TribLIVE

| USWorld


 
Larger text Larger text Smaller text Smaller text | Order Photo Reprints

Jobless pay millions in unneeded fees, report finds

About The Tribune-Review
The Tribune-Review can be reached via e-mail or at 412-321-6460.
Contact Us | Video | Photo Reprints

Daily Photo Galleries


By The Associated Press

Published: Monday, Jan. 28, 2013, 8:52 p.m.

WASHINGTON — Jobless Americans are paying millions in unnecessary fees to collect unemployment benefits because of state policies encouraging them to get the money through bank-issued payment cards, according to a report from a consumer group.

People are using the fee-heavy cards instead of getting their payments deposited directly to their bank accounts. That's because states issue bank cards automatically, require complicated paperwork or phone calls to set up direct deposit and fail to explain the card fees, according to a report issued on Tuesday by the National Consumer Law Center, a nonprofit group that seeks to protect low-income Americans from unfair financial-services products. An early copy of the report was obtained by The Associated Press.

Until the past decade, states distributed unemployment compensation by mailing out paper checks. Some allowed direct deposit. The system worked well for people who had bank accounts and could deposit the check without paying a fee.

It cost states millions of dollars each year to print and mail the checks.

Banks including JPMorgan Chase & Co., U.S. Bancorp and Bank of America Corp. seized on government payments as a business opportunity. They pitched card programs to states as a win-win: States would save millions in overhead costs because the cards would be issued for free. And people without bank accounts would avoid the big fees charged by storefront check cashers.

However, most of the people being hit with fees have bank accounts. The bank-state partnerships effectively shifted the cost of distributing payments from governments to individuals. The money needed to cover those costs is deducted from people's unemployment benefits in the form of fees.

Consumer advocates like NCLC are focused on ensuring access to the direct-deposit option so that people can avoid the card fees.

The trouble, the new report says, is that many states make it difficult for people to sign up for direct deposit. The rate of people using direct deposit ranges from a national high of 82 percent in Minnesota to a low of 16 percent in Arizona, the report says.

 

 
 


Show commenting policy

Most-Read Nation

  1. Rival Palestinian to make another attempt at uniting
  2. Hearing to determine fate of sergeant accused of killing 2 deaf Iraqi boys
  3. Postal Service overhaul expected to appeal to Dems
  4. ‘Patriots’ back Nevada rancher; Reid labels them ‘domestic terrorists’
  5. Images best of readied D-Day ships
  6. Mumps outbreak among Ohio’s largest
  7. Precautions lack year since fatal blast at plant
  8. Gun background checks miss fugitives
  9. Recovery expert believes wreckage of missing plane located
  10. Ohio couple married for 70 years dies just 15 hours apart
  11. Washington’s snowy owl recovers from apparent bus crash, returns to wild
Subscribe today! Click here for our subscription offers.