There are a lot of reasons why people are angry at big banks, leading more than a million people to withdraw their funds last week on Bank Transfer Day. Well, now big banks have given everyone yet another reason to hate them — charging exorbitant fees to people receiving unemployment benefits with the help of state governments.
Janell Ross of the Huffington Post explains that in “41 states major banks and financial firms have secured contracts to provide access to public benefits via prepaid debit cards. And banks are increasingly extracting hefty cuts of these funds through an assortment of small fees.” When she says that banks “secured contracts,” what that means is that they were given quasi-monopoly control of people receiving unemployment benefits — if someone wants to claim their benefits, they have to go through one of the big banks. Often, direct deposit or paper checks aren’t even an option, so the unemployed have to use pre-paid debit cards, which are associated with all kinds of crazy fees — for too many withdrawals, for going to see a teller, for pretty much anything.
That’s not even the worst part, though. In California, the state government is receiving $8 million dollars in kickbacks from Bank of America for providing the bank with this cash cow. So let’s get this straight — big banks are paying the state of California for the ability to levy huge fees on the unemployed. These kinds of fees are catastrophic, especially for those who have lost their jobs and most of their income. As finance blogger Felix Salmon notes, “people on unemployment benefits live very stretched, high-stress lives where pennies count. And they simply can’t afford the fees that banks like BofA and US Bank are levying with abandon on some of America’s poorest and neediest. The fact that the states are going along with the banks on this is just gruesome.” He goes on to rightfully call it “evil.”
Salmon is 100% correct: the point of unemployment benefits is to allow people who have lost their jobs to land on their feet, not to try to funnel their money to huge conglomerates making billion dollar profits. The fact that this kind of abuse originates in state regulatory bodies is especially disheartening — government regulators should focus on helping out those who have lost their livelihoods before trying to enrich banks even more. This scandal underscores the importance of the Occupy Wall Street movement — clearly, government is putting big banks above its constituents. It’s time for us to change that kind of cozy and corrupt relationship.
Photo credit: bytemark's Flickr stream.