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Report: States force jobless to pay needless fees

By The Associated Press

This article was published January 29, 2013 at 7:38 a.m.

— Jobless Americans are paying millions in unnecessary fees to collect unemployment benefits because of state policies encouraging them to get the money through bank-issued payment cards, according to a new report from a consumer group.

People are using the fee-heavy cards instead of getting their payments deposited directly to their bank accounts. That’s because states issue bank cards automatically, require complicated paperwork or phone calls to set up direct deposit and fail to explain the card fees, according to a report issued Tuesday by the National Consumer Law Center, a nonprofit group that seeks to protect low-income Americans from unfair financial-services products. An early copy of the report was obtained by The Associated Press.

Until the past decade, states distributed unemployment compensation by mailing out paper checks. Some also allowed direct deposit. The system worked well for people who had bank accounts and could deposit the check without paying a fee.

It also cost states millions of dollars each year to print and mail the checks.

Banks including JPMorgan Chase & Co., U.S. Bancorp and Bank of America Corp. seized on government payments as a business opportunity. They pitched card programs to states as a win-win: States would save millions in overhead costs because the cards would be issued for free. And people without bank accounts would avoid the big fees charged by storefront check cashers.

However, most of the people being hit with fees already have bank accounts. The bank-state partnerships effectively shifted the cost of distributing payments from governments to individuals. The money needed to cover those costs is deducted from people’s unemployment benefits in the form of fees.

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RBBrittain says... January 29, 2013 at 8:14 a.m.

When I started drawing unemployment in 2010, Arkansas was forcing all new claimants to use debit cards; right after that they changed and let you choose between direct deposit and debit card (I switched ASAP). DWS now even has brochures on how to avoid debit card fees. However, a handful of states apparently are STILL forcing people to draw unemployment by debit card WITHOUT a direct deposit option; the whole point of this report is to shame those states.

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RBBrittain says... January 29, 2013 at 8:21 a.m.

And before you jump on me for drawing unemployment, I'm now retired on disability (and get both my checks by direct deposit, thank you).

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