Share “Report: States force jobless to pay...”

Report: States force jobless to pay needless fees

Published on NewsOK Modified: January 29, 2013 at 8:29 am •  Published: January 29, 2013
Advertisement

"The difference in direct-deposit rates among states seems primarily due to how hard or easy the state makes it for workers to choose direct deposit," the report says.

In five states — California, Indiana, Kansas, Maryland and Nevada — unemployed people aren't offered direct deposit at all. The report says that setup is illegal under a federal law that bars states from requiring benefits recipients to open an account at a particular bank.

The federal government recommended in 2009 that people with bank accounts receive payments via direct deposit. Nearly four years later, the report says, "there is no excuse for any state not to be offering direct deposit as the first choice for payment of unemployment benefits."

Banks make more money when more people use the cards. In the past, some of their deals with states prevented states from offering direct deposit, or required states to promote the card program as a first option.

To cover the cost of issuing cards and running the programs, banks charge a plethora of fees, including charges for balance inquiries, phone calls to customer support, leaving an account inactive for a period of months, or making a purchase using a personal identification number.

Many states have eliminated some fees and improved consumer protections in the two years since NCLC published its first comprehensive review of state unemployment payments. Banks no longer charge overdraft fees, which skimmed up to $20 from the benefits of card users whose spending exceeded the balance on the card.

Pennsylvania was singled out for praise in the report. Residents of that state will save $5.2 million in card fees each year because the state switched to a lower-fee card.

In part because of the recent improvements, the report says, prepaid cards often are the best option for people who don't have bank accounts. Those people would often pay even bigger fees to storefront check cashing services.

"A well-designed prepaid card is safer, cheaper and more convenient than paying to cash a paper check," said Lauren Saunders, one of the report's authors, in a prepared statement. But she said "it is no substitute for direct deposit to an account of your own choosing."

___

Daniel Wagner can be reached at www.twitter.com/wagnerreports .