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.
Recently in ATM Category
Banks this year have dramatically increased the fees they charge noncustomers to use their automated teller machines, according to figures compiled by the research company Bankrate.com.
The average ATM surcharge charged by banks and thrifts is now $2.22, up 12.6% from $1.97 last year, said Greg McBride, a senior financial analyst with the
Bankrate.com surveyed 250 banks and thrifts nationwide in August and released the results last week.
Many banking companies raised their rates this year because consumers are making an effort to use ATMs operated by their banks and avoid paying the fees, McBride said. This prompted the higher fees, as banks needed to offset the lower surcharge revenue, to cover the fixed costs of maintaining their ATM networks, he said.
"Surcharge fees are higher, but they are avoidable" for consumers, McBride said.
While fees for noncustomers were up, the average fee banks charge their customers who use other financial companies' ATM fell, the survey found. Foreign fees, as they are called, averaged $1.32, compared with $1.46 last year. Bankrate.com said banks likely cut these fees as part of their customer-retention efforts.
The machine had charged him $2.75 -- even though he'd used a Chase ATM.
It's not
"This is not a user-friendly program by any means," said
The program doesn't cost the state a cent. Instead, JPMorgan Chase makes its money off fees charged to jobless West Virginians like
State officials say the program is saving them $340,500 a year by cutting back on postage and printing, and eliminating the time it takes to replace lost checks. But now, complaints about the cards and a recent technical glitch have prompted Workforce West
Under JPMorgan Chase's contract with the state, the company can't charge
But when the bank recently upgraded the computers that control its ATMs, a technical error hit people with a $2.75 transaction fee, Chase spokeswoman Nancy Norris said.
"It is fixed," Norris said Friday. "We have since refunded all the fees that we incorrectly charged."
After the Sunday Gazette-Mail asked Workforce West
That option is available until the state can offer the benefits through direct deposit, which Workforce West Virginia is in the "final stages" of developing, said spokeswoman Jama Jarrett.
"We don't want to cause any undue stress," Jarrett said. "Our unemployment clients are already in a stressful situation as it is."
CHARLESTON, W.Va. -- When Mike Hoover visited an ATM earlier this month to get his unemployment benefits with his state-issued Chase Visa debit card, he had $88.53 in his account. But after he withdrew $80, his balance was $5.78.
The machine had charged him $2.75 -- even though he'd used a Chase ATM.
It's not Hoover's only complaint about Workforce West Virginia's debit card program. At some banks, he can withdraw only $40 at a time, even though he's eligible for $140 a week in benefits. He's never received a monthly statement from either Chase or Workforce West Virginia, he said.
"This is not a user-friendly program by any means," said Hoover, a 54-year-old Air Force veteran who was laid off from the Kanawha County assessor's office earlier this year.
Hoover is one of 37,500 West Virginians using the debit cards, which Workforce West Virginia has given to everyone who's filed for unemployment benefits since late March.
The program doesn't cost the state a cent. Instead, JPMorgan Chase makes its money off fees charged to jobless West Virginians like Hoover.
State officials say the program is saving them $340,500 a year by cutting back on postage and printing, and eliminating the time it takes to replace lost checks. But now, complaints about the cards and a recent technical glitch have prompted Workforce West Virginia to offer alternatives.
Under JPMorgan Chase's contract with the state, the company can't charge West Virginia unemployment-card customers when they use Chase, WesBanco or Allpoint ATMs.
But when the bank recently upgraded the computers that control its ATMs, a technical error hit people with a $2.75 transaction fee, Chase spokeswoman Nancy Norris said.
"It is fixed," Norris said Friday. "We have since refunded all the fees that we incorrectly charged."
After the Sunday Gazette-Mail asked Workforce West Virginia about the program last week, acting executive director Russell Fry released a statement saying anyone who doesn't like the debit cards can choose to get their unemployment benefits by check.
That option is available until the state can offer the benefits through direct deposit, which Workforce West Virginia is in the "final stages" of developing, said spokeswoman Jama Jarrett.
"We don't want to cause any undue stress," Jarrett said. "Our unemployment clients are already in a stressful situation as it is."
Since March, a "handful" of recipients have asked to get their benefits by check instead of through the cards, she said. Workforce West Virginia granted those requests.
That's news to Hoover. When he called Workforce West Virginia to complain, they referred him to the bank, he said. The bank told him to call customer service.
Thirty other states also use debit cards for unemployment benefits, according to the U.S. Department of Labor's most recent count. Both consumer advocates and members of Congress have criticized the programs, saying they unfairly target the jobless.
In August, the federal department issued an advisory to state workforce agencies, urging them to use direct deposit -- rather than debit cards -- for unemployed people who have bank accounts.
Among other things, the department also suggested issuing wallet-sized listings of all card fees; eliminating overdraft charges; and cutting or eliminating denial fees.
West Virginia signed a one-year contract with JPMorgan Chase in November. Six other banks also bid on the program, according to state Purchasing Division records. Other banks proposed more fees than Chase did.
West Virginians using the Chase Visa unemployment cards pay $2.75 to withdraw cash from ATMs outside the Chase network. They pay 75 cents to use the card to pay bills online, and 25 cents to check their balances at nonaffiliated ATMs. There's also a $1.50 fee if their card is denied for insufficient funds.
Everyone who gets a card receives a packet from the state explaining the fees and advice on how to avoid them.
But for people struggling to find work, those charges -- and the incorrect ATM fees Chase recently charged -- can add up, Hoover said. That money could help them fill their gas tank so they can drive to job interviews.
What's a minor glitch for Chase is an issue to people who are trying to get along, he said.
Reach Alison Knezevich at alis...@wvgazette.com or 304-348-1240.
Since March, a "handful" of recipients have asked to get their benefits by check instead of through the cards, she said. Workforce
That's news to
Thirty other states also use debit cards for unemployment benefits, according to the U.S. Department of Labor's most recent count. Both consumer advocates and members of Congress have criticized the programs, saying they unfairly target the jobless.
In August, the federal department issued an advisory to state workforce agencies, urging them to use direct deposit -- rather than debit cards -- for unemployed people who have bank accounts.
Among other things, the department also suggested issuing wallet-sized listings of all card fees; eliminating overdraft charges; and cutting or eliminating denial fees.
Everyone who gets a card receives a packet from the state explaining the fees and advice on how to avoid them.
But for people struggling to find work, those charges -- and the incorrect ATM fees Chase recently charged -- can add up,
What's a minor glitch for Chase is an issue to people who are trying to get along, he said.
Who's the greater villain: the guy at a bar who has one drink too many or the bartender who sold him that drink?
If you think there's enough blame to go around, you'll agree there are two wrongs and two rights on the controversy surrounding bank overdraft protection fees.
It's wrong for financial institutions to prey -- and that is what they are doing -- on the carelessness of their customers.
It's also wrong for customers to complain about overdraft fees that they can largely avoid -- by keeping track of what's in their accounts and not overspending.
Financial institutions are right when they argue they are providing a service customers clearly want or otherwise they wouldn't use it.
But government has every right to rein in an industry practice that in many cases has become predatory by design, allowing customers to overdraw their accounts.
No matter who you think is right or wrong on this issue, I must point out a troubling trend that just won't die: The financial industry continues to greatly profit from consumers' love affair with plastic.
Much of the overdraft penalties come from debit card transactions.
In less than 15 years, debit card transactions in the
As access to credit tightened and people pulled back from using credit cards, they increased their debit card use.
Because debit cards are linked to individuals' banking accounts, customers supposedly are forced to spend only what they have in their accounts. The financial institutions have actually convinced some people that a debit card is the same as using cash.
It's not.
And it's not because the institutions allow you to spend -- either mistakenly or irresponsibly -- more than you have.
Most banks whose automated overdraft programs cover ATM and point-of-sale debit transactions only inform customers they don't have sufficient funds once a transaction had been completed, according to a 2008 study by the Federal Deposit Insurance Corp.
Overdraft penalties are assessed when a financial institution covers a check, ATM withdrawal or debit card transaction. When the customer eventually makes a sufficient deposit, the bank takes the overdraft amount plus a fee.
Unmonitored, the ease of using a debit card allows people to spend first and check later. Even a transaction costing a few dollars can trigger overdraft fees, which can be as high as $35.
The national median for overdraft fees on consumer checking accounts, debit cards and ATMs has increased to $26 per incident in 2009, up from $25 in 2008, according to Moebs Services, an economic research firm based in
In a recently released survey of 1,000 consumers, the American Bankers Association found that 82% had not paid an overdraft fee in the previous 12 months. Of those who did pay overdraft fees, 5% said they paid 10 or more separate fees in the 12 months.
Nearly all who were hit with fees said they were glad the payment was covered.
Clearly, people should be more responsible. But once again, financial services institutions have crossed the line of fairness. And to be honest, the federal government has helped.
The federal agencies that regulate the industry determined several years ago that overdraft protection programs were not extensions of credit, a ruling that was ridiculous.
Overdraft protection is most certainly the extension of credit. So let's call it what it is and put in some stronger consumer protections.
Financial institutions should get specific consent before signing up a customer for overdraft protection.
Consumers should be given an opportunity at every single point of sale to decline a purchase or cancel an ATM withdrawal if they don't have enough money in their account (even if they've consented to overdraft protection).
These are easy and fair fixes. Some major banks have already taken the step to change their overdraft policies. More will need to be legislatively pushed to do the right thing.
