Jobless Hit with Bank Fees on Benefits

by Chris Sturr | March 16, 2009

Here’s another one that I have been meaning to post for a while. I haven’t seen this anywhere else, so maybe you haven’t either.

Bank of America is particularly egregious, imho. A few examples: although I am not among the “unbanked,” I can identify with them, since sometimes I am close enough to living paycheck-to-paycheck that I need money fast and can’t wait for a check to clear at my bank. The bank I use is a locally-owned one (Cambridge Trust), but my (other) employer, Harvard University, pays me in two lump sums twice a year drawing on Bank of America.

The BoA branch in Harvard Square has appalled me for many years. Over the past few years (ten or so) Harvard Square, formerly chocked full of locally-owned businesses, independent bookstores, coffee shops, etc. (does anyone else remember The Tasty?) has been repopulated by high-end chains, cellular phone stores, and ATMs. Sometime in this period, the Harvard Square BoA branch remodeled itself so that the street-level part of the branch, gleaming with marble and flat-screen TVs with stock-tickers, is reserved for—I’m not sure for whom, but I’m assuming big-account investors (with huge banks of ATMs, too, of course). Anyone who wants to go to a teller has to go downstairs into a dingy and low-ceilinged space reminiscent of a welfare office.

Last fall when I went to cash my twice-yearly paycheck from Harvard, not only did I have to go to the dingy downstairs, but the teller informed me that I would have to pay a $6 fee. For BoA to cash a check drawing on a BoA account. A check made payable to me, not to BoA. Since I really needed the money, I reluctantly agreed. Then the kicker: the teller pointed to a small black ink pad. They needed my fingerprint before they would cash my check. “It’s for security,” I was told. Apparently all this is legal. When I went to deposit my cash at my own bank, I told the teller about my experience. She was appalled. “That check was payable to you,” she said.

(More recently, I’ve noticed that at least some BoA ATMs charge an outrageous $3 for out-of-network users.)

BoA (and the other big banks) are still following a profit model that involves leeching huge amounts of money, bit by bit, from the “unbanked” and the semi-banked. The big banks want a piece of the huge payday loan and check-cashing industry (which they themselves fund), and they are able to get it because so many people are locked out of mainstream banking, or are otherwise living on a financial edge. (For background on the big “respectable” banks’ role in the “fringe economy,” see this article from D&S a couple of years ago.)

Anyhow, this article from the Associated Press shows how such practices might fit into BoA’s model for returning to profitability:

Jobless hit with bank fees on benefits

By CHRISTOPHER LEONARD | AP Business Writer | Fri Feb 20

For hundreds of thousands of workers losing their jobs during the recession, there’s a new twist to their financial pain: Even as they’re collecting unemployment benefits, they’re paying bank fees just to get access to their money.

Thirty states have struck such deals with banks that include Citigroup Inc., Bank of America Corp., JPMorgan Chase and US Bancorp, an Associated Press review of the agreements found. All the programs carry fees, and in several states the unemployed have no choice but to use the debit cards. Some banks even charge overdraft fees of up to $20 — even though they could decline charges for more than what’s on the card.

“It’s a racket. It’s a scam,” said Rachel Davis, a 38-year-old dental technician from St. Louis who was laid off in October. Davis was given a MasterCard issued through Central Bank of Jefferson City and recently paid $6 to make two $40 withdrawals.

The banks say their programs offer convenience. They 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. But the banks benefit from human nature, as people end up treating the cards like all the other plastic in their wallets.

The fees are raising questions from lawmakers who just recently voted to infuse banks with taxpayer money to keep them afloat.

Rep. Carolyn Maloney, D-N.Y., a member of the House Financial Services Committee, said the situation points to “yet another example of how we need to regulate the ways in which banks charge overdraft and other fees.”

Read the rest of the article.

(By the way, does anyone else wish that Carolyn Maloney had been NY Gov. Patterson’s pick to replace Hillary Clinton? I don’t know much about her, but I like what I’ve heard.)

4 comments

Comments (4)

  1. Hey, isn’t there a credit union somewhere-anywhere-that could include you in its field of membership?I have the tremendous good fortune of being a member of credit union. The amount of money I save in fees continually amazes me. Why do you bank at BoA? Surely you have other options.

  2. Oh, I don’t bank with BoA (unless I have to, e.g. in the scenario I described). My main bank is a nice locally owned one that I like quite a bit. I have belonged to credit unions over the years (and I still have an account at one). Credit unions, like my nice bank, still have a waiting period (usually overnight) before a check from another bank clears.But I heartily second your endorsement of credit unions.

  3. I remember the Tasty. Great place. It’s where me and many of my classmates learned about “drunk food.”I also remember when walking to Central Square or even to the Charles river by yourself at night was somewhat risky. You’re right – they really gave Harvard Square a makeover, and not in a good way. Here in Chicago, the same thing happened to the Wicker Park/Bucktown neighborhood at pretty much the same time. Big corporations looking to cash in on the cool spots. Now that they’re broke, maybe a new wave of indie spots can take hold?

  4. We can only hope. Maybe replace the BoA branch with a credit union, and all those high-end stores with cooperatively run bookstore-cafes.

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