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Bank fees chip away at aid for state's familiesJun 14, 2009 (The Sun News - McClatchy-Tribune Information Services via COMTEX) -- The S.C. Department of Social Services has approved a debit card program that lets one of the nation's largest banks take money directly from benefits issued to some of the state's neediest families. The agency hired JP Morgan Chase this spring to administer the program, which deposits money each month to a debit card issued to low-income residents with dependent children. In return, JP Morgan Chase can charge those people fees when they use the card to access money and check their account balances. Some critics, including Bonnie Clore of Wampee, say the fees are taking money away from children who are supposed to benefit from the agency's programs. Clore gets $160 a month to take care of two foster children. "I'm not getting a lot, but I'd like to keep the money rather than see it go to some bank," said Clore, who has been hit with about $7 in fees since the program started May 1. Clore said the small fees can add up to big money considering the thousands of people using the debit cards each month. "This is state money going to help people raise kids," Clore said. "Why would social services set up something that lets a bank take that money?" Instead of receiving a check each month, participants in the state's Family Independence program now are given a debit card that is credited with funds whenever benefits are due. Beneficiaries are not allowed to receive their money any other way. The program is affecting a growing number of S.C. residents as the economy tightens. DSS last month made 26,509 debit card payments totaling $6.2 million. While that is about 42 percent of the nearly $15 million in non-food-stamp payments the agency made in May, the cards were used to distribute money to 82 percent of DSS clients. Nancy Norris, a spokeswoman for JP Morgan Chase, said the bank administers similar programs in several states and always provides a method for people to get their money without paying a fee. "The customer needs to understand the rules and what those methods are," she said. Norris referred specific questions to DSS. The debit cards are safer and more convenient than checks and will save S.C. about $200,000 a year in check writing and postage costs, said Robin Verenes, who oversees the program for DSS. That savings is offset, however, by the "unconscionable" fees JP Morgan Chase charges to use the card, according to Sue Berkowitz, director of the S.C. Appleseed Legal Justice Center in Columbia. For example, the bank charges 50 cents every time someone checks a card balance at an ATM and at least $1.25 for every ATM withdrawal. Berkowitz, whose nonprofit group advocates for legal and social justice for low-income residents, said the fees "are just another example of banks balancing their books on the backs of poor people." Berkowitz said the fees amount to another taxpayer bailout because tax dollars are used to fund the programs that fill beneficiaries' debit cards with money. "The fees can definitely nickel and dime you," she said. "For someone who doesn't have much to begin with, those nickels and dimes can make a big difference." Clore said her trouble started one day last month when she checked her card balance at an ATM and then went shopping. Thinking she knew her balance to the penny, Clore bought some groceries and attempted to purchase some clothes at a thrift store. She did not realize, however, that the balance shown at the ATM did not include the 50-cent charge for inquiring on her account. Clore's purchase at the thrift store was declined, leading to a 75-cent fee JP Morgan Chase assesses when there is not enough money on a card to complete a sale. Thinking there must have been a mistake, Clore asked the thrift store to try again. That led to another 75-cent fee, followed later by more fees. "All of the sudden my card was getting declined and I had no idea they were charging me a fee every time," she said. Clore said she later used an ATM that DSS had promised would be free of surcharges, and was hit with another $1.25 fee for withdrawing money. Verenes said there are fee-free ways to get money from the debit cards, but ATMs are not among them. "We are really reiterating to people to stay away from ATMs," she said. There is no charge to make a purchase at a store or to use the "cash back" option many retailers offer when purchases are made. Verenes said card holders need to keep a close watch on their card balance, which can be done for free by telephone or online. Card holders also are allowed one free withdrawal per month from a Visa-network bank. Subsequent bank withdrawals cost $5 apiece. Clore said she now plans to withdraw the entire available amount on her card at a bank each month rather than risk more fees. However, that defeats one of the primary reasons the debit card program was created, Verenes said. "We felt debit cards were safer than someone having all of the money on them at one time like they would when cashing a check," she said. Verenes said the debit cards also can be less expensive than checks for clients who do not have bank accounts. That is because those clients typically had to pay fees of up to 3 percent of the value of their check to get them cashed by check cashing services. South Carolina joins 29 other states that allow banks to administer debit card programs for social service and unemployment payments, according to the U.S. Department of Labor. JP Morgan Chase has contracts with seven of those states and pending deals with two others. The programs have been criticized by consumer groups, who say the banks are taking advantage of low-income people by charging them higher fees than typical bank account holders. The National Consumer Law Center, for example, said in a news release that "consumers should be able to obtain cash, get information and perform basic functions with no fees." The center has called on state and federal lawmakers to tighten restrictions on banks administering such programs. In addition to charging card holders, the banks are making money by charging fees to retailers for each transaction involving one of the debit cards. Berkowitz, the S.C. consumer advocate, calls such state-sponsored debit card programs "a racket." More S.C. residents soon could be forced to accept benefits through debit cards, according to a proposal by the state's Employment Security Commission. That agency is working with Bank of America on a plan to distribute unemployment benefits via cards later this year. Jimmy Jones, an assistant director at the agency, said the debit card program was supposed to have started by now but was delayed because resources had to be diverted to other programs. "It will happen," Jones said. "It's just taking a little longer." Contact DAVID WREN at 626-0281. ------ Debit card fees Fees for using debit cards issued by the S.C. Department of Social Services and administered by JP Morgan Chase: ATM cash withdrawals -- $1.25 (additional surcharges apply at ATMs not operated by Chase or Allpoint) ATM balance inquiries -- 50 cents Transactions denied for insufficient funds -- 75 cents Cash advance at Chase or Visa-network banks -- one free per month; $5 each thereafter Replacement cards -- first one is free; $5 thereafter Source: S.C. Department of Social Services To see more of The Sun News, or to subscribe to the newspaper, go to http://www.MyrtleBeachOnline.com. Copyright (c) 2009, The Sun News, Myrtle Beach, S.C. Distributed by McClatchy-Tribune Information Services. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. |