Louisiana Stops Using Prepaid Cards For Tax Refunds

by Ben Jackson 0

Louisiana is going back to checks and direct deposit for its tax refunds, since JP Morgan Chase has gotten out of the government prepaid business.

The state will stop using prepaid debit cards to issue taxpayer refunds starting later this week, the Louisiana Department of Revenue said Tuesday (Sept. 29) in a news release. Residents still have the option to receive refunds through direct deposit or by paper check.
Tax payers can use up the funds on any existing cards that they hold. The state is encouraging people to use direct deposit for their refunds.

Chase decided to get out of the government and corporate prepaid business, but it has kept its Chase Liquid card. The move has set off something of a rush among other banks who are looking for opportunities to fill in the gaps left by Chase’s exist.

However, a combination of factors may lead states to skip finding a new prepaid supplier. First, states may decide they don’t want to face the political pressures that have come with prepaid cards with questions being raised about what fees should be allowed on the cards and proposed regulations threatening the business model. Additionally, some states have been so demanding about the concessions that they want from suppliers that many have decided to pass on the business. So, states may not be able to find prepaid providers.

The Food and Nutrition Service has noticed that this could be a problem and asked for information about why so few companies want to get into the Electronic Benefits Transfer business. While they were asking primarily in regards to nutrition assistance programs, it indicates a broader reluctance by companies to take on government programs.

Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group

You can see the RFI (now closed) here

You can see the full story here