It's all about the rents, part one million and thirty-nine
Adam Levitin, MSN Money:
Right now some 4.3 million Americans receive unemployment benefits. And right now, in many states a big chunk of those unemployment benefits are going straight to the bottom-line profits of the nation's biggest banks because of junk fees tied to the prepaid cards used to distribute these funds.
While we can't take banks entirely out of the process, it's critical they get a smaller piece of the pie. We can certainly provide a more direct conduit for our tax dollars to get into the pockets of the unemployed. It would be one thing if banks were mandated to use the profits from junk fees to hire more people, but they aren't. As much money as possible should go to regular Americans, so their spending can help put the economy back on track.
Most states now provide unemployment benefits to workers using prepaid debit cards. While some states have more lenient rules than others, most states allow banks to load these cards with hidden junk fees, according to a recent study by the National Consumer Law Center. In California, one of the states with better rules around junk fees, unemployed workers lose $1.8 million every year on their state-issued prepaid debit cards. That's $1.8 million more in Bank of America's profit column, and $1.8 million less for families to cover necessities such as rent, gasoline and food
- Alaska: JPMorgan Chase charges $5 every time cardholders talk to a teller, $1.50 to withdraw money from an ATM more than once week and 35 cents just to call the automated customer service line. Chase even charges 40 cents to check the card balance from the bank's own ATM.
- Minnesota: U.S. Bank gets $3 every time a cardholder calls the bank's customer service department, after one free call per month.
- Iowa: Wells Fargo charges unemployment recipients 50 cents every time they check their balance, plus another 50 cents every time a transaction is denied for insufficient funds.
- Maine: Chase charges 25 cents every time an unemployment recipient uses his or her debit card to make a purchase at a store using a PIN.
- Ohio: U.S. Bank's 750 in-network ATMs charge no fees, but 16 counties in that state don't have a single U.S. Bank ATM. Vinton and Clinton Counties, in the southern part of the state, have some of the highest jobless rates in Ohio, lingering between 12.6% and 15%. Neither county has an ATM those unemployed people can use for free.
It almost seems as though the states are shilling for the banks.
Regardless of intent, these state-mandated arrangements force people (who already don't have enough to get by) to pay hidden fees with little guidance on the matter. But riddle me this: Why should states allow banks to treat the prepaid cards issued to the unemployed like their own personal piggy banks?
The good news is that we already know how to help families while drastically reducing the role of banks in the process. The Food Stamp program, now officially called the Supplemental Nutrition Assistance Program (SNAP), has been transitioning from coupons to prepaid debit cards in recent years. Nearly $73 billion worth of food aid was delivered to needy families using such cards in 2011, according to a study by the Federal Reserve.
Banks are involved in the process because they issue the cards, but under the SNAP program, which accounts for 73% of all government funds disbursed by prepaid cards, issuers are prohibited from charging fees to cardholders.
Did you spot the kicker? Here it is:
While we can't take banks entirely out of the process
That's your market state in action. The banks can be "taken entirely out of the process." The State could, for example, cut a check. Or the state could issue its own cards. And there's also a ready-made public distribution system that could be retrofitted for this purpose: The Post Office, which is mandated to cover the country. In a just world, people would be able to do their boring banking there too.