Big Banks Are Getting In Trouble for Swiping Millions from Welfare Recipients

Justin Sullivan via Getty Images
Justin Sullivan via Getty Images

Dominique Hudson is fed up with giving Wells Fargo her bus money.

Each month, the 18-year-old from Oakland, Calif., pays the bank about $12 in ATM fees to access cash from CalWORKS, California’s principle welfare program. The mother of a 3-year-old boy who relies on the public bus to get to her minimum wage job at a grocery store, Hudson could use that money for about five commutes.

Instead, she’s losing it to the bank. “That’s not good at all,” she told The Huffington Post.

California welfare recipients paid $19 million in ATM fees last year to withdraw their benefits in cash, according to a new study from the California Reinvestment Coalition, a low-income advocacy network.

These millions didn’t have to go to the banks. Critics say big financial institutions could easily afford to waive transaction fees for welfare withdrawal. They also blame welfare administrators for not doing a better job spreading the word about no-fee ATMs that are available to beneficiaries.

Those unfamiliar with the modern-day welfare system may be surprised to learn that benefits no longer arrive via paper check. California is one of many states who provides benefits by putting money on cards. Like bank-issued debit cards, people can use a card issued by CalWORKS to make fee-free purchases at stores. But to take out the money in cash, people must pay a fee if they don’t use a pre-approved ATM. The extra cost is usually around $2-$4, the same that anyone would pay for using an out-of-network ATM. One of the frustrating parts of this system for Hudson is that she actually has a bank account at Wells Fargo, but because her CalWORKS card is considered out-of-network there, she still has to pay fees.

In California last year, Bank of America earned $3.6 million from welfare-related ATM fees, JPMorgan Chase made $2.8 million and Wells Fargo made $2.3 million, according to the study.

“Banks don’t need this money,” said Jessica Bartholow, a legislative advocate at the Western Center on Law and Poverty. “They don’t need it like a child who’s living 50 percent below the poverty line needs the money.”

California welfare administrators are also under fire for not spreading the word about a free withdrawal option: There are 2,437 ATMs in the state branded as MoneyPass locations, at which welfare recipients can use their state-issued cards to withdraw cash up to four times a month, without a service charge. Yet just 9 percent of all CalWORKS withdrawals last year were made at a MoneyPass ATM, the study found. Critics of the system say this gaping discrepancy is due to a patchy network of poorly labeled machines.

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Source: Black Voices | Kevin Short