Magazine article American Banker

Prepaid Benefit Cards Draw Fire

Magazine article American Banker

Prepaid Benefit Cards Draw Fire

Article excerpt

Byline: Will Hernandez

Prepaid debit cards for unemployment benefits are under fire from a consumer group that claims they have unnecessary and undisclosed costs.

The National Consumer Law Center has singled out prepaid card issuers, particularly U.S. Bancorp and JPMorgan Chase & Co. The organization was especially critical of U.S. Bank, which charges $10 to $20 in overdraft fees on prepaid cards it issues in Arkansas, Idaho, Nebraska, Ohio and Oregon.

"There is no excuse for permitting overdraft fees to drain funds from cash-strapped unemployed workers," the group said in a report, which was released May 10.

But U.S. Bank counters that overdraft coverage is an opt-in feature for cardholders. "The terms are clearly disclosed so cardholders are aware of the fee should they need to use it," a bank spokeswoman said. She stressed that overdraft protection is an option states can choose to add to an unemployment card program.

The spokeswoman also challenged the group's claims that the overdraft charges might violate federal law.

"All of our products and services go through rigorous regulatory compliance review," she said.

The consumer group, which did not respond to a request for additional comment on the report, also criticized Tennessee's prepaid debit unemployment card, which JPMorgan Chase issues. The report claims Tennessee's card had the most "junk fees" and claims that the state does not offer free withdrawals at ATMs. …

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