A Los Angeles city committee agreed to seek a vendor to offer an identification card that doubles as a prepaid ATM card for the underbanked.
The proposed card, supported by Mayor Antonio Villaraigosa, is designed to serve residents who might not be able to get even a conventional prepaid card due to issuers' identification rules.
The National Council of La Raza, a Hispanic advocacy and civil rights organization in the U.S., supports the mayor's plan, saying any move to get undocumented residents out of the shadows is a positive contribution.
"The financial access issue is huge," says Marisabel Torres, a policy analyst for NCLR's wealth building project. "To take steps right now is only going to benefit the future."
An LA City Council committee voted Tuesday to begin soliciting vendor proposals for the card, though a draft proposal must still come before the full council, the Los Angeles Times
The card “gives people access to financial services so that they can easily shop for basic necessities,” Villaraigosa said in an emailed statement provided by a spokesman. “It offers proof of identification to make everyday interactions easier for our residents who lack these basic services because of financial circumstances or immigration status.”
Some reports, including those from the Los Angeles Times, call the card an “illegal immigrant” card because it provides services to undocumented residents. The mayor’s office says this label is misleading, as the card is available to all Los Angeles residents, most of which are U.S. citizens and legal residents.
While prepaid cards help consumers without bank accounts pay bills online, take advantage of direct deposit to avoid cash checking fees and manage their financial lives without relying on cash, most of the cards that provide these opportunities are issued by banks, which have strict identification requirements they attach to those cards, says Ben Jackson, senior analyst at Mercator Advisory Group.
Banks, focused on maintaining compliance with money laundering rules and the bank secrecy act, "might be reluctant to issue a card and allow payments to be moved if the only source of identification is the card itself," Jackson says.
However, the city says applicants would need to meet "strict" requirements for issuance. Plus the card does not replace a driver's license and law enforcement agencies could decide whether or not to recognize the card.
There's also the question of whether prepaid cards are effective at reaching the underbanked and unbanked populations, Jackson says.
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According to Villaraigosa and his supporters, the ID card would make LA streets safer since immigrants wouldn't be afraid to speak with law enforcement officials and the prepaid card could decrease crime as well, as immigrants relied less on carrying cash.
The LA ID card would cost users between $10 and $20 to receive the card and a few dollars a month for service.
Jackson says this acquisition cost is high, compared to Walmart's $5 Bluebird account, which links a prepaid card to a debit account through American Express.
But Torres says the high cost of the card is looking to offset the program's expense.
"People are willing to pay for services if they believe they are getting benefit from them," Torres says. "But the cost might be high enough that [LA] prices out the population they're trying to serve."
The proposal by the mayor comes after councilmen, Richard Alarcon, introduced another card to ID and provide financial services for undocumented residents. Alarcon suggested a library card that would double as a debit card.
While some opponents argue the card supports illegal immigration, by making life easier for people that have broken federal immigration laws, Torres says, "It isn't necessarily only benefitting undocumented workers, but could also help the elderly and homeless who are vastly underbanked by mainstream financial institutions."
