Julia Weeks/AP Photo
Fiserv and MetaBank, two dominant service providers of prepaid debit cards, hold the contract for EIP Cards and stand to profit from the pandemic relief measures.
Eugene Schwartz nearly threw out $2,400 in free money from the government. His Economic Impact Payment (EIP), the money Congress ordered sent to Americans as relief from the pandemic, arrived on a debit card, in a plain white envelope, just ahead of his and his wife’s move from Maryland to Florida. He was expecting a paper check, so when his wife asked if he had ordered a debit card, “My first thought was to cut it up,” he said.
The strangeness didn’t end there. The name on his card was Eugene Walker, his wife’s last name, not his.
But what Schwartz went through to get the money off the card was even stranger. The envelope included not just the debit card, and a letter signed by Donald Trump, but a schedule of fees: $2 for each out-of-network ATM withdrawal after the first, $0.25 for a balance inquiry, and $7.50 to replace a stolen or lost card plus $17 to ship it priority mail. It also had a $1,000 transaction limit at any ATM or bank.
Those terms look favorable compared to some prepaid debit cards, which cost consumers $10 to $12 a month at the median just to use. But it reflects a random disparity created through the delivery of payments approved in March’s CARES Act.
Those who received the payments by direct deposit got to keep all of the money, no strings attached—at least, if their bank or a debt collector didn’t grab it first to offset an existing debt. But the four million people like Schwartz who received the money on debit cards had to make their way through a byzantine maze of rules in order to come out with their payment intact.
Four million people who received the money on debit cards had to make their way through a byzantine maze of rules in order to come out with their payment intact.
Only a subset of people who haven’t given the IRS direct-deposit information and whose tax returns were processed out of Andover, Massachusetts, and Austin, Texas, received their EIPs on debit cards. But this appeared to be a dry run for future relief payments, most or all of which could be issued in this fashion. That would benefit Fiserv and MetaBank, two dominant service providers of prepaid debit cards, who hold the contract for EIP Cards. If everyone is sent a card and the companies earn just a tiny amount on each, that could translate into hundreds of millions of dollars in fees, on funds intended to go to Americans to pay for rent, food, or medicine during an economic crisis.
Beyond the fees, recipients who spoke with the Prospect described other hurdles to accessing their money. There were multiple instances of the government placing the wrong name on the debit card by swapping the last names of spouses. Recipients reported being unable to find banks or service providers willing to take the cards, even when they were listed on the EIP Card website as participants in the program.
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For example, Schwartz immediately took his card to a Bank of America branch, where he’s had an account for half a century, but when he tried to get the money through an ATM machine there, it gave him an error message. When he took it to the branch manager, “He looked at it and laughed,” he said. The bank wouldn’t accept it.
An attempt to transfer the card’s funds to his bank account was also unsuccessful. Finally, a customer service agent told Schwartz the “secret” to getting his money out: Take the card to an in-network ATM and withdraw the money in lump sums. Eventually he found a Wawa gas station six miles from his house with an ATM listed as in-network.
Schwartz took out $1,900 in four installments, afraid to withdraw large amounts in the middle of a bustling food court. It wasn’t until he got back in his car and looked at his receipts that he saw his remaining balance wasn’t $500 as it should have been, but $494. So he went back in and checked the balance on the ATM. The amount dropped even lower, to $493.75. He had been charged $2 for each of the last three transactions, plus $0.25 for the balance inquiry.
He called the toll-free EIP Card number and was told the $2 fees taken out were mistakes, as he shouldn’t have been charged for in-network withdrawals, so those would be refunded. But nothing could be done about the balance inquiry fee.
For someone who’s low-income, in desperate need of relief in the pandemic because she lost her job or got her hours cut, losing money to fees is a hardship.
Karen (who asked that we not reveal her last name), a senior citizen from Brunswick, Maine, also received her CARES Act funds on a debit card. Her daughter Laurie dealt with getting the money withdrawn, using a tool at the EIP Card website that lists in-network ATMs with no fees. She went to four different locations near her home. Three of them spat out the card and would not accept it. The fourth said it would charge a $2 ATM fee.
“Even though on principle I wanted to keep traveling around, I got the money,” Laurie said. Ultimately, the ATM charged $2.50. Her withdrawal left some money on the card, so she tried to make a purchase with it, but the total came to more than what was on the card, and the store wouldn’t allow split payments. Another transaction for less than the remaining balance was also unsuccessful. “You’re supposed to be able to use it like a credit card,” she said. She finally got it to work, but a $16 unused balance remains on the card.
Others in Maine who spoke to the Prospect reported similar problems, including fees for cash withdrawal and an inability to use the cards at retail outlets.
Mostly, these were inconveniences. “It’s not that I couldn’t exist without the money,” Schwartz said. Once he secured them, the funds were helpful: His wife hasn’t worked for a few years because of a health condition, and his work that involves extensive travel dried up in the pandemic, so the money has been a cushion.
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For someone who’s low-income, however, in desperate need of relief in the pandemic because she lost her job or got her hours cut, losing money to fees is a hardship. In addition, many don’t have the time to make endless phone calls and drive around to ensure they’re withdrawing the money in the correct way. “When you’re on the edge, that money is supposed to be for an emergency and not for ATM providers or the issuing bank,” Laurie said.
The EIP Card agreement does state that recipients can convert the debit card to a check, but Laurie discovered that would take seven to ten days for delivery. Poor Americans desperate for funds don’t have that kind of time.
“People that are moderate income, low-income people pay more for financial services,” noted Sen. Sherrod Brown (D-OH), who has sent a letter to the Treasury secretary with fellow Democrats complaining of the high fees, as well as a separate letter raising the alarm about a forced arbitration clause in the cards’ fine print. “It matters in getting money into the hands of people.”
The fees appear to go directly to Fiserv and MetaBank. It’s unclear what happens to unused balances on the cards. Fiserv and MetaBank referred questions about the EIP Card to Treasury’s Bureau of the Fiscal Service. Treasury has not responded to a request for comment.
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Both the White House and Congress have expressed a desire to send out another round of payments, although negotiations are on ice after Trump issued executive orders on his own this weekend. But if another round goes out, at least some of the money, if not all of it, would likely once again be disbursed on EIP cards. That’s why Brown is still pushing the issue. “We’re hopeful in the next package that these consumer protections will be in there, a ban on fees for debit cards and a ban on arbitration clauses,” he said.
Ultimately, Brown noted, what he wants is to create a way for all Americans to have bank accounts. Six percent of adults don’t have a bank account at all, while another 16 percent have accounts but still have to rely on alternative services like check cashers or payday loans. Brown has introduced legislation that would allow everyone to set up a free account at local banks and post offices, not just to receive federal coronavirus relief but also to get access to other services offered to those with regular accounts.
Schwartz refuses to withdraw the remaining few dollars on his card, out of spite. The situation left him outraged, he said. “Why hire a company to [send debit cards] when all they had to do was push a button and send it out the same way they send the refund checks or anything else they do?”
