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Sat Feb 15, 2014, 09:17 AM

How Big Banks Are Cashing In On Food Stamps


from The American Prospect:


How Big Banks Are Cashing In On Food Stamps

Virginia Eubanks
February 14, 2014

Many benefit programs have gone high tech with debit cards and J.P. Morgan Chase and others are making a pretty penny charging users fees. What is there to be done?



The Agricultural Act of 2014, signed into law by President Obama last Friday, includes $8 billion in cuts to the Supplemental Nutrition Assistance Program (SNAP) over the next decade. One way the bill proposes to accomplish these savings is by reducing food stamp fraud. When the new farm bill is enacted, many of America’s hardest working families will experience cuts in services and have trouble putting food on their family’s table. But there will be major gains for an industry that most Americans might not expect: banking.

Banks reap hefty profits helping governments make payments to individuals, business that only got better when agencies switch from making payments on paper—checks and vouchers—to electronic benefits transfer (EBT) cards. EBT cards look and work like debit cards, and by 2002, had entirely replaced the stamp booklets that gave the food stamp program its name. SNAP is the most well-known program delivered via EBT, but they also carry payments for Temporary Aid to Needy Families (TANF); Women, Infants and Children (WIC); childcare subsidies; state general assistance; and many other programs. EBT use is widespread, from the corner store to the supercenter. According to a 2012 USDA report, SNAP funds, averaging $133 per family member per month, can be spent at more than 246,000 authorized stores, farmers' markets, farms, and meal providers nationwide.

Not only are the operating costs of delivering benefits by EBT lower—no paper checks to cut, envelopes to stuff, or postage to pay—but electronic forms of payment allow banks to multiply opportunities for revenue generation. Banks hold contracts with federal, state, and municipal agencies to provide EBT cards and services, collect interest on federal reserve money held for government programs (though not on SNAP funds), charge transaction fees for merchant use of bank technology and infrastructure, and levy penalties on users for EBT card loss, out-of-network use, and balance inquiries. Banks make money distributing government benefits if the economy is bad, because more people sign up for assistance; they make money if the economy is good, because rising interest rates mean more profit on the money they hold to distribute to beneficiaries.

Distributing government benefits is a lucrative industry. According to the Government Accountability Institute, J.P. Morgan Chase, which currently controls EBT contracts in 21 states, Guam, and the Virgin Islands, made more than half a billion dollars between 2004 and 2012 providing government benefits to U.S. citizens. In New York alone, J.P. Morgan Electronic Financial Services (EFS) holds a nine-year, $177 million EBT services contract with the State Office of Temporary and Disability Services (OTDA). New York currently pays $0.95 per month for each its 1.7 million SNAP cases. In addition, J.P. Morgan EFS collects penalties and fees from benefit recipients: $5 to replace a lost EBT card, $0.40 for each balance inquiry, $0.50 each time their cards are declined for insufficient funds, and $1.50 per withdrawal if they use ATMs to get cash more than once a month. While information about profit margins on EBT contracts is neither collected at the national level nor released by banks, EBT is a significant growth area for big banks. Last year, the Federal Reserve Payments Study reported that the number of EBT transactions more than doubled since 2006. ..........................(more)

The complete piece is at: http://prospect.org/article/how-big-banks-are-cashing-food-stamps



11 replies, 1828 views

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Reply How Big Banks Are Cashing In On Food Stamps (Original post)
marmar Feb 2014 OP
KG Feb 2014 #1
xchrom Feb 2014 #2
jsr Feb 2014 #3
redwitch Feb 2014 #4
Hamlette Feb 2014 #5
NBachers Feb 2014 #6
adirondacker Feb 2014 #7
City Lights Feb 2014 #8
JEB Feb 2014 #9
seveneyes Feb 2014 #10
adirondacker Feb 2014 #11

Response to marmar (Original post)

Sat Feb 15, 2014, 09:22 AM

1. color me surprised.

not.

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Response to marmar (Original post)

Sat Feb 15, 2014, 09:31 AM

2. du rec.

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Response to marmar (Original post)

Sat Feb 15, 2014, 09:33 AM

3. A typical example of the rich getting richer off the poor

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Response to marmar (Original post)

Sat Feb 15, 2014, 09:54 AM

4. Outrageous!

Not surprised but outraged and disgusted here.

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Response to marmar (Original post)

Sat Feb 15, 2014, 10:28 AM

5. I won't defend banks, but I will defend the use of EBTs

I'm familiar with the contracts with banks for EBT cards for unemployment benefits and public assistance. The bank must provide a mechanism to allow access to the funds at no cost to the client and the costs savings to the government are huge. The bank also has to go through a competitive bidding process. EBT cards are more convenient for clients to say nothing of the fact a client can use SNAP benefits anonymously, no more counting out the paper food stamps at the grocery store. The EBT card looks like a MasterCard.

Yes, I'm sure banks make a profit off them but you, as tax payers, do too, in a sense, through lower costs.

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Response to marmar (Original post)

Sat Feb 15, 2014, 10:43 AM

6. So follow Elizabeth Warren's suggestion and tie 'em to the Post Office banks.

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Response to marmar (Original post)

Sat Feb 15, 2014, 10:45 AM

7. They Also manage Unemployment Benefits in many states.

The state cuts the benefit check on a Sunday evening and the banks let loose on Wednesday or Thursday (there is no consistency).

A Must Read...
The Vampire Squid Strikes Again....
http://www.rollingstone.com/politics/news/the-vampire-squid-strikes-again-the-mega-banks-most-devious-scam-yet-20140212

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Response to marmar (Original post)

Sat Feb 15, 2014, 10:45 AM

8. Sickening.



And to the banks.

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Response to marmar (Original post)

Sat Feb 15, 2014, 11:11 AM

9. The banks are fucking leeches.

 

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Response to marmar (Original post)

Sat Feb 15, 2014, 11:24 AM

10. Only a $1.50 per withdrawal?

 

I have seen $5 ATM fees for getting cash with a bank debit card. It's been a while since I've used one out of state, but it may be even more now. A buck fifty sounds like a bargain. Regardless, banks are making a killing for minimal services. Something for nothing is their credo.

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Response to marmar (Original post)

Sat Feb 15, 2014, 04:12 PM

11. Buried in the bullshit Kick. nt

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