Published March 25, 2014 09:07
Advocates Call for Reform of CalWORKs Distribution
March 25, 2014-- California: A new report released today by the California Reinvestment Coalition reveals that in 2012, over $19 million of state funds meant for family household needs through public assistance programs went instead to ATM fees charged to access the aid provided. The report calls on banks, the State of California, local counties, and nonprofit partners to work together to reduce the amount of money being lost to ATM fees through the CalWORKs program, which serves families with children and accounts for about 85% of the ATM fees.
Andrea Luquetta, Policy Advocate at the California Reinvestment Coalition, and author of the report, explains: “For families trying to escape poverty, these fees siphon away money that could be used for school supplies, transportation or medicine. The current system leads too many people to pay fees just to access the very benefits they need to survive. It is a diversion of taxpayer dollars away from their intended use of supporting families. That’s why we’re calling on the state, banks, county offices, and nonprofit partners to work together to address this pressing issue.” The California Reinvestment Coalition is coordinating a symposium in Los Angeles in May to discuss this issue with stakeholders, and another symposium later in the month in Alameda County.
Additional context on how fees are charged
California’s public assistance benefits, including CalWORKs, are administered through Electronic Benefits Transfer (EBT) cards, which look like and have some of the same features as prepaid cards or debit cards. The state has contracted with Xerox State and Local Solutions, Inc. to administer the EBT system. EBT users can access only four surcharge-free withdrawals at ATMs bearing the MoneyPass logo (MoneyPass is owned by US Bank) each month. After the fourth withdrawal, users must pay 80¢ surcharge for each additional ATM withdrawal. Xerox also charges 25¢ to check the card’s balance at MoneyPass locations. However, MoneyPass processes less than 9% of all EBT transactions. Most EBT transactions are processed by banks and other ATM owners that charge EBT users a significant fee, typically $2 to $3 per use or as high as $4.00 per use. Check cashing stores also charge a fee to withdraw money using EBT cards- usually 1 to 2% of the amount withdrawn. Together, these fees totaled over $19.4 million in 2012 going to fees instead of the intended purpose of the benefits.
1) State and county governments should work to increase CalWORKs recipient’s knowledge that they can opt to use direct deposit to receive their CalWORKs benefits, thereby avoiding ATM withdrawal and check balance fees.
2) Banks should offer inexpensive, safe bank accounts for recipients to receive their benefits via direct deposit without incurring fees, while also building a financial history.
3) The state of California can and should renegotiate their contract with vendors who provide EBT services so that beneficiaries are not losing money to ATM fees.
4) Nonprofit service providers can incorporate information about avoiding bank fees into their financial education curriculum and serve as a trusted resource for CalWORKs recipients to learn about direct deposit and avoiding ATM fees.
Additional Background on CalWORKs and ATM fees
The report used data from the State of California for 2012 and found:
1) In Los Angeles County, CalWORKs recipients spent an average of over $450,000 a month on ATM fees in 2012.
2) In Alameda County, CalWORKs recipients spent an average of $60,000 a month on ATM fees in 2012.
3) In August 2013, less than 15,000 recipients state-wide received their benefits via direct deposit- or about 2.5% of the total CalWORKs population.
How much CalWORKs Money Went to Bank ATM fees?
- Bank of America: $3.6 million earned in ATM fees charged to CalWORKs recipients during fiscal year 2012/2013, processing 12.43% of CalWORKs transactions
- JPMorgan Chase: $2.8 million earned in ATM fees charged to CalWORKs recipients during fiscal year 2012/2013, processing 9.02% of CalWORKs transactions
- Wells Fargo: $2.3 million earned in ATM fees charged to CalWORKs recipients during fiscal year 2012/2013, processing 7.18% of CalWORKs transactions