Banking on misfortune

New debit cards for unemployment benefits funnel more fees and customers to Bank of America


Unemployed San Franciscans are now receiving monthly benefit payments through a mandatory Bank of America debit card. While presented as a benefit to both recipients and the state, the initiative is the latest chapter in a long history of banks profiting off of the less fortunate.

In July, the California Employment Development Department (EDD) began distributing Bank of America debit cards to all California residents who receive unemployment benefits, "in what is one of the largest pre-paid card programs in the nation," EDD spokesperson Dan Stephens tells the Guardian.

The cards, a result of a recent contract Bank of America won to implement the EDD's new debit card system, replace the monthly unemployment check residents receive. The cards are also being used for disability insurance and paid family leave payments.

"We wanted a faster, safer, more convenient way for our customers to access their benefits," Stephens says. But figuring out the new system takes time, usage fees can surface, and complaints have arisen.

"Now I have against my will been forced to become a B of A customer, which I don't like," says Cliff Liehe, a part time business teacher at City College who collects unemployment benefits during the summer. "I don't want to do business with B of A. I hate them, and there's a lot of staff members that feel the same way, throughout the state, not just City College."

Liehe says that he dislikes B of A because it has a "corporate philosophy that I've disagreed with," as well as, "terrible customer service and high fees." Bank of America, the largest bank in the nation, angered the public by receiving a $20 billion federal bailout after buying Merrill Lynch in 2009, in the wake of the financial meltdown from which banks quickly recovered but the average American still hasn't.

Money can be accessed on the debit card through purchases, unlimited ATM withdrawals, or transferred to a bank account. Liehe opted to have the money transferred to an account independent from B of A, but says he found the process challenging, and the information and instructions difficult to find.

Bank of America is not paying the EDD, but the new system will save the EDD approximately $4 million in initial savings due to decreased paper, printing, mailing, and check processing costs, Stephens tells the Guardian. He remains vague about the EDD's plans for this money, but does make it clear that the agreement is a "no-cost contract" between parties.

However, Bank of America's participation is far from charitable. "B of A is covering its costs through fees paid by banks and merchants who honor the cards. Interchange fees are received from businesses that use the ATM network," Stephens says.

With 1.7 million Californians receiving unemployment benefits and using their cards at ATMs and retail establishments, Bank of America will be receiving a percentage off all this money spent, as well as gaining more than a million new customers, unless recipients have the know-how to have their money transferred to a different bank. This adds up to a substantial potential profit for America's richest bank.

"We generally don't comment on the profitability of individual programs or products, but we are pleased to be working with the EDD to provide more secure and convenient benefit payments to its constituents," bank spokesperson Jefferson George told us.

What consumers don't consider when using a credit or debit card to make purchases is that with each purchase, the merchant is paying a percentage back to the bank or other credit card processor. Here at the Guardian, for instance, we lose a significant percentage of our ad profits when advertisers pay with a credit card. With MasterCard and Visa, we lose 3.5 percent of the sales amount, and with American Express it's 4.15 percent, on top of monthly processing fees.

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