RSN Fundraising Banner
FB Share
Email This Page
add comment

Wagner reports: "Jobless Americans are paying millions in unnecessary fees to collectunemployment benefits because of state policies encouraging them to get the money through bank-issued payment cards, according to a new report from a consumer group."

Recipients of unemployment are paying for using bank issued payment cards to receive benifits. (photo: Reuters)
Recipients of unemployment are paying for using bank issued payment cards to receive benifits. (photo: Reuters)

Report: States Force Jobless to Pay Needless Fees

By Daniel Wagner, Associated Press

30 January 13


obless Americans are paying millions in unnecessary fees to collect unemployment benefits because of state policies encouraging them to get the money through bank-issued payment cards, according to a new report from a consumer group.

People are using the fee-heavy cards instead of getting their payments deposited directly to their bank accounts. That's because states issue bank cards automatically, require complicated paperwork or phone calls to set up direct deposit and fail to explain the card fees, according to a report issued Tuesday by the National Consumer Law Center, a nonprofit group that seeks to protect low-income Americans from unfair financial-services products. An early copy of the report was obtained by The Associated Press.

Until the past decade, states distributed unemployment compensation by mailing out paper checks. Some also allowed direct deposit. The system worked well for people who had bank accounts and could deposit the check without paying a fee.

It also cost states millions of dollars each year to print and mail the checks.

Banks including JPMorgan Chase & Co., U.S. Bancorp and Bank of America Corp. seized on government payments as a business opportunity. They pitched card programs to states as a win-win: States would save millions in overhead costs because the cards would be issued for free. And people without bank accounts would avoid the big fees charged by storefront check cashers.

However, most of the people being hit with fees already have bank accounts. The bank-state partnerships effectively shifted the cost of distributing payments from governments to individuals. The money needed to cover those costs is deducted from people's unemployment benefits in the form of fees.

Consumer advocates like NCLC are focused on ensuring access to the direct-deposit option so that people can avoid the card fees.

The trouble, the new report says, is that many states make it difficult for people to sign up for direct deposit. The rate of people using direct deposit ranges from a national high of 82 percent in Minnesota to a low of 16 percent in Arizona, the report says.

Minnesota offers direct deposit to people when they apply for benefits, and allows them to change their payment method online or over the phone, the report says.

In Arizona, by contrast, people are automatically enrolled in the card program. After they receive the card, they must find a paper form, fill it out, and submit it by mail. There is no way to change payment methods online or over the phone.

"The difference in direct-deposit rates among states seems primarily due to how hard or easy the state makes it for workers to choose direct deposit," the report says.

In five states - California, Indiana, Kansas, Maryland and Nevada - unemployed people aren't offered direct deposit at all. The report says that setup is illegal under a federal law that bars states from requiring benefits recipients to open an account at a particular bank.

The federal government recommended in 2009 that people with bank accounts receive payments via direct deposit. Nearly four years later, the report says, "there is no excuse for any state not to be offering direct deposit as the first choice for payment of unemployment benefits."

Banks make more money when more people use the cards. In the past, some of their deals with states prevented states from offering direct deposit, or required states to promote the card program as a first option.

To cover the cost of issuing cards and running the programs, banks charge a plethora of fees, including charges for balance inquiries, phone calls to customer support, leaving an account inactive for a period of months, or making a purchase using a personal identification number.

Many states have eliminated some fees and improved consumer protections in the two years since NCLC published its first comprehensive review of state unemployment payments. Banks no longer charge overdraft fees, which skimmed up to $20 from the benefits of card users whose spending exceeded the balance on the card.

Pennsylvania was singled out for praise in the report. Residents of that state will save $5.2 million in card fees each year because the state switched to a lower-fee card offered by JPMorgan. JPMorgan declined to comment. US Bancorp and Bank of America did not immediately respond to requests for comment.

In part because of the recent improvements, the report says, prepaid cards often are the best option for people who don't have bank accounts. Those people would often pay even bigger fees to storefront check cashing services.

"A well-designed prepaid card is safer, cheaper and more convenient than paying to cash a paper check," said Lauren Saunders, one of the report's authors, in a prepared statement. But she said "it is no substitute for direct deposit to an account of your own choosing." your social media marketing partner


A note of caution regarding our comment sections:

For months a stream of media reports have warned of coordinated propaganda efforts targeting political websites based in the U.S., particularly in the run-up to the 2016 presidential election.

We too were alarmed at the patterns we were, and still are, seeing. It is clear that the provocateurs are far more savvy, disciplined, and purposeful than anything we have ever experienced before.

It is also clear that we still have elements of the same activity in our article discussion forums at this time.

We have hosted and encouraged reader expression since the turn of the century. The comments of our readers are the most vibrant, best-used interactive feature at Reader Supported News. Accordingly, we are strongly resistant to interrupting those services.

It is, however, important to note that in all likelihood hardened operatives are attempting to shape the dialog our community seeks to engage in.

Adapt and overcome.

Marc Ash
Founder, Reader Supported News

+12 # MsAnnaNOLA 2013-01-30 10:59
My state Louisiana has also set up this scam for state income tax refunds. No choice of direct deposit when you do your return on the state website. They send you the card automatically. It is $1.50 to get your money off it at an atm. Oh and how do you get your money off it at an ATM when it is for an odd amount. Like $123.00. ATMs do not give out one dollar bills. So the issuer of the card would get to keep the extra unless you can find out a way to spend those extra few dollars and cents at a store. It is so annoying. I complained to my bank, Chase the issuer of the card.
+8 # LeeBlack 2013-01-30 11:18
There is also a suspicion that the State sells the names and addresses of those receiving unemployment to groups, especially religious groups. Churches that send a message like, "You are going through a rough time, come join us for spiritual help."
+7 # tuandon 2013-01-30 12:35
The fact that any state would require that the unemployed pay fees on these cards, or set up accounts in specific banks, is disgraceful. I am, as a Pennsylvanian, surprised that Pa. has not charged fees to the max. The Commonwealth has never been noted for its forward-looking atttitude. However, I am glad to hear that we are leaders in at least this one field.
+6 # michelle 2013-01-30 13:38
It isn't only the jobless. My daughter worked for a retail store over the Christmas holidays and was issued a bank card instead of a paycheck. There was a fee ($2.00) each time she used the card and a fee to check the balance. Even her bank would not 'cash' the card for her although her employer at the art supply store where she worked said Walmart would cash out the card for a fee. No surprise there. This is just the latest in the bleed the peasant society we are living in these days.

I don't see any hope of changing things legislatively. Our representatives work for the corporate world and big money, not the people who elect them. We can elect people all we want but in the end they need the money from the corporate world to run a campaign. Big money can primary them right out of a race. We have had a bloodless coup and we are stuck.
+5 # reiverpacific 2013-01-30 14:04
As if being unemployed and dependent, having to jump through the farcical "job search" hoop to get benefits you paid for, when there are little or none out there wasn't bad enough, the big leeches and robber barons who caused the slump in the first place are getting fat of other's misfortune: but that's the essence of capitalism for you comrades. The more they hurt the more we can bleed 'em!
And we can thank ol' Ronnie R' for instigating taxes on unemployment benefits which employers and employees alike have already paid into through payroll tax.
The land of opportunity for less and less it has become.
+4 # Doubter 2013-01-30 15:54
So the banks just keep on chugging along; this time shoving the underdogs face into the feces.

Typical of the banks and the government agencies they own.
+4 # Allen 23 2013-01-30 20:28
Debt is a big scam and permeates every aspect of our lives and keeps us all trapped.

We are awash in fear mongering to the point that we are all half-crazed.

The government is owned lock stock and barrel by corporations.

All of the politicians are a bunch of blood sucking vampires.

We are enslaved. We really, actually are. We are in prison. It is a big prison. "Seal the borders" for security? Hah. We are being sealed in.

We are in crazy land here, and ANYTHING we do to break out of that is worthwhile - almost nothing is happening to break out of it now - and we have absolutely nothing to lose.

We can't see the trouble we are in, because we have nothing to compare to.

The national political discussion is a joke.

The Democratic and Republican party politicians should all be tarred and feathered and run out of town.

America is a society gone completely mad. We live in a big prison. It is pathetic. Fear keeps us locked in. We are so saturated with fear, that it would not be off the mark to say that fear is the only thing happening here, and that anything else is ruthlessly suppressed and punished. And we are all trustees. Anyone refusing the role of trustee is isolated and viewed and treated as a pariah. That is not to say that we cannot overcome this - not in the least. We have to fight, though, every hour of every day and break the spell.

Let's smash it up. Let's never rest until we do. Nothing else is anything but a waste of time.
-3 # EPGAH3 2013-01-31 19:08
Democrat and Republican are two fingers of the same hand.

Seal the border? WHERE? The wall project was defunded, private citizens have been putting up mini-walls here and there as they can afford, there are supposedly Drones "guarding" the border, but I haven't seen ONE single Drone kill ONE single illegal! (Because killing our enemies one-by-one is SUCH an effective tactic, as demonstrated by Obama's personal list of terrorists!)

The rest I can agree with...
+4 # rockieball 2013-01-31 10:22
On top of the fee's thanks to Ronald Reagan with his wonderful tax reform bill, one also has to pay income tax on unemployment. The same hold true on Social Security. Come this March you no longer get a check sent to you it's direct deposit or a card. I know of older people who have never used a atm or bank card and have no idea of the added fee's.

THE NEW STREAMLINED RSN LOGIN PROCESS: Register once, then login and you are ready to comment. All you need is a Username and a Password of your choosing and you are free to comment whenever you like! Welcome to the Reader Supported News community.