Lawmakers criticize jobless debit-card programs

Key members of Congress on Friday criticized the growing number of state programs, including one in Utah, that use banks to pay unemployment benefits while collecting fees from jobless-aid recipients, saying action is needed.

Leaders of the powerful House Ways and Committee said they will ask the Labor Department to provide more information about the programs. And Senate Banking Committee Chairman Chris Dodd, D-Conn., said the fees underscore the need to pass a pending bill aimed at curbing credit-card abuses.

"Nickel-and-diming Americans with these kinds of unfair fees — especially those unemployed and receiving, at best, 50 percent of their original income while on unemployment benefits — is completely out of line," Dodd said in a statement.

The moves come a day after the Associated Press reported that 30 states have struck deals to replace unemployment checks with debit cards issued by banks that include Citigroup Inc., Bank of America Corp., JPMorgan Chase and US Bancorp. Those banks did not immediately return messages seeking comment Friday. Utah's program uses Comerica Bank to distribute unemployment benefits through debit cards.

The banks administer the debit cards at little or no charge to the states. But they collect revenue from fees when the unemployed access their benefits and use the debit cards at stores and restaurants.

In some states, the unemployed have no choice but to use the debit cards. The fees range widely from 50 cents for balance inquiries to $20 over overdraft fees.

The banks say their programs offer convenience. The banks also provide at least one way to tap the money at no charge, such as using a single free withdrawal to get all the cash at once from a bank teller. The cards also let unemployment recipients without bank accounts avoid check-cashing fees.

News of the debit-card programs raised concern on Capitol Hill, where lawmakers voted recently to spend billions of dollars to keep banks afloat.

"Banks, particularly ones that have received federal help, should not be imposing endless fees and charges on the unemployed in this time of economic crisis," said Rep. Carolyn Maloney, D-N.Y., a member of the House Financial Services Committee.

Maloney has written a bill to require that consumers be notified at the point of sale if they're about to incur overdraft fees. She said the debit-card program points to "yet another example of how we need to regulate the ways in which banks charge overdraft and other fees."

Neither banks nor credit-card companies will say how much money they are making off the programs. Nor will they say what portion of the revenue comes from users versus merchant fees or interest.

Ways and Means Committee Chairman Rep. Charles Rangel, D-N.Y., and Jim McDermott, D-Wash., said they will ask the Labor Department for more information about the fees.