Sen. Cory Booker (D-N.J.) and 17 other Senators have sent a letter to the Consumer Financial Protection Bureau asking them to investigate prepaid cards provided to former prisoners on their release.
“Today, some firms charge high fees on prison prepaid cards that create significant barriers to reentry for formerly incarcerated people. Most corrections agencies that report using prepaid cards also report that fees are imposed on cardholders, including unusual fees such as weekly maintenance fees…. As the Bureau moves forward with finalizing a proposed rule to strengthen protections for prepaid products, we urge you to take a second look at the impact of prepaid cards in the unique prison context. Prison release cards are a critical tool for people leaving prisons to transfer their earned wages and/or commissary account balances to a prepaid card. Any reductions to the wages and account balances of formerly incarcerated people could harm their ability to successfully reenter society,” the Senators wrote.
Prepaid cards have been used as a way to provide funds to newly released prisoners who either were incarcerated with money or who have earned money from jobs while in prison. Proponents of the cards say that they help eliminate cash and check costs for the prison systems and give inmate a way to receive funds that is more secure, but just as fungible as cash.
As noted above, there are concerned around the terms and the fees of the cards. The CFPB has said in the past that it does not intend to regulate fees. The struggles for prison release card providers include that the cards often have short lifetimes, low profitability, and a high risk profile. Portfolio sizes can also be small, which hurts the sustainability of the program. However, with the Justice Department releasing large numbers of low-level drug offenders, there may be a short term opportunity in this segment. If that leads to more people taking these cards, there may be opportunities for competition in the space.
If the intangible values of increased security and reduced cash in the prison system are valuable enough to the system, then they may want to consider taking on some fees themselves rather than charging cardholders fees.
Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group
Read the full story here
