Talk about kicking people when they are down. Recent news reports have shed light on several large banks charging bank fees to customers for the privilege of accessing their unemployment benefits. Many states are partnering with banks to issue funds on a prepaid debit card, rather than cutting paper checks, in an effort to reduce costs. The problem is banks are then turning around and hitting unemployed workers with fees for everything from accessing their money to calling for balance inquiries.
From a recent Yahoo story:
Arthur Santa-Maria, a laid-off engineer who lives just outside Albuquerque, N.M., said he didn’t pay any fees the first time he was laid off, for several months in 2007. His unemployment benefits were paid by paper checks. He found a new job last year but was laid off again last fall.
This time, he was issued a Bank of American debit card — a “prepaid” card in industry lingo — but he was surprised to learn he had to pay fees to get his money. He asked the bank to waive them. It said no. That’s when Santa-Maria called back to ask how to check his account online. He logged on and saw that the call cost him a half dollar. To avoid more fees, Santa-Maria found a Bank of America ATM at a strip mall and withdrew $80 at no charge. When he got back to his car, he decided to take out the rest of his money — $250 — and deposit it in his bank account.
Afterward, Santa-Maria logged on to his account and saw a charge of $1.50 for two withdrawals in one day.
To play devil’s advocate, most banks do offer a free alternative to withdrawing unemployment benefits. Customers may walk up to a teller and ask for a cash advance for the full amount on the card, and they should not be charged a fee. The problem is most people are using the card like a debit card (after all, that is what it is marketed as) and making small purchases and withdrawals all along.
I am not totally against the idea of banks charging fees, after all there are costs associated with operating ATMs such as maintenance, and reconciliation of the funds. However, it seems that an exception could be made in this case, especially since many banks recently received a portion of the billion dollar bailout!
With passage of the recent stimulus bill, unemployment benefits will receive a boost, which means banks will likely see an increase in the number and volume of these types of transactions. I would like to see state governments work with both banks and consumers to find an alternative method of transferring money to benefits recipients.
One idea would be to simply direct deposit the unemployment benefits to existing checking accounts where consumers bank. Most recently-employed workers are probably familiar with this format anyway as they likely received paychecks via direct deposit before they were laid off. This would be a more cost-effective method of transferring benefits than paper checks, and would allow unemployed workers to maintain their previous banking relationships and use existing debit cards and ATMs to access funds.