CHARLESTON, W.Va. -- A state program that pays unemployment benefits with prepaid debit cards is "problematic" because it hits jobless West Virginians with high transaction fees, according to a new report.
The National Consumer Law Center examined the 40 states that now contract with banks to issue debit cards -- instead of paper checks -- for unemployment benefits. West Virginia's program charges the highest fees in the nation for out-of-network ATM withdrawals ($2.75 each) and denied transactions ($1.75), the center found.
The NCLC looked at payment options, fees, and access to account information available to card users.
Since 2009, WorkForce West Virginia has contracted with JPMorgan Chase to provide the cards to people receiving unemployment. Today, about 87 percent of the state's nearly 97,000 unemployment claimants use the debit cards to get their benefits, said WorkForce West Virginia spokeswoman Courtney Sisk.
These cards can help people who don't have bank accounts, says the NCLC. People don't have to pay check-cashing fees, and they can use the cards to pay bills over the phone or on the Internet.
"Yet prepaid cards come with many fees that nickel and dime unemployed workers at a financially stressful time," the report's authors write. "Fees can drain precious dollars from families at the very time they need it the most."
The programs don't cost states anything, and they cut costs such as postage. The banks make money by charging transaction fees.
In West Virginia, the average unemployment payment is $266 a week, according to the U.S. Department of Labor.
The NCLC had three ratings for states' programs: "problematic," "runner-up," or "best bet." It said the Mountain State could improve its debit cards by eliminating fees for balance inquiries -- currently 25 cents at out-of-network ATMs -- and offering paper statements.
"On the positive side, the [West Virginia] card offers unlimited free in-network ATM withdrawals, and the state recently added direct deposit, making it one of only three states to give recipients all three options: direct deposit, a prepaid card or a paper check," the report states.
WorkForce West Virginia started testing its direct-deposit program in April, and the service was ready May 10, Sisk said.
In 2009, state officials told the Gazette they would start a direct-deposit program by the end of that year because of complaints about the debit card program.
Dave McMahon, a Charleston lawyer who represents low-income people, said the state deserves credit for offering alternatives to the debit cards.