ATM Fees Drag Down People on Public Assistance
California Gov. Jerry Brown signed the Electronic Benefits Transfer Protection and Empowerment Act, AB 1614, on Sunday. The law includes a requirement that recipients of the California Work Opportunity and Responsibility to Kids welfare program must receive information that helps prevent ATM fees being charged against them when accessing their benefits.
While the Federal Deposit Insurance Corp.'s reporting of growing use of prepaid products among the underserved stokes concerns about high costs, some note they can be a bridge to more traditional accounts.
Banks are transforming branches, rolling out new products and experimenting with alternative data, in an effort to bring more people into the financial mainstream. Such initiatives might have been a footnote in the past, but they have grown into a serious business strategy lately.
Access to cash is the most basic financial service that every retail bank can provide. Yet too many banks impose ATM surcharges on those who can least afford them: extremely low-income families receiving public assistance through state-issued electronic benefits transfer cards.
The vast majority of families enrolled in federal assistance programs receive their aid through EBT cards. Many grocery stores allow families to simply swipe their EBT cards and pay at the register. But to pay for household goods and services in places other than grocery stores, public assistance recipients must first use their cards to withdraw cash.
The ATM networks that treat EBT cards as out-of-network impose surcharges on all cash withdrawals. These fees add up to more than $19 million each year in California, which has the largest EBT program in the country, according to information from the California Department of Social Services and California Office of Systems Integration.
These ATM fees can cost families 1% or more of their already small monthly income, according to the EBT Working Group. In California, the average public assistance grant is only $510 a month, a paltry amount that doesn't come close to bringing a family above the federal poverty level. Recent surveys of EBT card users have found that recipients have difficulty avoiding these fees. Many were forced to spend their funds on fees instead of necessary household items such as medication or diapers for their baby.
Thankfully, some banks voluntarily waive ATM withdrawal fees for EBT card users. Banc of California is among only fourteen banks in our state that has made the decision to forgo this relatively small amount of fee revenue. We need other banks in the Golden State and elsewhere to do the right thing and waive EBT card surcharge fees.
Several banks have joined with the California Department of Social Services and the California Reinvestment Coalition to ask federal regulators to give Community Reinvestment Act credit to banks that voluntarily waive these fees. While the lost fee revenue is marginal for banks, this small measure can tremendously benefit the lives of extremely low-income families.
Waiving ATM fees will give families the full use of their public assistance dollars for household needs. It also helps low-income families to better manage their funds, as they will no longer be incentivized to withdraw all of their money at the beginning of every month in order to limit ATM fees.
As a second step, banks should help these families to open affordable bank accounts that will allow them to receive government via by direct deposit. More banks are already offering overdraft-free accounts, which are particularly useful for these extremely low-income families.
Banks that waive EBT card surcharge fees and offer good bank accounts to public assistance recipients provide invaluable financial services to families who need it most.
We at Banc of California call on our colleagues in banking to do so, both to protect public funds meant for families and to help those families avoid having to choose between daily needs and ATM fees.
Steven Sugarman is president and chief executive of Banc of California.