Steve Chiotakis: The Labor Department reported employers added 54,000 jobs in May. That’s the fewest number of jobs in the last eight months.
For those on the jobless roles, getting an unemployment check isn’t what it used to be. In fact, it’s not a check at all. It’s a debit card with benefits loaded onto it. And as you might expect, those cards can come with a lot of fees.
Lauren Saunders: Hi, good to be with you.
Chiotakis: What happened to the old-fashioned unemployment check that came in the mail?
Saunders: Well, like other checks, it’s disappearing. We’re going to an electronic age and states are moving to pre-paid debit cards instead of checks to pay unemployment insurance.
Chiotakis: Is it because they’re cheaper, the debit cards — you don’t have to print and all that?
Saunders: Exactly. Getting rid of checks saves states the money of printing and mailing the checks and dealing with lost checks and other questions.
Chiotakis: I want to focus on these debit cards that are being issued. What’s so dangerous about these cards, Lauren?
Saunders: Well pre-paid cards can be very useful for consumers, especially if you don’t have a bank account that can accept direct deposit. It’s a lot safer than carrying around a lot of cash in your pocket, and it can save you check-cashing fees. And it can give you entry into the electronic payments world; anywhere a Visa or MasterFard is accepted, you can use your debit card. But you do need to be careful, and states need to do a better job of designing cards so that unemployed workers aren’t nickeled and dimed with fees at a time when they need every dollar.
Chiotakis: What kind of money are we talking about in fees?
Saunders: The biggest fees are overdraft fees that only a few cards have. They can be as high as $20 if you opt in into overdraft coverage and then make a mistake and go over by 50 cents when you buy something. Other fees can range anywhere from 10 cents to $2.50, but they add up at a time when a worker is really struggling with a loss of income.
Chiotakis: I’m curious because I know we’ve heard a lot about the Credit Card Reform Act that supposedly did away with a lot of these hidden bank fees. Do these new laws not apply here?
Saunders: No. The Credit Card Reform Act doesn’t apply here. There are very few laws that apply to stop unfair fees on pre-paid cards.
Chiotakis: Who’s profiting from these fees — is it the banks, the states?
Saunders: Well, the banks are the ones that collect the fees, and they use them to pay for the cost of the program, even though states get separate grants to pay for administrative expenses. If they have revenue sharing, the bank may share some of the revenue from the fees with the state.
Chiotakis: You mentioned the five states with the overdraft fees. Which states were they?
Saunders: In Arkansas, Idaho, Nebraska, Ohio and Oregon; those are all states that use U.S. Bank to issue their cards. There can be overdraft fees that range from $10 to $20. Arkansas has the highest fee at $20.
Chiotakis: Is there a state with the best deal, where those who are unemployed don’t have to worry about these fees, or as many of them?
Saunders: California has the best card, and New Jersey is close behind. In California, a worker can use their card virtually for free; there’s no fees for purchases, for ATM withdrawals at a network ATM, for finding out your balance, for customer service calls. It’s almost completely free.
Chiotakis: And the worst?
Saunders: The Tennessee card has the most different kinds of fees; we call them “junk fees.” There are fees for using your debit card if you use a PIN number, for denied transactions, for balance inquiries, for calls to customer service — even if you just call automated customer service to check your balance. And also ATM fees.
Chiotakis: Is the bottom line, Lauren, that it really depends on the state that we’re talking — I mean, obviously the states are different, but the laws that are in these states, that regulate debit cards and consumer rights and things like that — is that what we’re talking about here?
Saunders: The fees vary based on the bargain that the state strikes with the bank. So the same bank can have a completely different card in two different states. The laws generally don’t limit the fees; it’s up to the state to strike the best deal for the worker.
Chiotakis: Who’s the onus on for resolving this issue with the banks or the states? Is it up to the banks or the states to regulate this or take care of it?
Saunders: We think the states, you know, need to do a little better job to eliminate unnecessary fees on workers who are really struggling with every dollar. We think the Department of Labor can also take a closer look to make sure that money intended for benefits goes for unemployment benefits. And the new Consumer Financial Protection Bureau, which is starting in July, can also take a look at pre-paid cards and make sure that they receive protections against unfair fees as well.
Chiotakis: Lauren Saunders, managing attorney at the National Consumer Law Center. Thanks for being with us.
Saunders: Thank you.
Chiotakis: And you can read more about the job market on our Makin’ Money blog.
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