Increased fees on prepaid cards for the unemployed adds to their woes
It is common knowledge that the unemployment benefits are given to those who are in need of cash. Hence, it would seem really unfair for those people to get their jobless benefits via their prepaid cards where they are subject to a wide range of fees, which they cannot afford to pay.
Banks are steadily eating into the funds that these people get by way of jobless benefits. The fees that are centered on this are termed as ‘junk’ by the center.
Prepaid cards are generally used by these jobless recipients as they don’t have other accounts with the banks such as a savings or a checking account. These individuals are also ineligible for direct deposit. These jobless benefits are normally distributed at the state level and the practices vary from one state to another. The terms of agreements are negotiated by the state with the card issuers. In some states charges are applied for usage of the ATMs (even if they belong to the network). Charges are levied for not using the card enough and even for checking balances.
This report has criticized the practices by US Bank as it charges an overdraft fee of $10 to $20 if the recipients go over the limit on their cards. This really makes no sense as they are charging overdraft fees to someone who does not even have a proper bank account. So, charging them overdraft is absolutely ridiculous.
The jobless benefits that come into the US Bank accounts generally go into pooled accounts and hence the US bank is able to carry out such practices. At this bank, there are subaccounts designated to these individual recipients.
But in most other states, when individual recipients use their cards and make purchases that exceed the benefits, the transaction doesn’t go through and it is simply denied. However, in some other states such as Ohio, Nebraska, Arkansas, Oregon, and Idaho, the US bank allows the transaction to get processed and then deducts the extra amount as well as the overdraft fee from the next check payment or the benefits check. The bank also issues cards without charging the overdraft fees in many other states. These types of fees can cause a huge dent as the weekly unemployment check amounts to just $294.
All of these practices are carried out despite the directive issued by the Department of Labor, which states that deducting such overdraft fee or denial fee from the future jobless benefits is not consistent with federal law.
