It has been pointed out recently, that the major banks that are administering several states’ unemployment programs have been charging people receiving those benefits numerous, and (shocker) poorly disclosed, fees for the use of a debit card. We touched on this topic a little while ago in a post about the misconceptions surrounding TANF and other welfare programs, but it is absolutely worth revisiting.
You can find a news story from Rhode Island here that gives more detail about how the system works, but the long and the short of it is that the states find it cheaper to dole out unemployment benefits via a deposit into an account attached to a debit card than they do to send paper checks, and the accounts and debit cards are serviced by major banks.
If you pay close attention to state-level politics, you may have heard a state legislator selling this to his constituents as a cheap way to administer the state’s unemployment program. Cheap, because the banks doing this tend to do it for free. They do it for free because the states allow them to charge numerous fees that your average consumer is not subject to.
Here is an example of what the fees are in Michigan, including a fee that occurs every time a recipient checks his or her account balance, and a fee for ever making a withdrawal from a teller.
It is understandable that the states would want to find the cheapest possible way to run an unemployment program. After all, state budgets have finite amounts of money to cover all of the programs that states need to run.
That being said, sacrificing people who are receiving unemployment benefits to banks like JPMorgan Chase or Bank of America is an unconscionable act.
Just like allowing banks to charge welfare recipients overdraft fees, allowing banks to charge fees for every single transaction that an unemployed person might make allows banks to load up on government money while almost totally defeating the purpose of social assistance programs.
What is the point of giving people money to help them make ends meet when they are losing it just because they have it in a bank?
And, why was a bank retained by Rhode Island to administer their program when it does not have a single branch or “in-network” ATM in the state, and knowing that, why were they allowed to charge fees for using “out of network” ATMs?
Fortunately, in response to some outrage over the Chase’s fee structure Rhode Island legislators are looking into having local banks to administer the program and some other altrnatives. The end result, however, should be a flat fee paid by the state. Even if that were to cut into benefits a little, it would be more transparent and would not affect out of work people who tend to spend more, like parents with multiple children.
So the question remains, is it fair for banks to charge these fees? We say no, because this system hurts unemployed people who tend to need it more. However, no one said that the banks had to provide the service for free.
What do you readers think?