The National Consumer Law Center has issued a report that is critical of the fees many unemployed people have to pay because their states put unemployment benefits on cards.
"Prepaid cards can help states eliminate the costs of paper checks and help unbanked workers avoid check cashing fees and the risks of carrying cash," said Lauren Saunders, managing attorney of the National Consumer Law Center in Washington and the primary author of the report. "Yet, prepaid card junk fees stack the deck against jobless Americans who need every dollar during a financially stressful time."
The NCLC reported that 13 million unemployed Americans get their unemployment benefits on cards issued by 40 states.
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The report, "Unemployment Compensation Prepaid Cards: States Can Deal Workers a Winning Hand by Discarding Junk Fees," analyzed the payment options, fees and access to account information available to workers in every state that pays unemployment benefits on prepaid cards. It also surveyed the laws that protect (or fail to protect) workers and offers recommendations for how states can design a card that works well for both the state and its unemployed workers, the consumer group said.
The report singles out as especially problematic the $10-$20 overdraft fees that U.S. Bank has on prepaid cards in five states: Arkansas, Idaho, Nebraska, Ohio and Oregon. No other bank's unemployment prepaid card charges overdraft fees, which the U.S. Department of Labor has found are "inconsistent with federal law." And the Tennessee card (issued by JP Morgan Chase) draws the two of clubs for the card with the most junk fees, including ATM, PIN debit, denied transaction and balance inquiry fees.
The report found California and New Jersey currently have the best cards (both issued by Bank of America), although both could benefit from fees more clearly and prominently displayed on websites.
The report urges the new U.S. Consumer Financial Protection Bureau, which starts work in July, and the Labor Department to work together to ban overdraft fees and other unfair fees and to improve transparency and competition by posting all fee schedules in one place so that states and consumers can compare who has the best hand.
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