On August 16, a Planet investigation raised a number of questions about a decision by the State’s Employment Development Department (EDD) to partner with Bank of America to send BofA Debit Cards to all 1.2 million Californians collecting unemployment insurance. Initial attempts to contact the EDD failed. However, following the publication of our story, The Planet received an extensive response from the EDD’s Communications Manager Patti Roberts who offered to provide “clarification for some of the misinformation in the article.” Here is the latest.
One major point EDD wished to make was that “Claimants do not need a Bank of America account to transfer money from their EDD Debit Card account to their personal bank account at another bank.”
The Planet had already made note of this in our follow-up report. The Planet reported that, while this “BofA opt-out” option is clearly stated on the EDD’s Website (although you need to do some scrolling to find it), this option is not spelled out in BofA’s letter to its Debit Card recipients.
EDD also states that: “Under contract, information cannot be used for marketing services of Bank of America, not will any information be shared to [sic] any other entity.”
The problem is: the “Agreement” BofA sent with the cards (as required by federal law) states that information will be collected and will be shared for “joint marketing” purposes. So let’s just hope that EDD’s contract trumps BofA’s agreement.
EDD concedes that BofA “charges $1 per withdrawal” from non-BofA ATMs (the first two withdrawals are free) but EDD believes that “the fee structure negotiated with BofA is probably more favorable than many people have with their own bank accounts.” EDD also notes: “A National Consumer Law Center report ranked California’s debit card as one of the two best in the nation because of the services provided to claimants for little or no fees.”
But why are there any fees at all? Couldn’t EDD have sent its own letter to its 1.2 million California claimants with instructions on how to arrange for direct deposit transfers into the banks of their choosing? The Planet has yet to receive an explanation of why this route was not pursued.
BofA initially explained that the card was being introduced to make check-cashing “Faster, Easier, and More Secure.” The EDD’s response provided a more reasonable rationale for introducing a plastic card — the card was created “for those without a checking account.” With the new card, EDD explains, “they no longer have to pay to get their checks cashed at a check-cashing facility.”
This makes sense. But why, then, was the card imposed on all EDD claimants, including the majority who already have existing bank accounts?
And, if servicing the poor is the goal, does BofA offer the best coverage in low-income communities? In Berkeley, four of the bank’s six offices are clustered in the downtown/campus area with a fifth branch on a commercial stretch of College Avenue. There is only one branch to serve all the residents of West Berkeley (located at 2546 San Pablo Avenue).
EDD has also provided another argument for “going plastic” in these uncertain times: “Continual delivery of benefits in the event of a disaster when mail service can be disrupted.” But what kind of calamity would disrupt mail carriers while leaving the electric grid and computer networks unscathed?
So how did BofA wind up with this exclusive contract to service 1.2 million job-seeking Californians? According to the EDD, the department “followed required state procurement protocol. BofA was the only financial institution that submitted a proposal that met all our requirements and offered almost no fees to claimants.” (That sounds a lot more transparent that the explanation offered by a BofA representative who told The Planet the contract was awarded because “EDD is a customer of the Bank.”)
EDD emphasizes that this flood of fiscal plastic comes at “no cost to EDD” since the BofA “is covering its costs through fees paid by banks and merchants who honor the cards.”
And how much money might this practice be raking in? The State’s merchants routinely impose a 3% service fee on the purchase price for every credit card or debit card transaction. (This difference is visible at some gas stations that post a higher price-per-gallon for credit-card users.)
According to EDD statistics, the average monthly payment claim is $1,180. Let’s assume that half of the people receiving the new card will use it to bank with BofA (either because they don’t know about the “opt-out” provision or because they don’t have the equipment or computer skills to transfer their funds online). That would amount to 600,000 Californians following BofA’s admonition to “make purchases everywhere Visa® debit cards are accepted.”
And if all 600,000 of these users spent all of this money on purchases made through their convenient new BofA cards, that would amount to $8.5 billion a year. BofA’s three-percent fee on all those purchases would reap $255 million a year. Such a tidy sum should certainly help BofA “cover its costs.”
A subsequent email from Loree Levy, EDD’s Deputy Director of Public Affairs, explained why the new debit cards appeared to have been mailed from a mysterious EDD office in Gray, Tennessee.
“There are very few locations in the country that produce debit cards,” Levy informed The Planet. “Unfortunately, none of them are in California.” EDD’s “banking partner,” BofA uses “a card production supplier that produces in a facility in Atlanta. The Tennessee address is for a Bank of America customer contact center where undeliverable mail is processed.”
And why did the EDD’s brand appear on an information packet created and mailed by BofA? “The EDD required Bank of America to include the EDD logo on the envelope so our customers know the envelope contains something from EDD…. Otherwise, as you know, some people don’t always open mail from an address they are not familiar with and we want our customers to open their envelope with their card included and activate it right away.”
Postscript: On August 26, I was invited to discuss The Planet’s debit-card disclosures on KPFA’s Morning Mix with Project Censored co-hosts Peter Philips and Mickey Huff. Philips recommended a Website called www.EDDsucks.com.
It is clear from the comments posted on EDDsucks that there is widespread anger and frustration over the BofA’s new role as the agent for dispensing unemployment insurance claims. The criticisms come from users who characterize themselves as “extremely annoyed,” “fed up,” and “starving.”
Among the specific complaints:
“BofA's direct deposit system is down, has been for several days, and they don't know when it will be up.”
“They… said I can't set up the direct deposit over the phone, (despite the info that was sent with the card that said I could do it over the phone).”
“Before, all I had to do was open the letter, take a picture of the check with my phone, and have the money deposited into my account. Now, according to the rep I talked to last night, I have to drive to a BofA ATM, take out $900 in $200 increments, drive to my bank with all that cash in my pocket, and deposit 45 $20 bills into my ATM … and hope that nothing goes wrong. Wow, what a great convenience this is!”
Hopefully, EDD is monitoring EDDsucks and trying to figure out why so many people are having problems using the new cards to claim their payments -- and rethinking the way the program was conceived. Clearly, there is room for improvement.