Guest Post: How Much Would You Spend to Save $19 Million a Year?
Blog Post
Aug. 22, 2014
Editor's note: This op-ed was originally published in the San Jose Mercury News and is co-authored by Paul Tepper, Executive Director of the Western Center on Law and Poverty, and Paulina Gonzalez, Executive Director of the California Reinvestment Coalition.
California loses about $19 million a year from its public assistance programs to a surprising cost: ATM fees.
California's public assistance program, known as CalWORKs, provides job counseling, childcare, housing services, and modest cash grants to families with children. In fact, the average grant for one parent with two children is only $463 a month.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.Part of the problem is that many CalWORKs recipients use EBT cards because they do not realize that cash aid can go directly into their bank accounts. While one county's data shows that about 30 percent of the CalWORKs recipients there have bank accounts, very few recipients receive their benefits through direct deposit. One woman we spoke with illustrates the problem: because she did not know she could receive aid through direct deposit, she paid numerous $3 fees each month to use her EBT card to withdraw funds at her own bank's ATM, only to turn around and deposit the money into her bank account to avoid future fees.Some local governments and community organizations are taking action. The Alameda County Social Services Agency has developed a financial coaching program to help families who receive CalWORKs assistance to save money. Los Angeles County is partnering with the federal Consumer Financial Protection Bureau to train social workers with a new financial education program to help improve financial knowledge amongst CalWORKs recipients. The California Reinvestment Coalition is helping local governments and non-profits that work with CalWORKs recipients to learn about bank accounts that safeguard against bank overdrafts and fees.While these efforts are already reducing the amount of taxpayer dollars lost to ATM fees, CalWORKs recipients and the counties charged with administering public assistance programs need a new statewide policy. Assemblyman Mark Stone, D-Monterey Bay, has introduced the EBT Protection and Empowerment Act, which would ensure that CalWORKs recipients get the information they need to avoid surcharges and fees when using their EBT cards to access their benefits. County social workers would inform recipients about surcharge-free ATM locations and would explain how to opt out of EBT card usage and instead receive cash aid through direct deposit to bank accounts.This important measure is currently awaiting consideration in the Senate. We are now urging state aenators to pass this EBT Protection and Empowerment Act so it can get to the governor's desk for consideration. Keeping $19 million in public assistance dollars to help California families in need is well worth a signature.