Stop ATM fees on unemployment aid, consumer advocates say

An increasing number of states charge no fees for withdrawals of unemployment assistance from in-network ATMs, a report by two nonprofit consumer advocacy groups shows. The groups urged a nationwide end to such charges to protect struggling workers, especially those who are unbanked.

Prepaid cards issued by banks are used to distribute unemployment insurance in 44 states and the District Columbia; only seven of those 45 jurisdictions now impose fees for in-network ATM withdrawals, compared with 18 four years ago, according to the report by Prosperity Now and the National Consumer Law Center. The seven are: Colorado, Connecticut, the District of Columbia, Illinois, Indiana, Mississippi and New Mexico.

“Eliminating ATM withdrawal fees is especially important,” Lauren Saunders, associate director at the National Consumer Law Center, said in a press release. Though every card has an option for obtaining fee-free cash at teller windows, “in reality, workers, like everyone else, use ATMs to get cash, which are much more convenient.”

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A 2012 study by Nerd Wallet found that prepaid cards on average cost $300 a year; a 2013 Consumers Union report found that fees charged by prepaid cards vary greatly. Both reports found that prepaid card costs can add up rapidly because of their various fees.

Cards in 10 jurisdictions charge fees for balance inquiries at ATMs, down from 22 in 2013, and those in eight jurisdictions charge for denied transactions, down from 21 four years ago.

Cards in 10 states — Alaska (KeyCorp); Arizona, California, Iowa, Maryland, New Jersey (all five issued by Bank of America); as well as Oregon, Pennsylvania, Utah and Wisconsin (U.S. Bancorp) — offer unlimited free withdrawals at network ATMs and some free withdrawals out of network, and they don’t charge fees up to a certain point for balance inquiries, bank teller withdrawals, customer service, requests for transaction histories, point-of-sale services, denied transactions or inactivity, the report says.

Lower fees would especially benefit those unemployed workers who are also unbanked, Saunders said. Pew Charitable Trusts research shows that unbanked consumers use prepaid cards like checking accounts.

The number of general-purpose prepaid debit cards increased from 159.1 million in 2012 to 290 million in 2015, a Federal Reserve payment study found. Although the number has increased, prepaid cards were used less intensively over the years, the study found.