This new groundbreaking report from the National Consumer Law Center looks at unemployment compensation (UC) prepaid cards currently used by 40 states (the remaining states are expected to soon follow suit). The comprehensive survey includes a state-by-state highlights comparison chart, including bank issuer and notable fees; a national overview of fees; and recommendations for card improvements.
Unemployment Compensation Prepaid Cards: States Can Deal Workers a Winning Hand by Discarding Junk Fees, analyses the payment options, fees, and access to account information available to workers in every state that uses UC prepaid cards. It also surveys the laws that do (or do not) protect workers and offers recommendations for how states can design a card that works well for both the state and its unemployed workers.
The report singles out as especially problematic the overdraft fees that U.S. Bank has on prepaid cards in five states: Arkansas, Idaho, Nebraska, Ohio, and Oregon. No other bank’s UC prepaid card charges overdraft fees, which the U.S. Department of Labor (DOL) has found are “inconsistent with federal law.” And the Tennessee card (issued by JP Morgan Chase) draws the two of clubs for the card with the most junk fees, including ATM, PIN debit, denied transaction, and balance inquiry fees.
So who holds the winning hand? California and New Jersey currently have the best UC cards (both issued by Bank of America), although both could benefit from fees more clearly and prominently displayed on websites. The State of California loses one trick for not offering direct deposit.
The report urges the new U.S. Consumer Financial Protection Bureau, which starts work in July, and U.S. Department of Labor to work together to ban overdraft fees and other unfair fees and to improve transparency and competition by posting all fee schedules in one place so that states and consumers can compare who has the best hand.
The trump card? States can design an unemployment prepaid card that works well for both the state and doesn't lose workers in the shuffle. They are generally an improvement over paper checks for the unbanked but there is room for improvement to ensure they deliver every penny to unemployed Americans (at last count, more than 13 million folks).
Now that National Consumer Law Center has laid the cards on the table, let's hope states use the report to cut a better prepaid card deal for their unemployed workers.