(Author’s note: Thanks to the Coalition of California Welfare Rights Organization (CCWRO); Jessica Barthalow, Western Center on Law and Poverty (WCLP); Lydia Velasco, Central California Legal Services (CCLS), for conducting interviews with CalWorks clients; and the Fresno County Employment and Temporary Assistance Department for providing data. This article is based on the May 2, 2011, issue of the CCWRO Welfare News.)
Over the past decade, the use of debit cards has grown in the United States. Today, federal- and state-based benefits for low-income-eligible families are delivered on a debit card as an electronic benefits transfer (EBT). The debit card industry is a multibillion-dollar engine that drives bank profits and point-of-purchase consumer sales, and it is redefining traditional payment options in the business and government sectors, such as CalWorks (cash for low-income families = “welfare”), Food Stamps, benefits and payroll. The debit card has arrived and is here to stay. (Source: U.S. Debit Card Market Report)
Folks on welfare used to get a check in the mail and were able to use all of that money to meet the basic survival needs of their families. However, in Fresno County, they often collected their checks at check-cashing “stores” and were charged a one-time fee to cash their checks.
In the early 2000s, the welfare bureaucracy decided that issuing checks was costly and that it would distribute benefits on EBT cards. In California, these cards are called Golden State Advantage and are the way SNAP/Food Stamps are now distributed as CalFresh.
The shift to EBT cards saved the welfare systems millions of dollars in printing and mailing costs. However, the EBT system forces welfare recipients to pay surcharges to banks.
To access their limited fixed public benefits income, if they do not debit their benefit at the few banks that do not charge surcharges (Bank of the West, West America Bank, Citibank, Rabobank) their benefits are charged to get their cash. Of the 20 bank locations not charging surcharges in Fresno, only six are in high poverty zip codes where there is a high percentage of CalWorks recipients. In rural communities, there is no surcharge-free access to CalWorks benefits.
After four withdrawals from these “surcharge free banks,” CalWorks recipients are charged $0.85 per transaction anyway. The family must either withdraw all their cash at once from the “right” ATM outside their neighborhood. They are then concerned about having excess cash that might be stolen or being charged for accessing their benefits during the month.
In California, CalWorks welfare recipients will be living on 1984 fixed income levels because lawmakers have reduced CalWorks grants by 12% since 2008–2009. The average grant for a family of three is under $638 per month as of July 1, 2011.
Bank fees and surcharges extract about $21 million annually from poor families through EBT cards in California. This gives the banks about $18 billion in profits yearly from client benefits. (Source: CCWRO and WCLP). Fresno County accounts for 5.55% of California CalWorks clients. Based on $21 million in statewide bank profit, Fresno County banks/ATMs are taking $1,165,500 directly from Fresno Cash Welfare Benefits yearly.
One month scenario: During January 2011, welfare recipients in California were charged $44,268.50 just to find out how much money they had in their EBT accounts. (Families who make an inquiry on their account balance at an ATM are charged $0.25 per inquiry.) Poor families also paid banks $61,846 in transaction fees in January 2011. Surcharges from ATMs were $1,695,983.28 in one month. This is money from CalWorks families that went directly to ATM/bank profit lines in one month (see table).
Banks in California that made $6 billion in profits during January 2011 extracted $1.6 million from welfare recipients in the form of “surcharges.” Bank of America, Chase, Bank of the Sierra and most ATMs located in businesses charge up to a $3.00 surcharge each time CalWorks cash is withdrawn.
This process affects the meager benefits of 30,078 families who are on CalWorks in Fresno County. A brief survey of 15 community residents in downtown Fresno demonstrated the problem for low-income Fresno families. The survey was conducted by the CCLS and the CCROPP. The survey found that 5 of 15 people on CalWorks who were interviewed did not know whether they were being charged a fee to receive their benefits. The other 10 knew that they were being charged to swipe their benefit card to access their CalWorks cash and charged $1–$4.50 every time they withdrew cash to pay bills or buy food with cash. Six of the 15 redeemed their CalWorks cash at banks or credit unions; eight redeemed it at food markets.
Assembly Bill 759, sponsored by Assembly Member Holly Mitchell (D–Los Angeles), would have prohibited using surcharges and other fees for using public benefits EBT cards. Banks vigorously opposed this bill. Banks have been able to collect money for profit for these transactions, therefore taking money out of the mouths of children living in poverty. On April 26, 2011, the banks prevailed. AB759 was defeated in the Assembly Human Services Committee.
This issue should be addressed by our state representatives. Banks should not be setting benefit rules for very low-income CalWorks families and hijacking federal benefits intended for poor families.
There is no federal law on cash EBT. Cash EBT recipients (nationally) are specifically excluded from the Federal Banking Rights Law. Changing state rules so that for-profit banks cannot collect money from CalWorks families must be addressed in the state legislature. Federal law currently does not allow any transaction or surcharge fees for SNAP/CalFresh (Food Stamp) benefits with EBT and should include protections for the poorest families when they access federal cash benefits.
Counties have the obligation to inform their clients where they can swipe their CalWorks benefits without charge. The county government should advocate, asking Fresno “surcharge free” banks to make transaction machines available in all low-income neighborhoods with high numbers of cash EBT recipients.
One can find out where CalWorks clients can cash their EBT benefits by zip code at the state Web site (https://www.ebt.ca.gov/caebtclient/cashlocationSearch.recip).
The Central California Regional Obesity Prevention Program (CCROPP) works to change environments and policies so that people have access to healthy food in their neighborhoods. We support the marketing of local produce and encourage people in need of healthy food to take advantage of the programs that exist to keep their families healthy such as SNAP/CalFresh (Food Stamps) and CalWorks.
The CCROPP is concerned that much of the usurious bank hijacking of federal benefits is taking place at ATMs in food stores. This decreases access to nutritious foods and families’ ability to lead healthy lives.
In response to this issue, the next steps need to be to understand more of the challenges and health effects on families because of the current benefit policies. The larger community, understanding both the need and effective use of federal resources, must advocate for a change in regulations by the State of California. Counties must inform CalWorks clients when they enroll at the county offices that they may lose benefits. The CCROPP, the CCLS and the WCLP are in discussions about producing a brochure to inform new CalWorks clients of charges to their limited benefits until such time as legislation remedies this issue.
|Money Extracted from Welfare Recipients by Banks in California|
|Balance Inquiry Fees||ATM Transaction Fees||
|Percentage of Increase||–2%||13%||12%|
Source: Coalition of California Welfare Rights Organization (CCWRO) and Western Center on Law and Poverty (WCLP).