Prepaid debit cards related to unemployment benefits are back in the spotlight with a consumer group criticizing what it believes are unnecessary and undisclosed card costs.
The National Consumer Law Center released a report May 10 that singled out prepaid card issuers, particularly U.S. Bancorp and JPMorgan Chase & Co. The organization was especially critical of U.S. Bank, which charges $10 to $20 in overdraft fees on prepaid cards it issues in Arkansas, Idaho, Nebraska, Ohio and Oregon.
“There is no excuse for permitting overdraft fees to drain funds from cash-strapped unemployed workers,” the report says.
But U.S. Bank counters that overdraft coverage is an opt-in feature for cardholders. “The terms are clearly disclosed so cardholders are aware of the fee should they need to use it,” a bank spokesperson tells PaymentsSource, also noting that overdraft protection is an option states can choose to add to an unemployment card program.
The spokesperson also challenged the group’s claims that the overdraft charges might violate federal law. “All of our products and services go through rigorous regulatory compliance review,” she says. “We are not going to comment on another organization's interpretation of the law.”
The consumer group, which did not respond to a request for additional comment on the study report, also criticized Tennessee’s prepaid debit unemployment card, which Chase issues. The report claims Tennessee’s card had the most “junk fees” and that the state does not offer free ATM withdrawals.
PaymentsSource, however, in January reported that Tennessee cardholders may withdraw cash for free at MoneyPass or Chase ATMs. ATM withdrawals made elsewhere cost $1 for the first two transactions and 60 cents for each additional withdrawal (
A Tennessee Department of Labor and Workforce Development confirmed to PaymentsSource that the fee schedule still applies.
Issuers have faced previous criticism regarding prepaid debit card fees associated with unemployment benefits. And Chase is quick to point out the states ultimately determine their fee schedules.
Chase provides recommendations and options for cardholders to access funds at no cost. “We pride ourselves on it; we make sure of it, and we then educate the cardholders on how to do it,” Tracy Dangott, Chase vice president of public sector card solutions, told PaymentsSource earlier this year (
The consumer group urges the new Consumer Financial Protection Bureau to ban overdraft and other “unfair” fees and to improve transparency and competition by requiring issuers to place all fee schedules in a central location so states and consumers “can compare who has the best hand.”
It remains unclear how the bureau will address prepaid debit cards. A bureau spokesperson last month told PaymentsSource it did not have anything to share yet regarding prepaid cards. The bureau, however, is reaching out to industry players.
Steve Streit, Green Dot Corp. chairman, president and CEO, last month told PaymentsSource in a statement that the prepaid card provider has been “very positively impressed by [the bureau’s] genuine outreach to the industry and their high level of understanding of both our products and the customers we serve.”
Green Dot recently was involved in a pilot with the U.S. Department of the Treasury to distribute 2010 tax refunds to reloadable prepaid card accounts (
Bonneville Bank, a subsidiary of Bonneville Bancorp, a Provo, Utah-based bank holding company, issued the cards. Green Dot has an application to buy Bonneville Bancorp pending regulator approval.
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