Title: The Next Frontier in Public Benefits: Electronic Benefit Cards
1The Next Frontier in Public Benefits Electronic
Benefit Cards
- Lauren Saunders
- National Consumer Law Center
- February 2010
2Time to Negotiate Prepaid Contracts
- No UI prepaid yet CT, DE, DC, GA, HI, ID, KY,
ME, MT, NH, NJ, TN,VT, WA, WI - EBT programs, with contract expiration, tracked
at http//www.fns.usda.gov/snap/ebt/ - ebt_status_report.htm
3Overdraft Fees EFTA (Reg E) Limits
- Reg E doesnt cover needs-tested or private cards
(yet) does cover UI cards - Effective Aug. 2010, consumer must opt in to
overdraft fees - Rule covers card swipe (ATM, merchant, POS), not
bill pay, recurring transfers - Shortage, NSF fees also prohibited. Reg. E
commentary 17(b)-1.iv
4Overdraft Fees on Benefits Cards
- Only on US Bank UI cards 10-20 fees in AR, HI,
MN, OH, OR, SD, WY - DOL overdraft fees on UI cards are inconsistent
with federal law. Fees cannot be deducted from
future UI payments to satisfy any private or
public debt. - On July 21, 2012, prepaid cards with overdraft
fees will lose exemption from new caps on
merchant interchange fees.
5And If Overdrafts Arent Covered?Declined
Transaction Fees May Be Unfair
- Declined transaction fees could raise
significant fairness issues under the FTC Act,
because the institution bears little, if any,
risk or cost to decline authorization of an ATM
or one-time debit card transaction. Feds Reg E
overdraft rules, 74 Fed. Reg. 59,033 59,041 (Nov.
17, 2009) - But half of state UI cards have declined
transaction fees of 0.25 to 1.50
6Bank Payday Account Advance
- 2.50 per 20 advance to prepaid card, repaid
next deposit 120 to 650 APR - Was offered by MetaBank on NetSpend cards
- Urban Trust Bank prepaid cards offered by Arizona
payday lenders, after AZ payday law expired, to
gain preemption of state law - OTS shut down iAdvance but OTS being abolished
- Wells Fargo, US Bank, Fifth Third, other banks
not supervised by OTS still doing on bank accounts
7Master-Subaccount Arrangements
- 2010 SSA OIG report nonbank financial service
companies (check cashers, loan companies)
controlling accounts to which SS/SSI benefits
deposited. - Deducting loan payments, check issuance, check
cashing fees - 25m/month (35,705 payments) at 5 banks. Nine
banks total. - Highest states IL, CA, GA, NY, PA (KY stopped)
8Treasury Proposal Prepaid Cards, Subaccounts
Eligible for Federal (SS/SSI) Direct Deposit
Only if
- Not attached to credit line, loan agreement
triggering repayment upon deposit - Comply with EFTA/Reg E payroll card rule (no
statements required) - FDIC/NCUA insurance payable to individual
- Comments due April 25
- No similar rule for state benefits
9Proposed Rule on Garnishment of Social
Security/SSI in Bank Accounts
- Treasury issued April 19, 2010 final rule soon.
- Any exempt federal benefits deposited
electronically in last 60 days cant be frozen. - Orders for alimony, child support included (must
proceed by offset) - Bank garnishment fees cannot be taken from
protected amount - States can extend rule to their benefits, wages
10For more information
- NCLC Consumer Banking
- Payments Manual
- NCLC website
- Banking Payment Systems/Prepaid Cards
- Other Issues/Exempt Benefits
- For nonprofit advocates and NACA members
E-payments listserv. Contact LSaunders_at_nclc.org