Legislation would reduce debit card fees for unemployed

Thanks to modern technology, some laid-off workers collect their unemployment on debit cards.

However, fees associated with the cards can take a significant bite out of the benefits.

"You need every dime when you've got to put food on the table," said Bradly Vaughan, a Ray Township resident who was out of work for nine months before landing a job.

"... If you use (a debit) card three or four times, that could be $10."

U.S. Rep. Sander Levin doesn't think that's right. Levin, D-Royal Oak, has introduced legislation he hopes will rein in exorbitant debit card fees charged to those who receive unemployment benefits.

"The last thing unemployed workers need when trying to make ends meet is to be charged bank fees when they use their unemployment benefits," Levin said.

"This legislation would prohibit banks from setting unnecessary fees attached to benefit cards and ensure workers have access to clear information about the terms of these cards."

Rules regarding the dispersal of unemployment benefits vary by state. In Michigan, recipients can have their benefits deposited directly into bank accounts, or they can use debit cards. In some other states, debit cards are the only option.

The banks that issue the cards are permitted to charge fees for their use. Those fees are dictated by the contracts the banks sign with the states.

In some cases, Levin maintained, the fees can become unwieldy. In Illinois, for example, unemployment recipients are charged 95 cents for each ATM withdrawal they make using the card. In Colorado, a teller transaction will cost $5, and in Michigan, a simple balance inquiry will cost $1 after one free transaction per deposit period.

Levin's legislation, called The Benefit Card Fairness Act, "essentially would make uniform the requirements and (recipients) would not be charged the fees they are now."

The act would:

Require beneficiaries have the option of receiving benefits through direct deposit;

Ensure that all recipients receive one free ATM withdrawal and one free bank teller withdrawal per deposit;

Prohibit fees for balance inquiries or card inactivity;

Require free telephone customer service and error resolution.

The legislation would apply only to unemployment recipients.

"People are being hurt by this," said Richard McHugh, an attorney with the National Employment Law Project, an agency that deals with unemployed workers.

"It might be a small hurt, but it's death by a thousand cuts."

Michael Grzech, unemployed since last July, would like to see Levin's proposals become law.

"You're at the mercy of the bank or the ATM machines," Grzech said.