The National Consumer Law Center has recentlypublished a review of unemployment prepaid card programs across the40 states that offer the cards to people who have lost their jobs.The report found that states charge too many fees and are targetingconsumers who can ill-afford to pay them.
It recommends that states should eliminate all penalty andinformation fees for things like balance inquiries and make surethat recipients can access each deposit without charge. It alsorecommends that states should put their contracts out to bid eachtime they are renewed.
The report highlights the ongoing issue for prepaid cards, whichis that because the margins are low and the business is based onvolume, the companies that work together in the prepaid card valuechain rely on fee income to pay for the cards. While states like topoint to the efficiency of the cards over paper checks, they facescrutiny from reports like this around whether or not the fees arefair and the savings are worth it.
The report also is an indication of things to come in the prepaidmarket. Competition will likely heat up, especially as these kindsof reports are released and as the market becomes more transparent.If states are pressed around fees and do feel political pressure tomake a change in providers, then they will find a number ofproviders lining up to offer alternative programs. It may become anopportunity for local community banks to get into this market andachieve sufficient volumes for profitability. It is likely that theprices will go down on fees as competitors force them down.