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FEMA aims to recover overpayments from natural disasters

Jun 05, 2011 Mike Garretson

FEMA aims to recover overpayments from natural disasters
For the many victims who suffered catastrophic losses as a result of Hurricane Katrina in 2005, the Federal Emergency Management Agency was there to provide compensation for damages caused by the storm.
 Six years later, FEMA is asking for its money back. In 2005, FEMA supplied millions of victims with funds to pay for clothing, shelter, medicine and home repairs. Political pressure to contribute to the disaster resulted in the agency relaxing its lending safeguards. In all, the organization awarded $600 million to roughly 154,000 victims. Apparently, agency employees handed out funds frivolously during this time, without interviewing applicants or inspecting property to determine the actual amount of damage that each person suffered. Incorrect banking information records and failure to check whether the candidates already had insurance to cover the wreckage resulted in fraudulent loans. FEMA sent letters to thousands of disaster victims asking for repayment - $22 million in total. Hundreds of people have been convicted of hurricane-related fraud, while many cases under review involve mistakes made by agency staff. These people will receive a letter asking for repayment due to human error. FEMA had already attempted to collect overpayments from hurricane victims in 2007, but lost a class-action lawsuit that stated its debt collection efforts were error-filled. In the years that passed, the organization regrouped and lowered its error rate from 14.5 percent to around 3 percent. "Under our current leadership, strong protections have been put in place to greatly reduce the error rate of improper disaster payments," said FEMA spokeswoman Rachel Racusen. Hurricane Katrina is not the only natural disaster that FEMA erroneously supplied aid for. The San Diego Union Tribune reports that victims of the October 2007 wildfires in California are suffering the same fate.
In all, 40 applicants have received notices of debt in California due to overpayment during the wildfires, totalling $270,365. "People used this money to survive," said Davida Finger, law professor at Loyola University in New Orleans, and representative of the plaintiffs in the 2007 Katrina case. "We don't want [them] to have to give money back that they simply needed for rent and food." Louisiana Senator Mary Landrieu recently co-sponsored a bill that would authorize the agency to waive debts that resulted from the human error of FEMA employees. The legislation was approved by a Senate committee last week.