The Unemployment Benefit Solution So Simple the Government's Already Doing It

PHOTO: Veronica Floyd fills out a job application at a National Career Fairs job fair in Arlington, Va., Jan. 30, 2013.

Right now more than 5 million Americans receive unemployment benefits. And right now, a big chunk of those unemployment benefits are going straight to the bottom line profits of the nation's biggest banks because of junk fees tied to the prepaid cards used to distribute these funds.

While we can't take banks entirely out of the process, it's critical they get a smaller piece of the pie. We can certainly provide a more direct conduit from our tax dollars to get into the pockets of the unemployed without such a huge vig. It would be one thing if banks were mandated to use the profits from junk fees to hire more people, but they aren't. As much money as possible should go to regular people so they can spend it, putting the American economy back on track.

Most states now provide unemployment benefits to workers using prepaid debit cards. While some states are much worse than others, most states allow banks to load these cards with hidden junk fees, according to a recent study by the National Consumer Law Center. In California alone -- one of the better states -- unemployed workers lose $1.8 million every year on their state-issued prepaid debit cards. That's $1.8 million more in Bank of America's profit column, and $1.8 million less for families to cover necessities like rent, gasoline and food.

If you take a look at the way the following states allow unemployment benefits to be nickeled and dimed by megabank prepaid card programs you will see why it's time to change the system:

Alaska: JPMorgan Chase charges $5 every time cardholders talk to a teller, $1.50 to withdraw money from an ATM more than once week, and 35 cents just to call the automated customer service line. Chase even charges 40 cents to check the card balance from the bank's own ATM.

Minnesota: U.S. Bank gets $3 every time someone calls the bank's customer service department, after one free call per month.

Iowa: Wells Fargo charges unemployment recipients 50 cents every time they check their balance, plus another 50 cents every time a transaction is denied for insufficient funds.

Maine: Chase charges 25 cents every time an unemployment benefits recipient uses his or her debit card to make a purchase at a store using a PIN.

Ohio: U.S. Bank's 750 in-network ATMs charge no fees, but 16 counties in that state don't have a single U.S. Bank ATM. Vinton and Clinton Counties, in the southern part of the state, have some of the highest jobless rates in Ohio, lingering at between 12.6% and 15%. Neither county has an ATM those unemployed people can use for free.

It gets worse. The Electronic Funds Transfer Act (EFTA) mandates that consumers must have the choice between a check, direct deposit or a prepaid debit card.

Five states currently violate that law: California, Indiana, Kansas, Maryland, and Nevada. These states force unemployed workers into debit card programs, according to the National Consumer Law Center study. Three of those states -- California, Kansas and Maryland -- allow workers to set up automatic transfers from prepaid cards to their own bank accounts. In practice, less than 25% of unemployment benefits recipients take advantage of this feature. Perhaps that's because these transfers can take up to four days, enough time to cause a crisis for families already trying to subsist on a fraction of their former wages.

Nevada and Indiana offer a prepaid debit card with all the hidden fees. No direct deposit. No paper checks. No fee-less transfer into your bank account.

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