2011-11-16 "How Big Banks And States Scheme Against The Unemployed" by Sam Taxy
are a lot of reasons why people are angry at big banks, leading more
than a million people to withdraw their funds last week on Bank Transfer
Day. Well, now big banks have given everyone yet another reason to hate
them — charging exorbitant fees to people receiving unemployment
benefits with the help of state governments.
Janell Ross of the Huffington Post explains [http://www.huffingtonpost.com/2011/11/01/bank-fees-unemployment-benefits_n_1033700.html]
that in “41 states major banks and financial firms have secured
contracts to provide access to public benefits via prepaid debit cards.
And banks are increasingly extracting hefty cuts of these funds through
an assortment of small fees [http://www.credit.com/blog/2011/05/report-states-let-banks-charge-unemployed-workers-junk-fees/].”
When she says that banks “secured contracts,” what that means is that
they were given quasi-monopoly control of people receiving unemployment
benefits — if someone wants to claim their benefits, they have to go
through one of the big banks. Often, direct deposit or paper checks
aren’t even an option, so the unemployed have to use pre-paid debit
cards, which are associated with all kinds of crazy fees — for too many
withdrawals, for going to see a teller, for pretty much anything.
not even the worst part, though. In California, the state government is
receiving $8 million dollars in kickbacks from Bank of America for
providing the bank with this cash cow [http://www.americanbanker.com/issues/176_221/debit-fees-bank-of-america-unemployment-benefits-cards-1044041-1.html?zkPrintable=1&nopagination=1].
So let’s get this straight — big banks are paying the state of
California for the ability to levy huge fees on the unemployed. These
kinds of fees are catastrophic, especially for those who have lost their
jobs and most of their income. As finance blogger Felix Salmon notes [http://blogs.reuters.com/felix-salmon/2011/11/14/the-unemployment-debit-card-scandal/],
“people on unemployment benefits live very stretched, high-stress lives
where pennies count. And they simply can’t afford the fees that banks
like BofA and US Bank are levying with abandon on some of America’s
poorest and neediest. The fact that the states are going along with the
banks on this is just gruesome.” He goes on to rightfully call it
Salmon is 100% correct: the point of unemployment benefits
is to allow people who have lost their jobs to land on their feet, not
to try to funnel their money to huge conglomerates making billion dollar
profits. The fact that this kind of abuse originates in state
regulatory bodies is especially disheartening — government regulators
should focus on helping out those who have lost their livelihoods before
trying to enrich banks even more. This scandal underscores the
importance of the Occupy Wall Street movement — clearly, government is
putting big banks above its constituents. It’s time for us to change
that kind of cozy and corrupt relationship.