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UNEMPLOYMENT

COMPENSATION

PREPAID CARDS

STATES CAN DEAL WORKERS A WINNING HAND

BY DI

SCARDING JUNK FEES

May 2011

NCLC

NATIONAL

CONSUMER

LAW

CENTER

© Copyright 2011, National Consumer Law Center, Inc. All rights reser ved.

Revised May 31, 2011

ABOUT THE AUTHORS

Lauren K. Saunders

is the Managing Attorney of National Consumer Law Center"s (NCLC) Washington, DC of?ce, where she directs the Center"s legislative a nd administrative efforts. She testi?es before Congress and contributes to several NCLC publications , including and . She previously worked at the National Senior Citizens Law Center, Bet Tzedek Legal Services, and Hall & Phillips. She graduated magna cum laude from Harvard Law School where she was an Executive Edito r of the Harvard Law Review, and holds a Masters in Public Policy from Harvard"s Kennedy S chool of Government and a

B.A., Phi Beta Kappa, from Stanford University.

Jillian McLaughlin

is a research assistant at the NCLC. She graduated from Kalamazoo College with a degree in political science.

ACKNOWLEDGMENTS

The views and opinions expressed in this paper are solely those of the N

CLC, which takes full

responsibility for all that is written here. We would like to thank the Ford Foundation for its generous support that allowed us to research and write this paper, as well as for its long-term support of o ur advocacy in support of low-income consumers. We would like to thank Carolyn Carter and Margot Saunders for their comm ents on this report, and Julie Gallagher for her help in preparing the ?nal report.

7 WINTHROP SQUARE, BOSTON, MA 02110 ? 617-542-8010 ? WWW.NCLC.ORG

ABOUT THE NATIONAL CONSUMER LAW CENTER

The National Consumer Law Center

, a nonpro?t corporation founded in 1969, assists consumers, advocates, and public policy makers nationwide on consumer la w issues. NCLC works toward the goal of consumer justice and fair treatment, particularly for those whose poverty renders them powerless to demand accountability from the economic marketplace. NCLC has provided model language and testimony on numerous consumer law issues before federal and state policy makers. NCLC publishes an 18-volume series of treatises on consumer law, and a number of publications for consumers NCLC

NATIONAL

CONSUMER

LAW

CENTER

©2011 National Consumer Law Center www.nclc.org Unemployment Compensation Prepaid Cards i

TABLE OF CONTENTS

Executive Summary 1

I. Background: Prepaid Cards and Unemployment Compensation 4 A.

What is a Prepaid Card? 4

B.

Why Are States Paying UC On Prepaid Cards? 4

C.

Advantages of Prepaid Cards for Consumers 5

II. Legal Protections for UC on Prepaid Cards 5

III. Important Features of a Fair UC Prepaid Card 6

IV. How the Cards Stack Up 7

A. Important Disclaimer: Information Not Always Available or Accurate 7 B.

Choice of Payment Method 9

C. Cost to “Cash" the Card and Other Usage Fees 10 10 11 12 13 D.

Penalty and Other Junk Fees 14

14 15 16 E. Access to Balances, Transaction Information, Customer Service 17 F.

Overall Assessment 19

UNEMPLOYMENT COMPENSATION

PREPAID CARDS

STATES CAN DEAL WORKERS A WINNING HAND

BY DI

SCARDING JUNK FEES

©2011 National Consumer Law Center www.nclc.orgii Unemployment Compensation Prepaid Cards

V. RECOMMENDATIONS 21

VI. CONCLUSION 23

ENDNOTES 24

Appendix A:

Usage fees on Unemployment Compensation 26

Prepaid Cards

Appendix B:

Penalty Fees on Unemployment Compensation 28

Prepaid Cards

Appendix C:

Information Fees and Availability on Unemployment 30

Compensation Prepaid Cards

Appendix D:

Payment Options for Receiving Unemployment 32

Compensation

Appendix E:

State Websites and Additional Details 34

Appendix F:

Additional State Fee Schedules

F1: Alaska Fee Schedule 44

F2: Arizona Fee Schedule 46

F3: Arkansas Fee Schedule 47

F4: Louisiana Fee Schedule 50

F5: Maryland Fee Schedule 51

F6: South Dakota Fee Schedule 52

F7: Utah Fee Schedule 53

F8: West Virginia Fee Schedule 54

F9: Wyoming Fee Schedule 55

Appendix G:

U.S. Bank Overdraft Fee Policy 58

Appendix H:

State-by-State Highlights of Unemployment 61

Compensation Prepaid Card Programs

TABLES

Table 1:

National Overview of State Unemployment Compensation 3

Prepaid Card Usage and Fees

Table 2:

Cost of First Cash Withdrawal, Selected States 12

Table 3:

Usage, Penalty and Information Fees, Selected States 20 ©2011 National Consumer Law Center www.nclc.org Unemployment Compensation Prepaid Cards 1

Forty states have largely stopped paying

unemployment compensation (UC) by paper check and now use a prepaid card for pay- ing some or all UC recipients. For recipients without bank accounts, getting cash from a

UC prepaid card will usually be cheaper than

paying a check casher to cash a paper check.

Prepaid cards also offer security over carry-

ing cash and the ability to make electronic purchases.

Yet prepaid cards come with many fees

that nickel and dime unemployed workers at a nancially stressful time. The typical unem- ployment compensation check is only $294 a week, barely a third of the average wage. 1 Fees can drain precious dollars from families at the very time they need it the most.

A survey of all 40 state UC prepaid

card programs shows considerable room for improvement in fee structures, access to infor- mation about the card, and payment options.

Following are key recommendations to ensure

that UC prepaid cards fulll their promise for both the state and its workers. St ates receive separate grants for administrative expenses and are not permitted to fund those expenses with money intended for benets.

But fees on prepaid cards skirt that rule:

22 cards charge fees at network auto-mated teller machines (ATMs), and all charge at out-of-network ATMs, on top of ATM surcharges.

24 cards charge ATM balance inquiry fees.24 cards charge denied transaction fees.

5 cards charge $10 to $20 overdraft fees.

16 cards charge for calls to automated customer service menus.

28 cards charge inactivity fees.

Other fees include fees for transactions

using a personal identication number (PIN), fees for live customer service calls, and teller withdrawal fees. States should eliminate all penalty and information fees and ensure that recipients can easily access each benet deposit without charge. Pr epaid cards offer little, if any, advantage over direct deposit for those who have a bank account. Some consumers will nd prepaid cards too difcult or expensive to use, especially if they are far from a network ATM.

6 states that use prepaid cards do not provide a direct deposit option.

Only 3 states offer all three methods of payment: check, direct deposit and the prepaid card. Ou r review shows:

The best UC prepaid cards are the Cali-fornia and New Jersey cards offered by Bank of America. These cards offer free

EXECUTIVE SUMMARY

©2011 National Consumer Law Center www.nclc.org2 Unemployment Compensation Prepaid Cards laws govern various aspects of UC prepaid cards, but the protection is not adequate. DOL and the CFPB should:

Review every state"s program to ensure that it complies with the law, includ-ing rules against mandating use of a prepaid card account and rules against certain fees.

Ban penalty and information fees and other unfair fees. Post all states" fee schedules on one website to promote competition and transparency.

It is quite possible to design a UC prepaid

card that works well for both a state its unemployed workers. UC prepaid cards are generally an improvement over paper checks for those without bank accounts, but more work is needed to ensure that they deliver

every dollar to unemployed Americans.and ample access to cash and transac-tion information with no penalty fees.

Close runners up include Arizona (JP Morgan Chase), Maryland (Citibank), and the U.S. Bank cards that do not carry overdraft fees (Minnesota, North Dakota, South Dakota and Wyoming).

The worst fee is the $10 to $20 over-draft fee that can be incurred on U.S. Bank cards issued in Arkansas, Idaho, Nebraska, Ohio, and Oregon. No other UC prepaid card imposes overdraft fees.

The Tennessee card (JP Morgan Chase) has the most junk fees.

The U.S. Department of Labor (DOL) and the

Consumer Financial Protection Bureau (CFPB)

have important roles to play. DO

L has issued

important guidance for UC prepaid cards, but not every card conforms to it. Several federal

AT A GLANCE . . .

A national overview of UC prepaid card fees is in Table 1 on page 3. A comparison of fee schedules for selected states is in Table 3 on page 20.quotesdbs_dbs19.pdfusesText_25

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