 and
completed the debit card
conversion in 2012. Debit fraud
losses from skimming peaked at
CA$142.3 million in 2009, but by
2015 are down by 92%.46
US

Partial
Implementation
Debit & Credit
(~80%)
2015 -
2019
↓87% at EMV merchants

↓62% at all US merchants47
Additionally, the Federal Reserve
Bank of Atlanta reported in June
2019 that “counterfeit card fraud
is dropping […] [in] a trend in
that direction that is consistent
with the [other] countries” that
had previously migrated to EMV
chip.48
45.
Even with only 80% of merchant terminals converted in 2019, the U.S. was
already seeing 87% decreases in fraud at merchants that had converted and 62% at all merchants,
including those who had not yet converted, as compared to fraud levels four years earlier.49 As
Helcim, a payment services provider focused on small businesses, reported to its customers:50

44 Alex Rolfe, US Market Hits 1 Billion EMV Chip Cards Milestone, Payments Cards & Mobile
(June 1, 2020), https://www.paymentscardsandmobile.com/us-market-hits-1-billion-emv-chip-
cards-milestone/.
45 Jim Daly, With Its EMV Conversion Nearly Complete, Canada’s POS Debit Fraud Falls to
New Low (Feb. 25, 2016), https://www.digitaltransactions.net/with-its-emv-conversion-nearly-
complete-canadas-pos-debit-fraud-falls-to-new-low/.
46 Id.
47 Visa EMV Chip Cards Help Reduce Counterfeit Fraud by 87 Percent, Visa (Sept. 3, 2019, 3:48
PM), https://usa.visa.com/visa-everywhere/blog/bdp/2019/09/03/visa-emv-chip-
1567530138363.html.
48 Douglas King, The Future of U.S. Fraud in a Post-EMV Environment, Retail Payments Risk
Forum at 22 (June 2019), https://www.atlantafed.org/-
/media/documents/rprf/publications/2019/06/23/future-of-us-fraud-in-post-emv-environment-
king-doug.pdf.
49 Visa EMV Chip Cards Help Reduce Counterfeit Fraud by 87 Percent, Visa (Sept. 3, 2019, 3:48
PM), https://usa.visa.com/visa-everywhere/blog/bdp/2019/09/03/visa-emv-chip-
1567530138363.html.
50 Danny Randell, EMV Chip Cards: Everything You Need to Know, Helcim Blog (Aug. 17,
2022), https://www.helcim.com/guides/emv-chip-card-technology/.
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When EMV cards were first introduced, they had a significant impact on payments fraud
because of these unique, dynamic data transaction IDs which cannot be replicated. As an
example, in the US, it is estimated that from 2015 to 2018, card-present credit card fraud
fell by as much as 75% due to the enhanced security of EMV chip technology.51

C.
By At Least 2019, EMV Chips Were the Industry Standard for Credit and
Debit Card Security.
46.
EMV chip technology standards have existed since 1996. By 2013, EMVCo’s
membership had expanded beyond the original members (Europay, Mastercard and Visa) to
include participation by all major stakeholder groups, including the principal global card brands:
JCB joined in 2004, American Express joined in 2009, followed by Discover and UnionPay in
2013.52 Participation also expanded to include a broad range of interested industry stakeholders,
including merchants, payment processors and other payments industry companies.
47.
The first major payments market to convert to EMV chips was the UK, which in
May 2003 began EMV trials and on February 14, 2006 converted nationwide. Shortly thereafter,
other countries began implementing EMV. By 2019, over 8.8 billion EMV chip cards had been
issued in Europe, Africa and the Middle East, Canada, and Latin America and the Caribbean, and
each of those regions had over 90% of their transactions processed with EMV chips.53
48.
In October 2010, United Nations Federal Credit Union became the first U.S.
issuer to offer EMV cards to its credit customers.54 Other U.S. banks soon followed, issuing
EMV credit cards to selected segments of their customers, including those with frequent
international travel.

51 A 75% reduction is consistent with Visa data from three months prior, March 2019, as
compared to the data referenced in the chart above.
52 Why EMV?, EMVCO, https://www.emvco.com/why-emv/ (last visited Feb. 27, 2025).
53 Alex Rolfe, US Market Hits 1 Billion EMV Chip Cards Milestone, Payments Cards & Mobile
(June 1, 2020), https://www.paymentscardsandmobile.com/us-market-hits-1-billion-emv-chip-
cards-milestone/.
54 Saurabh Kumar Choudhary, EMV Compliance in the U.S., Capgemini at 17 (2012),
https://www.capgemini.com/wp-content/uploads/2017/07/EMV_Compliance_in_the_U.S..pdf
(citing EMV Resources, Secure Technology Alliance, https://www.securetechalliance.org/smart-
cards-applications-emv/).
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49.
By mid 2012, the U.S. payments market committed to migrating to EMV.
MasterCard, Visa, American Express, and Discover each issued “liability-shift” rules that took
effect in October 2015.55 Liability-shift rules were used in many countries to create economic
incentives for issuers and merchants to adopt EMV technology. A liability-shift rule assigns
liability for fraud to whichever party (either the card issuer or the acquirer/merchant) has the
least protection.56 For example, if a mag-stripe only card is presented to an EMV capable
merchant, the issuer of that card bears the cost of any fraud associated with that transaction. The
opposite would be true if an EMV card is presented to a mag-stripe only reader—the merchant
rather than the issuer would be liable for any fraud. If the mag-stripe on an EMV capable card is
used on an EMV capable reader and the merchant has configured its terminal to accept the mag-
stripe rather than forcing use of the chip (as is industry standard practice), the merchant is liable
for any resulting fraud because the merchant allowed the less secure technology to be used.

55 EMV in the USA: The Story So Far, American Banker (April 5, 2013, 3:27 PM),
https://www.americanbanker.com/payments/slideshow/emv-in-the-usa-the-story-so-far.
For additional information see: Understanding the U.S. EMV Liability Shifts, US Payments
Forum at 4-5 (July 2017), https://www.uspaymentsforum.org/wp-content/uploads/2017/07/EMV-
Fraud-Liability-Shift-WP-FINAL-July-2017.pdf.
56 See id.
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50.
Shortly after the announcement of liability-shift rules and deadlines, several major
U.S. banks, including Bank of America, announced plans to issue cards with embedded EMV
chips for their credit card portfolios.57 The table below from Capgemini’s report entitled EMV
Compliance in the U.S. provides a timeline for key commitments to EMV in the U.S. announced
in 2010 and 2011.58

57 Saurabh Kumar Choudhary, EMV Compliance in the U.S., Capgemini at 17 (2012),
https://www.capgemini.com/wp-content/uploads/2017/07/EMV_Compliance_in_the_U.S..pdf
(citing EMV Resources, Secure Technology Alliance,
http://www.smartcardalliance.org/pages/smart-cards-applications-emv); Jonathan Camhi, Bank
of America Switches to EMV Chip Credit Cards for Consumers, InformationWeek (July 23,
2012, 3:50 PM), https://www.banktech.com/payments/bank-of-america-switches-to-emv-chip-
credit-cards-for-consumers/d/d-id/1295590d41d.html?.
58 Id.
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Figme 1: EMV Compliance in the U.S.
October 2010
United Nations Federal Credit Union became the first the U.S. institution to
offer its customers EMV cards
December 2010
Travelex introduced a pre-paid foreign currency Chip and PIN card
denominated in Euros and pound sterling for U.S. travelers abroad
October 2010
State Employees Credit Union announced its plan to convert its entire 1-million-
card debit pcrtfolio to EMV chips
Wells Fargo & Co., the U.S. bank with the most branches, began testing
February 2011
microchip-embedded credit cards with frequent travelers to address complaints
of customers who have trouble using their cards abroad
July 2011
Silicon Valley Bank {SVB) began providing chip-enabled, or Smart, credit cards
available to businesses in the U.S.
June 2011
The U.S. bank announced that it will offer its international travelers EMV cards
JPMorgan Chase & Co. announced that it will begin issuing its J.P. Morgan
June 2011
Select Visa Signature card with EMV chip technology, the second in its card
pcrtfolio-following the J.P. Morgan Palladium Card-to sport the smart chip
lhe Payment Processing Solutions {PPS) division of Jack Henry & Associates
Juno 2011
announced it will begin offering chip-and-signature debit and credit cards to its
credit union customers
PSCU Financial Services began offering its entire member-owner base of 680
August2011
credit unions new credit cards that carry both EMV chip-and-PIN security and
traditional magnetic stripes
August2011
Citl announced the launch of the Citi Corporate Chip and PIN card, a compliant
smart card designed for the U.S. corporate cardholders traveling abroad
November 2011
Bank of America decided to roll out chip-and-pin business cards in 2012
51.
By 2014-2015, the U.S. debit card industry had begun migration effo1is to EMV.
According to the 2014 Debit Issuer study by Celent, a lai-ge global research and advis01y fnm
focused on technology for financial institutions:
86% of the US debit issuers were planning to staii issuing EMV cai·ds in
2014-2015, with most eff 01is focused on 2015. The EMV Migration
Fornm [a cross industry body focused on the U.S. EMV u·ansition]
forecasts that 4.5 million te1minals will have been installed by the end of
2014, and over 46% of US merchant tenninals will be enabled for EMV
by the end of 2015. In October 2014, President Obama signed an
executive order to use EMV for all government cai·ds. It is estimated that
100 million EMV chip cards will have been issued by the end of 2014. In
September, Bank of America announced that all new debit cards will be
24
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EMV. “The US EMV train has finally left the station and is building
up steam,” said Zilvinas Bareisis, senior analyst at Celent.59
52.
On September 20, 2014, Bank of America announced it was committed to
converting its consumer and commercial debit card portfolio to EMV to provide enhanced
security for its customers, becoming the first major U.S. bank to add EMV chip technology to
debit cards.60 Titi Cole, retail products and underwriting executive for Bank of America, stated
that “[c]hip technology is an important tool in increasing card security, and we want our
customers to have the best possible experience when using their payment cards” and “[t]he new
chip-enabled debit cards will improve security of customers’ transactions when traveling abroad
and at home as more U.S. merchants adopt chip technology.”61 The release noted that existing
Bank customers would receive chip cards when their existing cards were replaced at expiration
or for any other reason and that the Bank expected to complete conversion of its consumer and
small business debit cards to EMV by the end of 2015.62
53.
On October 17, 2014, President Obama signed an Executive Order, Improving the
Security of Consumer Financial Transactions, calling for all government agencies to shift to the
use of chip-and-PIN technology (i.e. EMV) credit, debit, and other payment cards, including for
all prepaid debit cards used to distribute federal government benefits.63 The switch was needed,
the Order explained, to “further strengthen the security of consumer data” and “improve the
security of consumer financial transactions in both the private and public sectors.”64 The Order
mandated that all executive departments and agencies must “transition payment processing

59 US Shifts to EMV as Obama and Apple Weigh In, FinTech Futures (Dec. 15, 2014),
https://www.fintechfutures.com/2014/12/us-shifts-to-emv-as-obama-and-apple-weigh-in/
(emphasis added).
60 Bank of America Begins Rollout of Chip Debit Cards, Business Wire (Sept. 30, 2014, 11:10
AM), https://www.businesswire.com/news/home/20140930005292/en/Bank-of-America-Begins-
Rollout-of-Chip-Debit-Cards.
61 Id.
62 Id.
63 Exec. Order No. 13681, 79 F.R. 63491 (Oct. 23, 2014).
64 Id.
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terminals and credit, debit, and other payment cards to employ enhanced security features,
including chip-and-PIN technology.”65 The mandate to transition to EMV chip cards applied to
Direct Express federal programs, which provide prepaid debit cards for monthly deposits of
Social Security, Supplemental Security Income, veterans, and other federal benefits and that are
administered by the Treasury Department,66 as well as credit, debit, and other payment cards
provided through the General Services Administration (GSA).67 The Executive Order directed
both the Treasury Department and GSA to transition covered cards to EMV by no later than
January 1, 2015. The relevant text of the Executive Order states:
Given that identity crimes, including credit, debit, and other payment card
fraud, continue to be a risk to U.S. economic activity, and given the economic
consequences of data breaches, the United States must take further action to
enhance the security of data in the financial marketplace. While the U.S.
Government's credit, debit, and other payment card programs already include
protections against fraud, the Government must further strengthen the security
of consumer data and encourage the adoption of enhanced safeguards
nationwide in a manner that protects privacy and confidentiality while
maintaining an efficient and innovative financial system.
By the authority vested in me as President by the Constitution and the laws of
the United States of America, and in order to improve the security of
consumer financial transactions in both the private and public sectors, it is
hereby ordered as follows:
Section 1. Secure Government Payments. In order to strengthen data security
and thereby better protect citizens doing business with the Government,
executive departments and agencies (agencies) shall, as soon as possible,
transition payment processing terminals and credit, debit, and other payment
cards to employ enhanced security features, including chip-and-PIN
technology. In determining enhanced security features to employ, agencies
shall consider relevant voluntary consensus standards and specifications, as
appropriate, consistent with the National Technology Transfer and
Advancement Act of 1995 and Office of Management and Budget Circular A-
119.

65 Id. §1.
66 See Direct Express, Frequently Asked Questions, https://www.usdirectexpress.com/faq.html
(last accessed Aug. 8, 2024).
67 Exec. Order No. 13681, 79 F.R. 63491, §1 (Oct. 23, 2014).
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(a) The Secretary of the Treasury shall take necessary steps to ensure that
payment processing terminals acquired by agencies through the Department of
the Treasury or through alternative means authorized by the Department of the
Treasury have enhanced security features. No later than January 1, 2015, all
new payment processing terminals acquired in these ways shall include
hardware necessary to support such enhanced security features. By January 1,
2015, the Department of the Treasury shall develop a plan for agencies to
install enabling software that supports enhanced security features.
(b) The Administrator of General Services shall take necessary steps to ensure
that credit, debit, and other payment cards provided through General
Services Administration (GSA) contracts have enhanced security
features, and shall begin replacing credit, debit, and other payment cards
without enhanced security features no later than January 1, 2015.
(c) The Secretary of the Treasury shall take necessary steps to ensure that
Direct Express prepaid debit cards for administering Government
benefits have enhanced security features, and by January 1, 2015, the
Department of the Treasury shall develop a plan for the replacement of
Direct Express prepaid debit cards without enhanced security features.
(d) By January 1, 2015, other agencies with credit, debit, and other payment
card programs shall provide to the Office of Management and Budget (OMB)
plans for ensuring that their credit, debit, and other payment cards have
enhanced security features.
54.
By early 2018, 91% of all U.S. ATMs had converted to EMV-enabled ATM
terminals to service EMV-enabled debit and credit cards.68 By March 2019, 99% of Visa’s U.S.
payments volume ($81B) was completed using an EMV chip card.69
55.
In my opinion, based on the above facts and my experience, by at least 2019,
EMV had become the industry standard for payment card security in the United States.

68 Nearly All US ATMs Now EMV-Capable, Study Finds, ATM Marketplace (April 6, 2018),
https://www.atmmarketplace.com/news/nearly-all-us-atms-now-emv-capable-study-finds/.
69 See Chip Technology Helps Reduce Counterfeit Fraud by 76 Percent, VISA (May 28, 2019,
3:28 PM), https://usa.visa.com/visa-everywhere/blog/bdp/2019/05/28/chip-technology-helps-
1559068467332.html; EMV in the U.S. (2020 Update), Thales (2020),
https://www.thalesgroup.com/en/americas/united-states/digital-identity-and-security/emv; see
also Understanding the U.S. EMV Liability Shifts, US Payments Forum at 4 (July 2017),
https://www.uspaymentsforum.org/wp-content/uploads/2017/07/EMV-Fraud-Liability-Shift-WP-
FINAL-July-2017.pdf.
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D.
The Bank’s Failure to Include EMV Chips in its EDD Debit Cards Resulted
in Cards with Below Industry Standard Security.
56.
The Bank promised in its contract with EDD to “employ the highest level of
security and fraud safeguards” for EDD debit cardholders.70 However, for many years after the
Bank had converted its consumer and commercial debit cards to EMV chip cards,71 and even
after 2019 when the U.S. market reached the milestone with 99% of U.S. payments volume
being processed as EMV within the U.S.,72 the Bank continued to issue mag-stripe only cards to
its EDD debit cardholders and did not provide EDD debit cardholders the same level of security
it afforded to its commercial customers.73
57.
By failing to include EMV chips in its EDD debit cards in the beginning of 2020,
the Bank did not provide EDD debit cardholders the “highest level of security and fraud
safeguards.”74 As described in paragraphs 36-45 and the paragraphs below, by 2019 EMV
technology was the industry standard for all credit and debit cards issued in the United States,
including for debit cards used in the administration of government benefits. Even though EMV
chips are considerably more secure than mag-stripe only cards and better protect the cardholder
from card-present counterfeit fraud for the reasons stated above,75 the Bank did not include its
EDD debit cards in its EMV migration in 2014.76 The Bank’s failure to include EMV chips in its
EDD debit cards thus resulted in cards with below basic industry standard security. For all the

70 BANA’s Response to State of California Electronic Benefits Payments RFP Vol. I & II at 253-
54.
71 See Martin Tr. 61:19-23 (Bank has included EMV chips in all consumer and small business
debit cards issued since late 2014).
72 Chip Technology Helps Reduce Counterfeit Fraud by 76 Percent, VISA (May 28, 2019, 3:28
PM), https://usa.visa.com/visa-everywhere/blog/bdp/2019/05/28/chip-technology-helps-
1559068467332.html.
73 Martin Tr. 65:4-14, 65:8-10.
74 BANA’s Response to State of California Electronic Benefits Payments RFP Vol. I & II at 253-
54.
75 See supra ¶¶ 29-45.
76 Martin Tr. 65:4-14, 65:8-10.
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reasons discussed above, the lack ofEMV chips in EDD debit cards rendered them highly
susceptible to card skimming and card-present counterfeit fraud.77
E.
The Bank's Decision to Not Include EMV Chips in EDD Debit Cards in
Early 2020 Was Inconsistent with Other Participants in the Payments
Industry.
58.
Documents produced by the Bank in this litigation demonstrate that the Bank
knew as early as January 2020 not only that (1) EMV was ah-eady the indust1y standard for debit
card secmity, but also that (2) the cost of making a modest investment in EMV chips for the
78 It is therefore my opinion, based on my industiy experience and
expe1iise, that the Bank's decision not to include EMV chips in EDD debit cai·ds at least as of
January 2020 was highly inconsistent with how I would expect a sophisticated financial
institution in the payments industiy to make decisions regarding payment card secmity.
59.
Bank documents suggest that the Bank did not implement EMV in EDD debit
cards before 2020, despite the well-established benefits of EMV for cardholders, as described
above,due to
9
60.
By eai·ly 2020, however, not only had EMV been the industiy standard throughout
the credit and debit card market for at least a ear, 80 but the Bank's own internal anal ses cited
77 I understand that it was not until July 2021, sho1ily after a preliminaiy injunction was issued
against Bank in this lawsuit, that the Bank finally begin issuing EMV cards to new EDD debit
cai·dholders and to existing cardholders whose cards needed to be replaced. Martin Tr. 65:8-10.
78 See BANA EDD MDL-351 839 at -351839-40.
-
-
79 See BANA EDD MDL-116001 at -116001
").
80 See supra ,i,i 47-56.
29
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1 Under the Electronic Funds Transfer
Act ("EFTA") and EFTA's implementing Regulation E, the Bank would be liable for card-present
transaction fraud, 82 and under the liability shift rnles, unauthorized card-present transactions on
EDD debit card accounts would not be recoverable by the Bank where the transaction took place
at an ATM or payment te1minal with a chip reader. 83
62.
As a result, the Bank's own pre-pandemic cost-benefit analysis in Januruy 2020,
81 BANA_EDD_MDL-370150 at-370154 (emphasis added).
82 See 15 U.S.C. §1693f(b); 12 C.F.R. §1005.ll(c)(l).
83 See supra 50.
84 See BANA EDD MDL -351839 at -351839-40. A
85 BANA EDD MDL-351839 at-351839.
-
-
. See BANA EDD MDL-104742 at -104744.
-
-
30
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64.
The head of the Bank's EDD debit card product team, Brad Garfield, noted that
"87 Garfield ex lained in an email dated Januaiy 10, 2020:
65.
Prior to the pandemic, the Bank's business case alone, regai·dless of past practice,
should have been c • • • • • • • • • • I •
I I ' •
. ' • • I • • •
I • : . .
recognized that (1)
86 Id.
87 Id.
BANA EDD MDL-57837 at -57850.
-
-
88 Id. ( emphasis added).
. See
31
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the Bank continued to ignore industiy standards and its
cardholder's interests by deciding not to include the higher secmity EMV chips in its EDD debit
cards. In my experience working in EMV h'ansitions across multiple markets, products, and
67.
I have known many industiy stakeholders to make investments in EMV on far
weaker business cases than the Bank had here, relying instead on a combination of both
quantitative factors (costs and benefits of investment dollars) and qualitative factors (such as
customer experience, ubiquity of acceptance, and tiust built on network reliability and security).
In my experience, for many markets, the quantitative analysis predicted 4 or more years to break
even and 6-7 years to reach a positive net present value. Yet those markets moved fo1ward with
conversion to EMV on the strength of the qualitative components. Here, the Bank's analysis
Given this analysis, the Bank's failme to
convert its EDD debit cards to EMV chip cards was highly i1Tegular compared to the behavior of
other paiticipants in the payments sector.
89 See BANA EDD MDL-351839 at -351839
■·
90 Id. at -351839-40.
91 Id. at -351839.
32
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Documents produced by the Bank in this litigation indicate that the Ba
92 If trne, such facts would render the Bank's decision not to
convert its EDD debit cards to EMV chip cards in early 2020 even more inconsistent with how I
would expect a financial institution to make decisions about payment card security, based on my
indust1y experience and expertise.
69.
The contract between the Bank and EDD provided that the patties would split the
revenue eained on "float," i.e. interest eained on EDD debit cai·dholders' account balances.93 As
As one internal Bank email
explained:
other internal email from Brad Gai·field, head of the Bank's EDD debit card
product team, dated March 10, 2020 also explaine
92 See BANA_EDD_MDL-351 839 at -351839-40; BANA_EDD_MDL-102937 at -102937;
BANA_EDD_MDL-116001 at-116001; BANA_EDD_MDL-123235 at -123 235.
93 Chestnut Tr. 55:21-56:9, 169:1-170:13.
94 BANA EDD MDL-116001 at -116001 • see also BANA EDD MDL-102937 at -102937
33
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95 BANA_EDD _MDL-351839 at -351839 (emphasis added).
34
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In March 2020, the Bank created a PowerPoint document entitled'
."99 All of those facts and observations are accurate, based on my personal,
expe1t knowledge and experience, and consistent with the indusby repo1ts cited above.100
96 BANA_EDD _MDL-123235 at -123235 (emphasis added).
97 BANA EDD MDL-167019 at -167019-24.
-
-
98 Id. at -167021.
99 Id. at -167021.
100 See supra,, 29-45, n.30-51.
35
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, the Bank did not adopt EMV in 2020 for its EDD
101 BANA_EDD_MDL-167019 at -167022 (emphasis added).
102 Id.
103 Id.
104 Maitin Tr. 65:8-10.
36
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75.
Based on my review of these Bank docmnents and m
before the onset of the pandemic, the Bank understood that
Given these factors, in
my extensive experience building and analyzing business cases for EMV chip migration, I would
have recommended and expected the Bank to migrate the EDD portfolio to EDD no later than
January 2020. The Bank's decision not to make a minor investment
would have sharply reduced the increasing fraud losses the Bank was ex
which
was highly inegular and, in my opinion,
inesponsible to EDD cardholders.
76.
Even after witnessing historic fraud on EDD debit cards in 2020 dming the
COVID-19 pandemic, the Bank still did not act swiftly to add EMV chips to EDD debit cards.
An Executive Summaiy on the prepaid unem lo
105 BANA_EDD_MDL-104742 at -104744, -104746.
37
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77.
Yet still the Bank did not begin issuing EMV chip cards to new EDD debit
cardholders and to existing cardholders whose cards needed to be replaced until July 2021,
shortly after a prelimina1y injunction was issued against Bank in this lawsuit.106
78.
The Bank's failme to meet industry standards for fraud secmity before July 2021
was patiicularly egregious, in my opinion, because (1) EMV was industiy standard at least a year
and, finally, (3) the Bank was awai·e of the
ability of EMV to prevent the fraud cardholders were experiencing throughout the pandemic.
Yet instead of immediately implementing a switch to EMV at any of those points, the Bank did
not begin conversion until July 2021, thus exposing eve1y EDD debit cardholder to the risk of
card-present counterfeit fraud for no justifiable reason.
F.
It Was Highly Foreseeable that the Bank's Failure to Include EMV Chips in
EDD Debit Cards Would Lead to Counterfeit Fraud Targeting EDD Debit
Cardholders During the Pandemic, Because Fraud Migrates to the Weakest
Link.
79.
It is well established that fraud migrates to the weakest link. As described in
examples below, long before the pandemic, industty expe1is had warned that retailers and banks
that lagged in implementing EMV after the liability shift risked increasing their cardholders'
vulnerability to fraud. Indeed, experts had long been raising warnings to smaller programs and
merchants that there was significant risk to fmiher delaying EMV chip implementation.
80.
The 2016 Community Banking Connection report, a nationwide Federal Reserve
System resomce for community banks, identified the risk smaller programs faced related to
106 Maiiin Tr. 65:8-10.
38
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becoming the “easiest target” for criminals:107
What is the risk of delaying? Timing is another factor to consider. Migration to
chip cards is a version of “musical chairs” for card issuers: No one wants to
be the last one in a market to convert to chip cards because fraudsters tend
to attack the easiest targets first. Because magnetic stripe cards are easier to
counterfeit, they are generally attractive targets for thieves.
81.
In June 2017, the American Banker similarly warned in an article entitled,
“Crooks Are on the Prowl for Late EMV Converts,” that smaller banks are at risk of being “in
the cross hairs of criminals poised to exploit obvious holes” and may face a major fraud event:108
More than 60% of all U.S. payment cards are now EMV-enabled and just
over half of all merchants are chip-compliant, which has slashed
counterfeit card risk for many operators. But the U.S. has a long way to go
before full conversion to the EMV standard is completely finished, and
those who delay may find themselves in the cross-hairs of criminals
poised to exploit obvious holes in the system. Smaller financial
institutions and merchants in specific categories that have not made the
move to EMV may now be at higher risk for counterfeit card losses
from criminals exploiting account data on the shrinking number of
older magnetic-stripe payment cards not yet equipped with the more
secure EMV chip technology.
A handful of smaller banks still haven’t taken action on EMV, and they
may have to get hit by a significant fraud event before they’re
convinced they need to invest the money and time into finally
converting to chip cards, “says Troy Bernard, director of strategic
marketing and products at CPI Card Group, a card manufacturer.

107 Mary J. Hughes, The U.S. EMV Chip Card Migration: Considerations for Card Issuers,
Community Banking Connections (2016),
https://www.communitybankingconnections.org/articles/2016/i1/emv-chip-card-migration
(emphasis added).
108 Kate Fitzgerald, Crooks Are On the Prowl for Late EMV Converts, American Banker (Jun 23,
2017, 12:01 AM), https://www.americanbanker.com/payments/news/crooks-are-on-the-prowl-
for-late-emv-converts (emphasis added).
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82.
In April 2018, Javelin Research reported that criminals were beginning to focus
on mag-stripe only debit and prepaid cards, with counterfeit fraud targeting prepaid cards nearly
tripling compared to the previous year: 109
Transaction fraud losses are falling because of EMV and a shift in
behavior. As more and more credit cards are meeting the EMV standard,
criminals are focusing their attention on less lucrative debit and
prepaid cards. In 2017, roughly 3.4 million people lost control of their
prepaid cards - nearly three times as many as the previous year. The
average amount per fraudulent transaction is declining. In the same period,
debit card fraud victims rose from 5.2 million to 6.6 million.
83 .
Thus, even before the st.art of the pandemic, the industry was warning that the
lack of EMV chips cards made mag-stripe only debit and prepaid cards targets for skimming
attacks and counterfeit card fraud.
84.
In addition, the pre-pandemic load values (a te1m for the amount of money being
added to or "loaded" onto the benefit cards) for the EDD program were aheady large enough to
be an atfractive target for counterfeiting.110 The sheer volume of money that the Bank was
administering provided an incentive for criminals to target the program.
85.
Based on my experience, a sophisticated financial institution like Bank of
America would have been aware well before the start of the pandemic of the high risk that
fraudsters would target its EDD debit cardholders because their mag-sfripe only cards were
paiiicularly vulnerable to skimming and counterfeit fraud. Indeed, a Bank presentation dated
January 27, 2020 confnms the Bank's awareness that its EDD debit cai·ds had become an
atti·active target for fraud:
109 From Application to Transaction: Card Fraud Trends, Threats, & Tactics at 5 (April 201 8),
https://javelinstrategy.com/sites/default/files/files/repo1is/18-5006J-FM
From%20Application%20to%20Transaction-FIS.pdf ( emphasis added).
110 See BANA EDD MDL-154042 at-154042
40
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86.
The impact of the pandemic increased both the number of benefit recipients and
the total load value on EDD debit cards, which were reloaded with benefits eve1y two weeks. 112
This made the vulnerabilities in the Bank's administration of the EDD program even more
attractive to criminals. 113 Based on my experience, it would have been foreseeable to any
sophisticated financial institution like Bank of America at the onset of the pandemic that the
increase in EDD debit card load, combined with the known security vulnerabilities of mag
stripe-only EDD debit cards, would make EDD debit cards an even more attractive target for
card skimming and counterfeit fraud during the pandemic, in the absence of EMV chip cards.
111 BANA_EDD_MDL-370150 at -370154 (emphasis added).
112 BANA EDD MDL-059687 at -59687- 88
113 During the pandemic, reports confnmed that EDD debit cardholders were falling victim to
skimming and counterfeit card fraud. For example, on November 13, 2020, NBC Los Angeles
identified three victims of likely skimming fraud who had their EDD funds stolen from their
accounts. See Christine Roher, Thousands Are Being Stolen From Bank of America Accounts,
and EDD May Be Linked. Here's How to Protect Yourself, NBC Los Angeles (Nov. 14, 2020,
3 :07 PM), https://www.nbclosangeles.com/news/local/edd-bank-of-america-fraud-bank-account
stolen/246219 8. On November 20, 2020, CalMatters wrote about five additional victims of
skimming fraud related to EDD accounts. L auren Helper & Stephen Council, How Bank of
America Helped Fuel California's Unemployment Meltdown, CalMatters (Nov. 20, 2020),
https://calmatters.org/economy/2020/11/how-bank:-of-america-helped-fuel-califomias
unemployment-meltdow.
41
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88.
For example, in one email dated April 24, 2020, Bank employees discussed the
y confnms th
91.
In an internal email chain on July 9, 2020, William Martin (cmTent Bank
Management Executive for Prepaid Unemployment Programs and fo1mer Senior Fraud Policy
Manager119) asked:
114 BANA_EDD_MDL-228914 at -228914 (emphasis added).
11s Id.
116 Id. ( emphasis added)
117 BANA_EDD_MDL-297295 at -297295 (emphasis added).
118 BANA EDD MDL-171972 at-171973.
-
-
119 Maitin Tr. 26:11-25; see also BANA_EDD_MDL-57837 at -57844.
42
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Melody Szretter, who oversaw the Bank's fraud strateoies for EDD
93.
In an internal email dated Se tember 9, 2020, Brad Garfield, head of the EDD
94.
The Bank's documents show that the Bank understood, consistent with my
opinion, that adding an EMV chip to its cards would provide the best protection against
counterfeit fraud. In an internal email dated November 2 2020 Melod
a question from Brad Garfield about
120 BANA EDD MDL-172469 at -172471-72.
-
-
121 Martin Tr. 37:2-4; see also BANA_EDD _MDL-57837 at -57844.
122 BANA_EDD_MDL-172469 at-172471-72 (emphasis added).
123 BANA_EDD_MDL-455617 at - 455617 (emphasis added).
124 BANA_EDD_MDL-154042 at -154043; see also BANA_EDD_MDL-370150 at -370154.
125 BANA_EDD_MDL-163307 at -163307 (emphasis added).
43
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95.
Based on these Bank documents and others, it is evident that the Bank knew its
EDD debit card program was highly attractive to criminals given the high dollar amounts pre-
pandemic and even higher dollar amounts during the pandemic combined with a lack of EMV
chip security, which is consistent with my opinion that EDD debit cards were in fact highly
attractive to criminals during the pandemic and highly susceptible to skimming and counterfeit
fraud because they lacked industry-standard EMV chips. Had the Bank issued its EDD debit
cardholders industry-standard EMV chip cards, just as it had issued its other consumer and small
business debit cardholders EMV chip cards since 2014, EDD debit cardholders would have been
protected from such fraud. Had the Bank begun its migration of the EDD card portfolio to EMV
when the rise in counterfeit fraud became evident in 2019, the Bank would have had EMV chip
cards in place before or at the very least early in the pandemic, which would have prevented
much of the subsequent loss and hardship that EDD cardholders experienced as a result of
skimming and counterfeit fraud. The Bank nonetheless made a deliberate choice not to adopt
EMV chips in EDD debit cards for reasons that are wholly inconsistent with my experience of
how participants in the payment sector make their EMV migration decisions.

G.
The Bank’s Decision Not to Issue EMV Chip Cards to EDD Debit
Cardholders Led to an Increase in Skimming Attacks Targeting California
EDD Cards.
96.
In my professional opinion, the most likely explanation for the unauthorized ATM
withdrawals class members experienced while their EDD debit cards were still in their
possession is the use of a counterfeit card created as a result of skimming.126
97.
The lack of an EMV chip in a mag-stripe only card renders that card susceptible
to skimming and to counterfeit card fraud. The Bank’s failure to issue industry-standard EMV
chip cards to EDD cardholders subjected all EMV chip class members to an unnecessary and

126 This conclusion is bolstered by the narrow definition of the class, which includes only those
individuals who reported unauthorized ATM transactions while still in possession of their ATM
cards. This immediately excludes as a possibility the use of a lost or stolen card to carry out the
transactions class members reported.
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heightened risk of unauthorized access to and disclosure of info1mation on their EDD cards and
in their EDD debit card accounts-including from skimming and from any subsequent uses of
their skimmed info1mation.
98.
The Bank's decision not to equip EDD cards with EMV chips made all EDD
cardholders more vulnerable and significantly increased the likelihood that those cardholders
would become the victims of having their personal info1mation accessed through skilllllling.
99.
The Bank's decision not to include EMV chips in the EDD debit cards po1ifolio,
which grew rapidly in load value during the pandemic, foreseeably led to increased skilllllling
attacks targeting EDD cards in California, a predictable increase that the Bank's own documents
demonstrate the Bank was aware of. See supra ,n[ 88-94. Accordingly, the issuance of mag
stripe only EDD cards put each EDD cardholder at much higher risk for unauthorized access and
use and disclosure of personal info1mation.
100.
This is because mag-stripe only cards, like the EDD debit cards at issue here, are
far easier and far more profitable targets of criminal ente1prises than EMV chip cards. As stated
above, fraud migrates to the weakest link in a system. By 2020, vulnerable mag-stripe only cards
like the EDD debit cards that the Bank issued to class members were that "weakest link" in the
system. Had the Bank issued EMV chip cards to EDD cardholders, criminals would have had
little incentive to target them with skimming attacks. Thus, it was highly foreseeable that the
lack ofEMV chips on EDD debit cards would lead to increased counterfeit fraud specifically
targeting EDD cardholders during the pandemic.
101.
This foreseeable outcome of the Bank's decision not to issue EMV chip cards to
EDD cardholders is exactly what happened. In 2020 and 2021, the Bank obse1ved an
127 BANA EDD MDL-166345 at -166345 ('
specifically.127 Again, a Bank employee
45
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128 And another Bank
employee noted that
102.
The Bank's decision not to issue EMV chip cards thus foreseeably led to an
increase in skimming attacks on vulnerable EDD cards, paiticularly as their load value increased
during the pandemic.
H.
EMV Chip Cards Would Have Prevented All or Nearly All of the
Unauthorized ATM Withdrawals and Other Unauthorized Card-Present
Transactions Class Members Experienced.
103.
By definition, eve1y class member repo1ted an unauthorized, PIN-enabled AIM
withdrawal, which is necessai·ily a cai·d-present transaction. The inclusion of an EMV chip in
EDD debit cards would have prevented all or nearly all of those AIM withdrawals, and to the
extent an unauthorized withdrawals could have occmTed at non-chi -enabled ATMs, the Bank's
104.
As explained, EMV chips are effective at protecting against any unauthorized
card-present transactions, paiticulai·ly at an AIM machine ( almost all of which were chip-enabled
as of 2020), that a fraudster may attempt with a counterfeit card created using the info1mation
stolen from a skimming, data breach, or phishing attack. 130 See supra ,i,i 29-32, 42-45.
Accordingly, EMV would have prevented all or nearly all of the unauthorized ATM transactions
that class members experienced.
128 BANA EDD MDL-370150 at -370154.
129 BANA EDD MDL-297295 at -297295.
130 Although EMV chips would not have prevented unauthorized transactions by family
members, which could also be card-present fraud, I am aware of no reason to believe that family
fraud constitutes more than a de minimis percentage of the fraud class members experienced.
46
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105.
Moreover, had the Bank implemented EMV technology and provided EDD
cardholders the same level of card security it provided its non-prepaid consumer cardholders at
the time, any attempt to commit fraud on those EMV chip cards through fallback transactions
would have been significantly limited by the Bank's own security measures.
106.
This is demonstrated by the experience in 2020 of the Bank's 11011- re
107.
, one Bank employee explained:
109.
By 2021, one Bank employee describe
,134
131 See, e.g., BANA_EDD_MDL-2 2 8914 at -228914.
132 Id.
133 BANA EDD MDL-57504 at -57505.
-
-
134 BANA EDD MDL-431011 at - 431012.
-
-
47
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had the Bank issued EMV chip cards to EDD cardholders.
113.
Had the Bank issued EDD cards with EMY, either the transaction would be
declined because no chip was present or the Bank'
would stop or significantly
135 There are three types of "CVV numbers " relevant to a payment transaction. The CVV2 that is
printed on the back of the card is unrelated to the CVV number written on the mag stripe
(described supra ,Il7) and the iCVV (frequently called dynamic CVV) that can be generated only
by an EMV chip. When the Bank requests the cardholder to enter their CVV2 number, it is the
number that is printed on the back of the card, as the cardholder cannot see either of the other
two. This step provides assurance that the card is in the cardholder's possession. See Mitigating
Fraud Risk Through Card Data Verification, Visa Business News (Oct. 8, 2015),
https://www.cba-ok.org(wp-content/uploads/2016/09NBN-Mitigating-Fraud- Risk-Through
Card-Data-Verification-002 .pdf.
136 BANA EDD MDL-297295 at -297295
refers to the
Ba 's non-prepa1 consumer debit cards, all of which ha EMV c 1ps as of 2014. Business
Wire, Bank of America Begins Rollout of Chip Debit Cards (Sept. 30, 2014, 11:10 AM),
https://www.businesswire.com/news/home/20140930005292/en/Bank-of-America-Begins
Rollout-of-Chip-Debit- Cards.
48
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limit the transaction. EMV would have prevented all or nearly all the card-present transaction
fraud that class members experienced.
I.
Any Financial Institution in the Bank's Situation Would Have Known that
Many EDD Cardholders Who Reported Unauthorized PIN-Enabled ATM
Withdrawals Were True Victims of Counterfeit Fraud.
114.
Plaintiffs' Counsel have infonned me that from September 28, 2020 until the
preliminaiy injunction in this case went into effect on June 8, 2021, the Bank ran all incoming
EDD debit cardholder unauthorized-transaction claims through its "Claim Fraud Filter " ("CFF ")
and used the results of that CFF as a basis for automatically denying ce1tain categories of claims
which the Bank inte1preted as any claim involving an
unauthorized ATM withdrawal.137 If a claim involved a claim of an unauthorized ATM
withdrawal (which was necessai·ily a PIN-enabled ATM withdrawal because all ATMs require the
use of a PIN), Indicator 1 of the CFF was triggered, and the claim was denied on that basis.138
Plaintiffs' Counsel have also info1med me that on or about September 28, 2020, the Bank applied
its CFF retroactively to claims that had been submitted between April 1, 2020 and September 27,
2020 and which the Bank had ah-eady resolved by issuing pe1manent credit.139 For all such
137 BANA's Verified Responses & Objections to Plaintiffs Fomth Set of Intenogatories (Nos. 28,
30, and exhibits thereto); BANA_EDD MDL 125177 at -125177 · BANA_EDD_MDL_l00634
at -100649 (describing Indicator 1 as '
Martin Tr. 125:18-
126:8, 127:8-10 (similai-); Rule 30(b)(6
1 s Tr." 285:22-286:13,
289:7-12 similar . Indicator 1 was also
90640, -90643 (same).
138 Id.
r 1
; BANA_
_
_
4 0 at-
139 Maitin Tr. 175:10-14, 178:13-23; Daniels Tr. 23 4:24-236:5.
49
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claims that triggered Indicator 1 of the CFF because they had involved a claim of an
unauthorized ATM withdrawal, the Bank rescinded the permanent credit that the Bank had
previously issued.140
115.
For the reasons explained above, it has long been known throughout the payment
services industry that mag-stripe only cards are vulnerable to skimming and card-present
counterfeit fraud. Given that knowledge, and based on the Bank’s own documents discussed
above, it is my opinion that, as a matter of industry practice, it was clear at the time the CFF was
in place that due to the absence of EMV chips in the Bank’s EDD debit cards, legitimate
cardholders were vulnerable to skimming attacks and counterfeiting. It would also have been
clear to industry practitioners that criminals could easily create counterfeit cards (using
cardholder information obtained either through skimming, phishing, data breaches, or other
security attacks) and that, due to the lack of EMV chips in the Bank’s EDD debit cards, the
criminals could use those counterfeit cards to make unauthorized POS transactions and ATM
withdrawals.
116.
The Bank’s cardholder agreement advised cardholders that they “may incur no
liability for unauthorized use of [a] Card” but only “provided [the cardholder] notify [the Bank]
within a reasonable time of the . . . unauthorized use.”141
117.
Industry leaders also knew that innocent cardholders can be the victims of fraud.
Visa, Bank of America’s card network partner, knows that consumers can be innocent victims.
Visa’s Zero Liability Policy is designed to protect consumers from fraudulent activity on their
cards. Visa explains its Zero Liability Policy to consumers on its website, as specifically
protecting fraudulent use of cards offline (meaning card present transactions):142

140 See id.
141 BANA_EDD_MDL_536398 at -536402.
142 With Zero Liability, You’re Not Responsible for Unauthorized Charges, Visa,
https://usa.visa.com/pay-with-visa/visa-chip-technology-consumers/zero-liability-policy.html
(last accessed Aug. 9, 2024) (emphasis added).
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Visa's Zero Liability Policy* is our guarantee that you won't be held
responsible for unauthorized charges made with your account or account
information. You're protected if your Visa credit or debit card is lost,
stolen or fraudulently used, online or offline.
118.
The Consumer Financial Protection Bureau, known as CFPB, similarly recognizes
that legitimate cardholders can be innocent victims of fraud and provides consumers with advice
regarding their protections under law. The CFPB is the federal agency charged with overseeing
the financial services industry and protecting consumers from unfair, deceptive, or abusive
practices. The CFPB’s website poses several Frequently Asked Questions, including one focused
on unauthorized transactions on a debit card, which is shown below: 143
If the unauthorized transaction was made using a debit card or other
electronic fund transfer, you might have additional protections under
federal law. Electronic fund transfers include ATM transactions, purchases
using your debit card, some online bill payments, and payments you’ve set
up to be deducted from your account automatically . . . .
What if someone charges my account but I have my physical debit card?
If an unauthorized withdrawal appears on your bank statement, but you
did not lose your card, security code, or PIN or had any of them stolen,
you should notify your bank or credit union right away.
119.
In light of everything discussed above, it is my opinion that any financial
institution in the Bank’s situation would have known, and the Bank knew or should have known,
that many of its EDD debit cardholders who reported an unauthorized ATM withdrawal between
April 1, 2020 and June 8, 2021 were in fact victims of counterfeit card fraud that likely resulted
from card skimming. The Bank’s decision to issue mag-stripe only rather than EMV chip cards
to its EDD debit cardholders prior to July 2021 enabled such fraud. It is also my opinion that
any financial institution in the Bank’s situation would have known, and the Bank knew or should
have known, that its “Claim Fraud Filter” strategy would result in the wrongful denial of a

143 How Do I Get My Money Back After I Discover an Unauthorized Transaction or Money
Missing From My Bank Account, Consumer Financial Protection Bureau (Aug. 28, 2023),
https://www.consumerfinance.gov/ask-cfpb/how-do-i-get-my-money-back-after-i-discover-an-
unauthorized-transaction-or-money-missing-from-my-bank-account-en-1017/ (last accessed Aug.
9, 2024).
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substantial number of valid claims and the wrongful freezing of accounts of innocent EDD debit
cardholders.
VII.
CONCLUSION
120.
It is my opinion that, from Jauuaiy 2020 to July 2021, Bank of America denied its
EDD debit card customers the industry-standard secmity it had long provided to its colllillercial
debit and credit card customers. Financial institutions knew, as the Bank confirmed in its own
words, that including EMV chips on its credit and debit cai·ds would be the most effective tool
for fighting counterfeit fraud in a cai·d-present envirolllllent. In the years before the pandemic, it
was widely recognized and readily foreseeable to everyone in the industry, including the Bank,
that fraud would move to the remaining less secme mag-stripe only cai·ds that remained in the
market and that card programs that did not converi to EMV would be increasingly targeted by
counterfeit fraud.
121.
In my professional experience, the Bank's decision to proceed without EMV chips
in its EDD debit cai·ds from January 2020 until July 2021, even after
was highly inegular· in the payments industry.
122.
The Bank's failme to issue EMV chip cards to EDD debit cardholders rendered
EDD debit cardholders pariicular·ly vulnerable to counterfeit cai·d fraud (such as unauthorized
ATM withdrawals) that could have been prevented by the presence of au EMV chip on their
debit cards.
123.
As a foreseeable result of the Bank's decision not to intr·oduce industry-staudar·d
security EMV chips into EDD debit cards, there was significant card-present tr·ansaction fraud
targeting the Bank's EDD debit car·d portfolio during the pandemic, including unauthorized ATM
withdrawals).
52
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Page 55 of 66

124.
In my opinion any financial institution in the Bank's situation would have known,
and the Bank did know or should have known, that due to Bank's decision to issue vulnerable
mag-stripe only rather than EMV chip cards to its EDD debit cardholders prior to July 2021,
many of its EDD debit cardholders who reported an unauthorized ATM withdrawal between
April 1, 2020 and June 8, 2021 were in fact victims of card-present counterfeit fraud that likely
resulted from card skimming. It is also my opinion that any financial institution in the Bank's
situation would have known, and that the Bank did know or should have known, that its "Claim
Fraud Filter" strategy would result in the wrongful denial of a substantial number of valid claims
and the wrongful freezing of accounts of innocent EDD debit cardholders.
* * *
* * *
Dated: March 4, 2025
Appendix A: Curriculum Vitae
Appendix B: List of Materials Considered
53
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APPENDIX A
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Jane.cloninger@gmail.com
Jane E. Cloninger
415.218.7417

JANE E. CLONINGER
San Francisco, CA | jane.cloninger@gmail.com | 415.218.7417 | linkedin.com/in/janecloninger

A senior leader with broad consulting experience in competitive strategy, new product development,
business case development and implementation execution. Primary expertise is electronic payments
systems, particularly emerging products and technologies including mobile, contactless and EMV for both
face to face and online payments and real time payments. Worked in many parts of the card industry
including working with card brands, issuers, merchants, co-brand partners, third party processors, and
major merchant acquirers. Global experience includes Canada, Latin America, UK, and Australia.

1. EDUCATION

University of California at Los Angeles, Anderson Graduate School of Management, Los Angeles,
CA; Master of Business Administration, Strategy and Finance, 1982

University of Tennessee, Knoxville, TN; Bachelor of Science, Economics, 1978 (with honors)

2. EMPLOYMENT HISTORY

Accenture, Senior Managing Director, Accenture Payment Services
San Francisco, CA

2017 – 2019

Edgar, Dunn & Company, Director/Partner
San Francisco
1985 – 2017

First Interstate Bancorp, Assistant Vice President
Los Angeles, CA
1982 – 1985

Wilshire Associates
Los Angeles, CA

1979 – 1980

3. SELECTED LITIGATION SUPPORT EXPERIENCE

Jane has provided expert reports and testimony at depositions, mediation, arbitration, and jury trials.
Selected examples include the following:

Class Size – Analyzed the likelihood that customers who could potentially benefit from the settlement would
have remained customers and that they would have active credit cards on file by which they could receive any
settlement funds.

Bankruptcy Dispute – Provided expert opinion and testified in deposition in a case involving the bankruptcy of
a charter airline. Provided testimony regarding industry risk management practices and the role and
responsibility of the acquirer in underwriting and monitoring their merchant clients.

Securities Litigation – Class Action. In support of a class action lawsuit alleging inappropriate public disclosure
of credit card portfolio performance to investors, prepared expert report based on analysis of portfolio
performance during each quarter of the class period to determine what actual performance was compared to
reported performance. Evaluated loan loss reserves and calculated appropriate reserve levels based on risk
exhibited by the portfolio performance indicators. Testified for mediation and prepared Expert Report for
settlement purposes. Case settled in favor of our client.
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Jane.cloninger@gmail.com
Jane E. Cloninger
415.218.7417

Contract Dispute – Valuation of Co-Brand Credit Card Portfolio. Prepared the damage assessment related to
litigation resulting from the co-brand partner’s refusal to honor an established co-brand agreement. Assessed
the competitive environment and management practices during the interim period to identify any changes in
value related to other factors. Provided expert witness testimony in deposition and in a jury trial that
concluded in favor of damages for our client.

Contract Dispute – Credit Card Program Valuation. Provided expert witness testimony related dispute
between a bank and its former cobrand marketing partner. Developed estimated future earnings potential
and loss forecasts to estimate the probable profitability if the program had been continued

4. OTHER SELECTED PROJECT EXPERIENCE

Jane has been a consultant to the credit card and payments industry since 1985. Below are selected examples
of projects:

De Novo Digital Bank. Responsible for the client relationship and oversight of various client engagement
teams involved in the implementation of a new core banking platform, accounting platform, AML tools and
data strategy development.

Business Case Development for Chip. Developed the business case for the migration of a national PIN debit
scheme from magnetic stripe technology to chip. Developed the industry business cases for migration within
the US considering the costs and benefits to issuers, acquirers/merchants, and processors. Developed the
business case for a large regional issuer which included its retail credit and debit programs as well as
commercial and prepaid portfolios.

Risk Assessment. Led a review how risk was introduced into a global payment services’ core services and how
the client identified and responded to incidents. Scope included working with Treasury and Settlement to
develop an end-to-end view of the process. Areas addressed including client on-boarding, transaction
authorization processing and backend monitoring and settlement. Documented key workflows and made
recommendations to address areas of risk including upstream Treasury dependencies.

Payments Roadmap. Developed a payments roadmap for a large transportation company. Identified and
prioritized over 20 opportunities for near term and long-term implementation based on their ability to meet
management’s objectives.

Payment Strategy. Developed the corporate strategy for a national debit brand. Identified what areas of
investment to pursue and what not to pursue. Reviewed the competitive landscape to identify threats and
opportunities. Assisted client in assessing the impact of changing regulatory and competitive environment on
their business. Developed planning scenarios and related volume projections. Identified various competitive
and regulatory scenarios and likely merchant and consumer reactions under each scenario. Identified the
implications to the client and likely transaction volumes that would result under each competitive scenario.

Product Strategy. Created a Product Roadmap for a national debit brand that outlines the planned product
evolution, including opportunities and investment requirements across eleven proposed products, including:
contactless, mobile, P2P, cross border debit, bill payment, prepaid and online payments. Assessed the
competitive environment, market need, strategic fit, and level of effort and investment required to
implement.

Mobile Payments. Developed an NFC commercialization roadmap for a global payment brand. Analysis
included identifying key requirements for commercialization and assessing six markets’ readiness against
those requirements.

5. SELECTED SPEAKING ENGAGEMENTS

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Jane.cloninger@gmail.com
Jane E. Cloninger
415.218.7417

Card Not Present Expo, Moderator, “Remote Control: Focusing on mobile Web and in-app capability
vs. mPOS”, May 2016

Money 20/20, Moderator “Payment Card Innovation – and the Evolving Role of Issuers, Processors
and Networks”, October 27, 2015

ARC Travel Connect, 2015 (Airlines Reporting Company), Speaker and Panel Moderator, “How Do
New Developments in Payments Impact the Travel Industry”, Washington DC, October 22, 2015

Mobile World Congress, Barcelona. Moderator “Mobile Retail: Delivering Contextual Experiences to
Drive Loyalty and Spend”, March 16, 2015

Money 20/20, Moderator “Payment Security Evolution: EMV, Mobile, CNP & Beyond”, November 3,
2014

Cartes America, “Mobile Payment Ecosystem Views”, May 13, 2014

Payments Summit, Smart Card Alliance, Mobile Payments, the Battle of the Approaches, February 3,
2014

Law Seminars International, Palo Alto, CA, “Mobile Payments, Players, and The Customer Experience
– and the Issues They Raise, November 21, 2013

Money 20/20, Panel Moderator “The Future of the Secure Element and Trusted Execution
Environment”, October 7, 2013

Merchant Risk Council, Webinar, May 23, 2013. Results of survey conducted by EDC and MRC:
“Mobile Commerce and the Merchant Experience”

Law Seminars International, San Francisco, CA, November 15, 2013. “Mobile Payments Ecosystem”

Law Seminars International, Seattle WA, May 13, 2013. “Mobile Payments: Players and Their
Technologies”

Cartes America, Las Vegas, April 23, 2013. “EMV, NFC and Mobile Implementations Based on the US
Business Case”

Merchant Risk Council, Las Vegas, March 28, 2013. Mobile Super Session. “Mobile Commerce”

Smart Card Alliance, Las Vegas, February 4, 2013. Moderator: “Keynote Plenary Panel Session: The
Pressing Issues on EMV Migrations”
6. PUBLICATIONS

2016 Advanced Payments Report, Edgar, Dunn & Company and Cards & Payments Mobile
2015 Advanced Payments Report, Edgar, Dunn & Company and Cards & Payments Mobile
2014 Advanced Payments Report, Edgar, Dunn & Company and Cards & Payments Mobile
2013 Advanced Payments Report, Edgar, Dunn & Company and Cards & Payments Mobile

Case 3:21-md-02992-GPC-MSB Document 591-35 Filed 10/17/25 PageID.41585
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APPENDIX B
Case 3:21-md-02992-GPC-MSB Document 591-35 Filed 10/17/25 PageID.41586
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Appendix B: List of Additional Materials Considered

Date
Document Type Title/Description
Bates Range
2/8/2024 Transcript
Excerpts from the transcript of
Plaintiffs’ deposition of the Bank’s
Rule 30(b)(6) designee, Robert
Chestnut, taken on February 8,
2024 (“Chestnut Tr.”)

2/14/2024 Transcript
Excerpts from the transcript of
Plaintiffs’ deposition of the Bank’s
Rule 30(b)(6) designee, William
(“Matt”) Martin, taken on February
14, 2024 (“Martin Tr.”)

2/6/2024 Transcript
Excerpts from the transcript of
Plaintiffs’ deposition of Defendant
Bank of America, N.A.’s (the
“Bank”) Rule 30(b)(6) designee,
Shane Daniels, taken on February
6, 2024 (“Daniels Tr.”)

2/16/2024 Transcript
Excerpts from the transcript of
Plaintiffs’ deposition of the Bank’s
Rule 30(b)(6) designee, Michael
Letson, taken on February 16, 2024
(“Letson Tr.”)

8/7/2024 Article
“The Magnetic Stripe”

8/12/2021 Article
“Swiping Left on Magnetic Stripes”
5/30/2012 Article
“The Long Life and Imminent
Death of the Mag-Stripe Card”

9/17/2018 Article
“Why U.S. Counterfeit Credit Card
Fraud Is Down 75%”

7/14/2011 Article
‘Taking a Trip to the ATM, Beware
of ‘Skimmers’’

3/15/2018 Article
“How to Detect Skimming Devices
on ATM’s [sic]”

3/31/2017
Article
“Why I Always Tug on the ATM”

4/17/2023 Article
“Understanding Card Skimmers
and How to Protect Yourself”

9/18/2017 Article
“ATM Skimming Gets a Tech
Upgrade”

Article
“What Is Credit Card Fraud?”

12/6/2002 Article
“Is Your Credit Card Being
Skimmed?”

Case 3:21-md-02992-GPC-MSB Document 591-35 Filed 10/17/25 PageID.41587
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12/13/2016 Article
“ATM Fraud: The Evolution of An
Epidemic:

3/29/2017 Article
“FICO Reports a 70 Percent Rise in
Debit Cards Compromised at U.S.
ATMs and Merchants in 2016”

8/4/2015 Article
“Global Card Fraud Losses Reach
$16.31 Billion – Will Exceed $35
Billion in 2020 According to The
Nilson Report”

8/2015 Article
“Card Fraud Losses Reach $16.31
Billion”

8/1/2024 Article
“How We Can Help You,
Skimming”

3/18/2020 Article
“The Role of the EMV®
Specifications”

9/2022 Article
“EMV At a Glance”

11/2014 Article
“A Guide to EMV Chip
Technology”

3/2019 Article
“Debunking EMV Myths”

12/2016 Article
“EMV Implementation Guidance:
Fallback Transactions”

9/16/2024
Article
“Fraud & Fallback: What You Need
to Know About Skimming Attacks”

11/7/2018 Article
““Fallback” Fraud Declines
Significantly as Banks Implement
New Policies”

1/27/2017 Article
“ATM ‘Shimmers’ Target Chip-
Based Cards”

4/2018 Report
“From Application to Transaction:
Card Fraud Trends, Threats, and
Tactics”

4/6/2018 Article
“Nearly All US ATMs Now EMV-
Capable, Study Finds”

2018 Article
“2018 ATMIA EMV Migration
Survey: Executive Summary
(2018)”

6/1/2020 Article
“US Market Hits 1 Billion EMV
Chip Cards Milestone, Payments
Cards & Mobile”

2019 Article
“Fraud the Facts 2019”

2/25/2016 Article
“With Its EMV Conversion Nearly
Complete, Canada’s POS Debit
Fraud Falls to New Low”

Case 3:21-md-02992-GPC-MSB Document 591-35 Filed 10/17/25 PageID.41588
Page 63 of 66

9/3/2019 Article
6/23/2019 Article
8/17/2022 Aliicle
2/27/2025 Aliicle
2012 Aliicle
4/5/2013
Aliicle
7/2017 Aliicle
7/3/2012 Aliicle
1 2/15/2014 Aliicle
9/30/2014 Aliicle
8/8/2024 Webpage
10/23/2014 Order
5/28/2019 Aliicle
7 /10/2015 Document
1/10/2020 Email
7/21/2020 Email
1/28/2020 Email and
Attachment
Statute
9/30/2020 Email and
Attachment
10/20/2023 Document
"Visa EMV Chip Cards Help
Reduce Counterfeit Fraud by 87
Percent"
"The Future of U.S. Fraud in a
Post-EMV Environment:
"EMV Chip Cards: Everything You
Need to Know"
"Why EMV?"
"EMV Compliance in the U.S. "
"EMV in the USA: The Sto1y So
Far"
"Understanding the U.S. EMV
Liability Shifts"
"Bank of America Switches to
EMV Chip Credit Cards for
Consumers "
"US Shifts to EMV as Obama and
Apple Weigh In "
"Bank of America Begins Rollout
of Chip Debit Cards"
"Direct Express, Frequently Asked
uestions "
Exec. Order No. 13681, 79 F.R.
63491
"Chip Technology Helps Reduce
Counterfeit Fraud by 76 Percent "
Exce1pts of BAN.A's Response to
State of California Electronic
Benefits Payments RFP Vol I & II
15 U.S.C. §1693f(b); 12 C.F.R.
§1005.ll (c)(l).
BAN.A EDD MDL-351839-
35140
-
-
BAN.A EDD MDL-116001-
-
-
116002
BAN.A EDD MDL-370150-
-
-
370155
BAN.A EDD MDL-104742-
-
-
104746
BAN.A EDD MDL-057837-
-
-
057 878
Case 3:21-md-02992-GPC-MSB Document 591-35 Filed 10/17/25 PageID.41589
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2/21/2020 Email
2/26/2020 Email
3/3/2020 Email
3/13/2020 Email and
Attachment
2016 Aliicle
6/23/2017 Aliicle
4/2018 Aliicle
9/9/2020 Email
3/28/2020 Email
6/11/2020 Email and
Attachment
11/14/2020 Aliicle
11/20/2020 Aliicle
------------
4/24/2020 Email
4/23/2021 Email
7/10/2020 Email
8/18/2020 Email
11/2/2020 Email
Document
"The U.S. EMV Chip Card
Migration: Considerations for Card
Issuers, Community Banking
Connections "
"Crooks At·e On the Prowl for Late
EMV Conve1is"
"From Application to Transaction:
Card Fraud Trends, Threats, &
Tactics"
"Thousands At·e Being Stolen From
Bank of America Accounts, and
EDD May Be Linked. Here's How
to Protect Yourself'
"How Bank of Alnerica Helped
Fuel California's Unemployment
Meltdown"
BANA EDD MDL-102937
-
-
BANA EDD MDL-123235-
-
-
123236
BANA EDD MDL-352396-
-
-
352397
BANA EDD MDL-167019-
-
-
167024
BANA EDD MDL-154042-
-
-
154044
BANA EDD MDL-059687-
-
-
059690
BANA EDD MDL-15366-
153576
BANA EDD MDL-228914-
-
-
228915
BANA EDD MDL-297295
-
-
BANA EDD MDL-172469-
-
-
172473
BANA EDD MDL-455617-
-
-
455619
BANA EDD MDL-163307-
-
-
163308
BANA EDD MDL-
-
-
00166345
Case 3:21-md-02992-GPC-MSB Document 591-35 Filed 10/17/25 PageID.41590
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10/30/2020 Email
2/9/2021 Email
10/8/2015 Aliicle
1/2/2024 Document
9/28/2020 Email
10/2020 Document
10/9/2020 Document
1 2/29/2020 Email
3/1/2018 Document
8/9/2024 Webpage
8/28/2023 Webpage
"With Zero Liability, You're Not
Responsible for Unauthorized
Char es "
How Do I Get My Money Back
After I Discover an Unauthorized
Transaction or Money Missing
From M Bank Account
BANA EDD MDL-
-
-
0057504-57506
BANA EDD MDL-
-
-
00431011-14
BANA EDD MDL 125177-
-
-
-
125179
BANA EDD MDL 100634-
-
-
-
100679
BANA EDD MDL 5923 24-
-
-
-
592330
BANA EDD MDL 090640-
90647
-
-
-
BANA EDD MDL 536398
-
-
-
-536406
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14C1 — In re Bank of America California Unemployment Benefits Litigation (Dkt. 591-35, S.D. Cal. No. 3:21-md-02992)

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