Here's the gist:
For hundreds of thousands of workers losing their jobs during the recession, there's a new twist to their financial pain: Even when they're collecting unemployment benefits, they're paying the bank just to get the money — or even to call customer service to complain about it.
Thirty states have struck such deals with banks that include Citigroup Inc., Bank of America Corp., JP Morgan Chase and US Bancorp, an Associated Press review of the agreements found. All the programs carry fees, and in several states the unemployed have no choice but to use the debit cards. Some banks even charge overdraft fees of up to $20 — even though they could decline charges for more than what's on the card.
"They're trying to use my money to make money," said Santa-Maria, a laid-off engineer who lives just outside Albuquerque, N.M. "I just see banks trying to make that 50 cents or a buck and a half when I should be given the service for free."
The banks are handling this with their usual flair for interpersonal relations:
The banks say their programs offer convenience. They also provide at least one way to tap the money at no charge, such as using a single free withdrawal to get all the cash at once from a bank teller. But the banks benefit from human nature, as people end up treating the cards like all the other plastic in their wallets.
As somebody asked earlier today: Is your blood boiling yet?
But wait. The shorter versions of this AP story conveniently concentrates on the plight of the victims and the rapacious nature of the banks, and omit this:
The U.S. Department of Labor allows the fees as long as states create a way for recipients to get their money for free, spokeswoman Suzy Bohnert said.
"Beyond that, the individual decides how to manage his drawdowns using the debit card," she said in an e-mail.
A typical contract looks like the agreement between Citigroup and the state of Kansas, which took effect in November. The state expects to save $300,000 a year by wiring payments to Citigroup instead of printing and mailing checks.
Citigroup's bill to the state: zero. The bank collects its revenue from fees paid by merchants and the unemployed.
Let's parse this, shall we?
1) The Labor Department specifically allows these fees.
2) The States are saving big bucks by sending the money to the banks instead of writing checks.
3) The States knew going in that the only way the banks could make any money was by charging fees.
So essentially what happened here is that the States decided to transfer the cost of delivering unemployment benefits to the recipients..
Not the banks--even though they certainly haven't protested the opportunity to gouge a few more fees--the States.
The State governments.
You have to wonder if Kansas had said to Citigroup, Hey, we'll give you $150,000 of the $300,000 we're saving as your handling fee if you don't charge any fees on these cards, what might have happened.
But the State bureaucrats who certainly knew it was legal for the banks to charge those fees decided that saving money in their budget was more important than insuring that unemployed people received all of their benefits.
My question: how come I've seen this story about six bazillion times and nobody ever criticizes the government bureaucrats who decided to balance their budgets by stiffing the unemployed?