Alameda County to Install ATMs so Families Don’t Have to Pay Fees

What ATM fees could have paid for instead

Remember the $19 million ATM fee report by CRC, released last year?

The Contra Costa Times reports that Alameda County will be installing ATM machines in Oakland and Hayward so that Alameda County residents can withdrawal their benefits without incurring costly ATM charges.

Andrea Luquetta, Policy Specialist at CRC, comments:

“Alameda County supervisors have shown incredible leadership with this…Other counties have taken creative steps, but this is the most creative and practical we’ve seen, and it’s the right thing to do.”

Take a look:

The special ATMs will be installed in the lobbies of Oakland agencies, such as the Eastmont Self-Sufficiency Center; the Adult and Aging Office; the Enterprise Office; and the Thomas L. Berkley Square Office. The machines also will be placed in the Eden Multiservice Center in Hayward.

Read the rest of the story here: Alameda County to install no-fee ATMs for families in need

 

Service Members Deserve More Transparency From On-Base Banks, Credit Unions

New research from Pew on banks at military bases and how well information is disclosed to servicemembers.  As a reminder, you can also check out our report from earlier this summer that we conducted with our partners in North Carolina, New York, Illinois, and California: HOW BANKS SELL OVERDRAFT: RESULTS OF OVERDRAFT MYSTERY SHOPPING IN FOUR KEY STATES

Consumerist

(Hammerin Man) (Hammerin Man)

The Military Lending Act attempts to shield military personnel and their families from some predatory lending practices, but a new report from the Pew Charitable Trusts claims that some traditional banks on military bases are nickel-and-diming members of the armed forces with excess overdraft fees, and a general lack of transparency.

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How Much Would You Spend to Save $19 Million in ATM Fees?

Editor’s note: Earlier this year, CRC published a report, THE $19 MILLION ATM FEE: How Better Banking Services Would Protect Our Public Investment in Families that highlighted the over $19 million in public benefits lost to ATM fees annually in California.

Today, an Op-Ed about a bill introduced by Assemblymember Mark Stone (D- Monterey Bay), the EBT Protection and Empowerment Act, to address this problem appears on the San Jose Mercury News website.  It’s co-authored by Paulina Gonzalez, executive director of the California Reinvestment Coalition, and Paul Tepper, executive director at the Western Center on Law and Poverty:

How much would you spend to save $19 million a year?
Most aid for CalWORKs and other benefits programs is delivered through Electronic Benefits Transfer (EBT) cards, which looks like a traditional debit card. Currently, the company that contracts with the state to administer the EBT system provides limited access to “in-network” ATMs. However, “out of network” banks and ATMs often collect a withdrawal fee of up to $4 that reduces the recipient’s grant amount. As a result of these charges, about $19 million goes annually to pay bank and ATM fees, rather than to help parents pay for their kids’ needs like co-pays for medicine, school supplies, heating bills, or transportation to work and school.

Read the rest of the Op-Ed here:  Paul Tepper and Paulina Gonzalez: How much would you spend to save $19 million a year

Bankers Sell Overdraft Without Understanding It

Overdraft Fees

Banks make tens of billions of dollars in revenue every year on overdraft fees so it’s no surprise that many banks pitch it as a service to potential customers. However, most bank customers may not realize that there are a number of rules about overdraft. Another surprise is how poorly bankers themselves understand how it works and how confusing their explanations are when asked  about it by customers.

 Most people hate overdraft fees. In fact, 68% percent of those polled by Pew Charitable Trusts said they’d rather be declined at the register than overspend and get hit with overdraft fees. In 2010, federal bank regulators required banks to make overdraft optional: account owners are to be given the opportunity to opt in if they want it, and opt out any time after that if they don’t. But over half of those who are currently enrolled don’t remember signing up.

CRC and our colleagues at three other organizations across the country (Reinvestment Partners in North Carolina, New Economy Project in New York, and Woodstock Institute in Illinois) sent “mystery shoppers” to major banks to see how overdraft was presented to potential bank customers in four cities. You can read the full report here: HOW BANKS SELL OVERDRAFT: RESULTS OF OVERDRAFT MYSTERY SHOPPING IN FOUR KEY STATES

The results of the mystery shopping show:

  1.  In all four cities, banks’ explanations of overdraft programs were highly inconsistent, and often unclear and incorrect. The inconsistent and erroneous information bank personnel provided to mystery shoppers raise concerns about banks’ training of staff and sales practices and suggest that banks may not be giving people the information they need to understand overdraft programs and make informed choices
  2. Bank employees often did not clearly or correctly explain how overdraft fees are triggered.The misinformation made it difficult or impossible for shoppers to understand the real costs of overdraft and make informed decisions.
  3. Bank employees frequently did not explain the opt-in requirement for ATM and debit courtesy overdraft, and led people to believe that it was an automatic account feature, raising serious concerns about whether the large banks are complying with federal regulations.
  4. In two of the cities, bank branches visited in predominantly non-white neighborhoods had limited staff availability and long wait times, in stark contrast to well-staffed branches in predominantly white neighborhoods. The poor service clearly affected the quality of assistance provided to customers in non-white neighborhoods.

The four organizations urge federal banking regulators and the CFPB to:

  1.  Prohibit overdraft feeson all ATM withdrawals and debit card transactions.
  2. Limit the fees a bank may charge for overdrafts to an amount commensurate with the actual cost of the transaction to the bank and proportional to the actual amount overdrawn.
  3. Prohibit banks from reordering transactions to maximize overdraft fees.
  4. Prohibit banks from providing financial incentives to branch or bank employees for the sale of overdraft products to customers.
  5. Create a uniform standard for how banks should verbally describe overdraft products and fees.
  6. Require training of bank employees on the verbal explanation of overdraft standards and conduct periodic reviews of training and compliance.
  7. Limit the number of times a financial institutions may impose any type of overdraft charges to once a month, or a maximum of six charges in a 12-month period, whichever comes first.

Overdraft fees are still hitting us hard, and hitting lower income, nonwhites the hardest

The solution is for banks to remove the overdraft feature. Period.

Back in 2010, federal regulators responded to public outrage over the “$35 cup of coffee” – the result of a debit card charge that went over by $5 and triggered a $30 fee – by requiring that banks give customers the choice to “opt in” for overdraft service or not. Some consumer advocates called for better disclosure, urging large, bold print in clear language and simple formats so that consumers would make a more informed choice.  Four years later, new research by the Pew Charitable Trusts shows that consumers are still paying overdraft fees- now averaging $35- while over half do not remember signing up for that option.

The communities that CRC advocates for are hit hardest.

Overdraft fees take a huge chunk out of people’s pockets. People who pay them usually pay 3 or more and most report that their last overdraft ended up costing them at least $30 , sometimes over $100 to over $200 in fees while their account was negative. Predictably, the communities that CRC advocates for are hit hardest: people who earn under $100,000 are more than twice as likely to pay these fees, and nonwhites are 85% more likely than whites to pay them.

The fees cause a ripple effect: over a quarter of overdrafters go on to close their checking account because of overdrafts, thereby increasing the rate of unbanked and underbanked households who to turn to check cashers and prepaid cards for basic financial services. No wonder the members of our community with the least amount of money to spare- welfare recipients-  tend to have an attitude of “we don’t do banks.”

Clearly, requiring banks to give customers the choice to “opt-in” and to provide better disclosure did not reduce the harmful effects of overdraft, so what will?

Most overdrafters say they would rather be declined at the register than be allowed to overspend and charged a $35 overdraft fee.

The simplest answer is this: banks should remove overdraft from their accounts. This is not a pipe dream. Major banks are finally getting the idea that people don’t want bank accounts that will cause them to fall into fee traps. Bank of America, Citibank and Union Bank all have accounts now that either do not allow overdrafts for debit card purchases (the biggest source of these charges) or not at all.

With these options, customers do not have to turn to unregulated products like prepaid cards. Customers can use their debit cards in major ATM networks so they can avoid out of network fees that can also add up. And most importantly, customers can use their debit cards with the security that if they try to buy something without enough money in the account, they won’t get charged a fee because the bank will just decline the transaction.

Simple. Affordable. Safe.

CRC has developed a set of standards for bank accounts called “SafeMoney” that advocates, service providers and everyday people can use to evaluate potential bank accounts. We are using it with welfare administrators and financial education providers to help welfare recipients avoid ATM and overdraft fees all at once. Advocates working to reduce the rate of unbanked and underbanked households should also use it. After all, there is no point to helping someone open a bank account, only to watch them drown in overdraft fees and close their account. No overdraft accounts just make more sense.

 

Asset Building Program and Partners Recommend Best Practices for TANF Payment Card Contracts

WASHINGTON, DC – Earlier this week, New America’s Asset Building Program, the Center for Law and Social Policy (CLASP) and the California Reinvestment Coalition (CRC), submitted a letter urging the Consumer Financial Protection Bureau (CFPB) and Administration for Children and Families at the U.S. Department of Health and Human Services to provide guidance to states about best practices for their contracts with Electronic Benefit Transfer (EBT) vendors, so that families accessing public assistance can do so safely and with fewer fees.

Currently, families participating in the Temporary Assistance for Needy Families program (TANF/cash assistance) often must pay significant fees and surcharges to withdraw their benefits at an ATM. In California, fees charged to recipients of TANF and other public assistance programs added up to $19 million in 2012, according to a new report from CRC. Since families’ average monthly grants are only a few hundred dollars, these small fees can have a significant impact on their ability to make ends meet.

“Some benefit payment card contracts appear cheap to the states because the real costs are passed on to recipients in the form of fees,” said Elizabeth Lower-Basch, Policy Coordinator and Senior Policy Analyst with CLASP. “This memo offers recommendations on how states can protect recipients’ interests in contracts with benefit card providers and make sure taxpayer funds are going to needy families—not banks.”

“For families living on the brink, small expenses add up fast,” said Aleta Sprague, Policy Analyst with the Asset Building Program. “Reducing EBT fees and connecting more striving households with safe, affordable bank accounts are two strategies that would help taxpayers get the most from their investment.”

“States must protect taxpayer investments in safety net programs so they can support families and children, not private corporate profits,” said Andrea Luquetta, CRC’s Policy Advocate. “In the face of constant cuts to these critical programs, we cannot continue to allow nickel and diming fees to casually drain family resources at ATMs and check cashers. We have to give families as much opportunity as possible to put every safety net dollar to work.”

Specific best practices the groups recommend include:

  • permitting a certain number of fee-free withdrawals per month
  • providing clear and accessible information about fees and surcharges
  • ensuring protections against theft and fraud
  • permitting and encouraging direct deposit to a bank account as a less expensive and more convenient alternative to receiving benefits on a state-issued card

To read the full brief, “Recommended Standards for TANF Payment Card Contracts,” please click here.