Labor Department urges lower unemployment fees
The U.S. Department of Labor will launch a national education program to help jobless workers avoid fees while collecting unemployment benefits through bank-issued debit cards.
But the agency will not challenge contracts already in place that allow banks to collect fees up to $25 a piece from the unemployed.
Labor Secretary Hilda Solis outlined the new effort in a letter sent Tuesday to the House Ways and Means Committee, which had asked her to investigate the debit card programs after The Associated Press reported 30 states have signed deals with banks to issue unemployment benefits through the cards.
The growing use of debit cards saves states money by eliminating costs to print and mail unemployment checks. The banks, including Citigroup Inc., Bank of America Corp., JPMorgan Chase and U.S. Bancorp, make money partly by charging fees to the unemployed to access their benefits.
“It is clear from our review that some states have negotiated debit card arrangements that are more advantageous to (unemployment insurance) beneficiaries than others,” Solis wrote in the letter to U.S. Rep. Jim McDermott, D-Wash., who chairs the Ways and Means subcommittee on income security and family support.
While some states prohibit charging overdraft fees, for example, others allow charges of $15 to $25. Solis said the department would urge states to negotiate better contracts with banks going forward and ask them to clearly spell out the fee structure to cardholders.
Officials in several states are tying to limit or reduce the fees already in place.
New Mexico announced a partnership this month with local banks and credit unions that will voluntarily waive ATM fees for unemployed debit cards issued by Bank of America, which will still charge its own fees on the transactions. In Missouri, lawmakers proposed capping unemployment debit card fees in a state budget amendment that has not passed. In Oregon, officials are reviewing their contract to provide benefits through U.S. Bancorp, while in Minnesota state representative Ryan Winkler has proposed offering checks instead of the cards.
The Labor Department on Thursday declined to comment beyond Solis’ letter. The department requires all states to offer at least one free way for the unemployed to get their benefits — such as a single cash withdrawal — but does not control the programs beyond that.
The letter said debit card programs help the unemployed avoid check cashing fees if they don’t have bank accounts, and can help track expenditures.
House Ways and Means Committee spokesman Mike DeCesare said it would be difficult for states or the Labor Department to revisit existing debit card programs that carry fees for cardholders.
“There are existing arrangements. You can’t just sort of swoop over the top of them,” Decesare said.
JPMorgan Chase declined to comment, while Citigroup Inc., and US Bancorp did not return messages seeking comment.
Bank of America spokeswoman Britney Sheehan said the company makes all fees clear to cardholders in New Mexico, the only state where it operates an unemployment insurance debit card program.
“These cards offer a convenience if you do not want a cash or direct deposit alternative,” Sheehan said.
In a statement, McDermott said he supports the debit card programs but wants states and the Labor Department to take steps “keeping any costs associated with a debit card as close to zero as possible.”
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