State Currently Requires Claimants to Receive Benefits Through Prepaid Debit Card or Direct Deposit
TRENTON – Legislation sponsored by Senator Nia H. Gill (D-Essex) to require state agencies to provide recipients of certain government payments, such as Unemployment Insurance benefits, with the option of receiving money through a paper check rather than a prepaid debit card or direct deposit was approved today by the full Legislature.
The Senator sponsored the bill (S-3046) in response to complaints from benefit recipients following a decision by the Department of Labor and Workforce Development to eliminate payments for Unemployment Insurance, Temporary Disability Insurance and Family Leave Insurance in check form. In place of checks, the department implemented a prepaid debit card account program.
“Residents who are out of work need every dollar they earn from their insurance benefits. Requiring claimants to have their benefits payments issued either by direct deposit or a prepaid debit card is unfair, especially to those without bank accounts who would be forced to use the debit card option,” said Senator Gill. “Under the program, individuals without access to a network bank are forced to pay debit card fees and ATM surcharges. These extra costs only reduce the minimal amount of money they have to spend on groceries, housing, utilities and other daily living expenses.”
The Department of Labor and Workforce Development entered into an agreement with Bank of America to provide debit card accounts to UI claimants, and in November 2010 began automatically converting those who receive benefits by paper check to prepaid debit cards. The department expanded its program to include Temporary Disability Insurance and Family Leave Insurance in April. Paper checks are no longer available. New claimants automatically receive a debit card, unless they choose to register for direct deposit.
Senator Gill said she is concerned about debit card fees assessed to individuals without access to a Bank of America branch or the bank’s ATMs, such as those in urban and rural areas. Under the terms of the program, debit card users are allowed two non-Bank of America ATM withdrawals a month. Claimants are then charged a $1 fee for the third non-Bank of America withdrawal, and for each thereafter. A prepaid debit card user would also be subject to any surcharge imposed by a third-party ATM owner, a charge which can be as high as $5.
“For individuals who depend on public transportation or who are without access to a network bank or ATM, this new program could end up costing them a considerable amount of their insurance benefits. This is unacceptable as it disproportionately affects the most vulnerable residents in our state,” said Senator Gill. “This legislation would create a fairer and more reasonable payment system for benefits by allowing residents to opt out of the debit card program and choose the payment method that is most convenient for them.”
A 2009 Federal Deposit Insurance Corporation (FDIC) Survey of Unbanked and Underbanked Households found that 7.4% of New Jersey households are “unbanked” (do not have a checking or savings account) and an additional 12% are “underbanked” (have a checking or savings account but rely on alternative financial services, such as non-bank check-cashing services and payday loans). The FDIC survey showed that nearly one-third of unbanked consumers closed their account because of the cost of maintaining it – including service fees, overdraft and bounced check fees, and minimum balance requirements.
In addition to requiring that the paper check option be restored for payments issued for Unemployment Insurance, Temporary Disability Insurance and Family Leave, the bill would also require the option of a paper check be offered to state employees for their net pay. Taxpayers would have the option of receiving the refund of any state tax payment in the form of a paper check, under the bill.
The Senate approved the bill by a vote of 26-13. The Assembly approved the bill by a vote of 42-29. It now goes to the desk of Governor Chris Christie.