$19 Million in ATM Fees Charged Annually to CalWORKs Recipients to Shrink under Proposed California State Contract
CONSUMERS: “PROPOSAL IS GOOD STEP FORWARD, BUT MORE CAN BE DONE TO REDUCE THE ATM FEES WE HAVE TO PAY TO OBTAIN OUR BENEFITS”
March 11, 2015 Sacramento- A new draft Request for Proposals (RFP) by the state of California may help lower the amount of ATM fees that CalWORKs recipients have to pay in order to access their benefits. A 2014 report found that CalWORKs and other public assistance recipients were charged over $19 million in ATM fees in2012 in order to obtain their benefits.Though overall fees fell slightly to about $18.8 million in 2013, data about fees paid in 2014 is expected to show an increase back up to almost $20 million.
The state is expected to collect public comments about the draft RFP, make any changes necessary and release it to vendors who would apply to manage the distribution of CalWORKs benefits via Electronic Benefit Transfer(EBT) cards. The state’s current vendor is Xerox, Inc. which signed the contract in 2008 for over $69 million.Xerox also receives revenue from fees charged to EBT users who use their cards more than four times a month or when recipients use ATMs to check their balance.
The recently released draft RFP proposes measures to help reduce the surcharge fees that recipients pay to other ATM networks, such as those owned by major banks. For example, the new vendor will be required to increase the number of surcharge-free ATMs by adding a second state-contracted ATM network that CalWORKs recipients can use at a reduced cost. The draft RFP also provides incentives up to $2 million if the vendor reduces annual surcharges by 95% and requires website and mobile app technology that will make it easier for EBT users to locate surcharge-free ATMs.
CalWORKs consumers, advocates, and administrators applaud the draft RFP, but point to gaps that need closing to further decrease the amount of benefits lost to ATM fees. Advocates recommend the state eliminate the ATM charges within the state contracted ATM networks, impose a penalty if surcharges increase significantly, and encourage the use of direct deposit by cash aid recipients into safe, no- or low- fee bank and credit union accounts.
Jessica Jones, a communications major at Sacramento City College, adds: “The fees are crazy- I was able to find an ATM that doesn’t charge fees, but it’s not nearby. So, it becomes a toss-up between making the trip to use the ATM that’s located far away but doesn’t charge fees, or using the ATM that’s convenient, but then losing some of your benefits to fees. I think the state should eliminate the fees altogether.”
Farrah McDaid Ting, a legislative representative for the California State Association of Counties comments:“Counties are working to maximize grant benefits for program recipients and appreciate the state’s recent attention to this issue. Together, we think progress can be made and the draft RFP is a step in the right direction.”
Andrea Luquetta, policy advocate with the California Reinvestment Coalition, explains: “This draft RFP is a big step forward in reducing the ATM fees for people who can least afford it. At the same time, we think there are critically needed improvements that should be incorporated into the final RFP that would make a big difference for people who even with state assistance are living under the federal poverty level.”
“As a coalition of affordable housing developers, we see our residents making the most of limited monthly income. Increments of $2 and $3 dollars can make or break a monthly budget. It is imperative that 100% of these funds go to the recipients, and not to unpredictable fees” adds Monica Palmeira, program specialist with the California Coalition for Rural Housing.
“CalWORKs families are among the poorest in the state. It makes no sense that the EBT system would allow banks to pocket any portion of a grant intended to prevent their homelessness and shoelessness” comments Jessica Bartholow, legislative advocate at the Western Center on Law and Poverty.
-After the publication of the “$19 Million ATM Fee” report, a petition on the Daily Kos website urging banks to stop charging the fees garnered more than 40,000 signatures.
-In addition to Citi Bank, which doesn’t charge ATM fees to CalWORKs recipients, since the publication of the report, several banks have voluntarily agreed to stop charging recipients ATM fees, including Tri-Counties Bank, Rabobank, and Banc of California.
-Bank of America, JPMorgan Chase and Wells Fargo all charge public assistance recipients $3 per ATM withdrawal. Annually, Bank of America collects over $3.6 million in fee revenue paid for with state assistance, JPMorgan Chase collects over $2.8 million, and Wells Fargo collects over $2.6 million.
-In September 2014, Governor Jerry Brown signed AB 1614, the EBT Protection and Empowerment Act, a bill sponsored by Assemblymember Mark Stone (D-Monterey Bay). The bill requires that CalWORKs recipients receive critical information to help prevent ATM fees being charged to them when accessing their benefits. The legislation was co-sponsored by the California Reinvestment Coalition and the Western Center on Law and Poverty.
-The $19.4 Million ATM Fee, a report released by the California Reinvestment Coalition in March 2014,analyzes the high toll that ATM fees take on California’s most vulnerable families. The report found that big banks earned millions of dollars from the fees, including Bank of America ($3.6 million); JPMorgan Chase ($2.8 million); and Wells Fargo ($2.3 million)