Bankers Sell Overdraft Without Understanding It

Overdraft Fees

Banks make tens of billions of dollars in revenue every year on overdraft fees so it’s no surprise that many banks pitch it as a service to potential customers. However, most bank customers may not realize that there are a number of rules about overdraft. Another surprise is how poorly bankers themselves understand how it works and how confusing their explanations are when asked  about it by customers.

 Most people hate overdraft fees. In fact, 68% percent of those polled by Pew Charitable Trusts said they’d rather be declined at the register than overspend and get hit with overdraft fees. In 2010, federal bank regulators required banks to make overdraft optional: account owners are to be given the opportunity to opt in if they want it, and opt out any time after that if they don’t. But over half of those who are currently enrolled don’t remember signing up.

CRC and our colleagues at three other organizations across the country (Reinvestment Partners in North Carolina, New Economy Project in New York, and Woodstock Institute in Illinois) sent “mystery shoppers” to major banks to see how overdraft was presented to potential bank customers in four cities. You can read the full report here: HOW BANKS SELL OVERDRAFT: RESULTS OF OVERDRAFT MYSTERY SHOPPING IN FOUR KEY STATES

The results of the mystery shopping show:

  1.  In all four cities, banks’ explanations of overdraft programs were highly inconsistent, and often unclear and incorrect. The inconsistent and erroneous information bank personnel provided to mystery shoppers raise concerns about banks’ training of staff and sales practices and suggest that banks may not be giving people the information they need to understand overdraft programs and make informed choices
  2. Bank employees often did not clearly or correctly explain how overdraft fees are triggered.The misinformation made it difficult or impossible for shoppers to understand the real costs of overdraft and make informed decisions.
  3. Bank employees frequently did not explain the opt-in requirement for ATM and debit courtesy overdraft, and led people to believe that it was an automatic account feature, raising serious concerns about whether the large banks are complying with federal regulations.
  4. In two of the cities, bank branches visited in predominantly non-white neighborhoods had limited staff availability and long wait times, in stark contrast to well-staffed branches in predominantly white neighborhoods. The poor service clearly affected the quality of assistance provided to customers in non-white neighborhoods.

The four organizations urge federal banking regulators and the CFPB to:

  1.  Prohibit overdraft feeson all ATM withdrawals and debit card transactions.
  2. Limit the fees a bank may charge for overdrafts to an amount commensurate with the actual cost of the transaction to the bank and proportional to the actual amount overdrawn.
  3. Prohibit banks from reordering transactions to maximize overdraft fees.
  4. Prohibit banks from providing financial incentives to branch or bank employees for the sale of overdraft products to customers.
  5. Create a uniform standard for how banks should verbally describe overdraft products and fees.
  6. Require training of bank employees on the verbal explanation of overdraft standards and conduct periodic reviews of training and compliance.
  7. Limit the number of times a financial institutions may impose any type of overdraft charges to once a month, or a maximum of six charges in a 12-month period, whichever comes first.

Community leaders protest sale of 20 local Banco Popular Branches in Los Angeles

Banc of California Press Conference Picture

Editor’s note: On September 4, 2014, Banc of California announced a new, public Community Benefit Plan.  Read more details about the plan here: CRC Announces Support for Community Benefit Plan by Banc of California as Part of Banco Popular Branch Acquisition

Earlier this week, prominent local Los Angeles leaders gathered at a downtown Banco Popular and held a press conference, urging a bank regulator to postpone the sale of the 20 branches until more information is given to the community about the acquisition. Banc of California, headquartered in Irvine, is trying to buy 20 Banco Popular branches which are located in Los Angeles and Orange counties.

In its application to buy the branches, Banc of California said that it would eliminate three checking account features at Banco Popular, including cash incentives for opening new accounts, interest rate bonuses on savings when customers maintain their checking accounts, and a debit card reward program.  Community advocates criticized the proposed cuts, saying that these features help people to open and maintain checking accounts, which can be the first step in building a financial history.

Community leaders are deeply concerned that Banc of California has not provided much detail in its community reinvestment activities since its last CRA exam, which examined the bank’s activities from January 2010 to December 2011 and earned the bank a “satisfactory” rating.  Since that time, the bank has grown considerably, and given its larger size, the bank’s next Community Reinvestment Act will be more extensive. Despite the nearly 2 ½ years that have passed since that exam, the bank did not provide much information in its acquisition application.  The bank noted a recent investment in a Community Development Financial Institution as well as the fact that bank staff volunteer with local nonprofits.

The Office of the Comptroller of the Currency is the bank regulator that will decide whether or not to approve the bank’s acquisition application.

Paulina Gonzalez, executive director of the California Reinvestment Coalition, an umbrella organization with over 300 organizational members throughout the state, explains: “While other large banks develop their CRA plans with input from the community, Banc of California has not. While other large banks make their community reinvestment goals public, Banc of California has not. The FDIC and the Federal Reserve have both required this type of transparency in recent bank mergers and acquisitions, and we expect no less from the Office of the Comptroller of the Currency.”

The comment period for the public to weigh in on the bank’s acquisition was recently extended by the Office of the Comptroller of the Currency (bank regulator) to August 19th.  The comment period was extended because the bank originally published its announcement in the Orange County Register and New York Times.  The California Reinvestment Coalition pointed out to regulators that current Banco Popular customers may have missed the notice.  The new notice was published in La Opiniónand Los Angeles Times.

The California Reinvestment Coalition, an umbrella coalition of over 300 organizations throughout California, is urging the Office of the Comptroller of the Currency to postpone or deny Banc of California’s application until the Banc is more transparent with the community.

Picture from Press Conference: Banco Popular Protest

Picture of 20 branches to be acquired: 20 Branches.

Letter from California Reinvestment Coalition to Bank Regulator, opposing merger: CRC letter

The Banc of California Acquisition application can be downloaded here: Banc of California application

If you’re interested in learning more about the Community Reinvestment Act, read this article:

The Community Reinvestment Act: A Law That Works

If you’d like to learn more about this recent proposed acquisition, these articles give more context.  Please note, some of the American Banker articles require a subscription to view.

Communities Deserve Transparency in Bank M&A In this Op-Ed, Paulina Gonzalez, executive director of the California Reinvestment Coalition, explains why CRC is opposing Banc of California’s proposed acquisition of 20 Banco Popular branches. Gonzalez cites a lack of CRA transparency and questions how the  Office of the Comptroller of the Currency can review the proposed acquisition when Banc of California has provided few details on bank activities that would qualify for credit under the Community Reinvestment Act. BankThink.July 24, 2014.

East L.A.’s Pan American Bank gets $6-million bailout from other banks In this article about 16 community and regional banks investing in Pan American bank, opposition to Banc of California’s proposed acquisition of 20 Banco Popular branches is cited. E.Scott Reckard.Los Angeles Times. July 23, 2014.

Fusión bancaria podría eliminar programas para latinos Prominent Los Angeles community leaders gathered at a local Banco Popular branch to speak out about the lack of transparency in Banc of California’s community reinvestment plans. Araceli Martínez Ortega.La  La Opinión. July 22, 2014.

Banc of California expansion opposed by advocates for minorities, low-income CRC’s concerns about Banc of California’s lack of a public Community Reinvestment Act plan are cited in this article. Paulina Gonzalez, executive director at CRC, explains the importance of transparency in building trust with customers. Josie Huang. Southern California Public Radio. July 22, 2014.

Advocacy Group Secures Review of California Branch Deal When Banc of California announced its intention to acquire 20 Banco Popular branches, it published notice in theOrange County Register and the New York Times. In CRC’s letter to the OCC opposing the acquisition until Banc of California is more transparent in its plan for the branches and community, CRC members expressed concern that current Banco Popular customers may not have seen the notice. This article explains that the Office of the Comptroller of the Currency required Banc of California to re-publish the notice in local media, including the Los Angeles Times and La Opinión. The OCC also extended the comment period on the proposed acquisition 30 days, until August 19th. Chris Cumming. American Banker. July 18, 2014.

Banc of California, Advocacy Group Spar over CRA Plan CRC’s opposition to Banc of California purchasing 20 Banco Popular branchs is cited in this article. Paulina Gonzalez is quoted about the bank lacking a public community reinvestment plan. Chris Cumming.American Banker. July 17, 2014.

Banc of California Expects OK of Branch Purchases CRC’s support for Banc of California to release a public reinvestment plan prior to its acquisition of 20 Banco Popular branches is cited. Andrew Edwards. Los Angeles Business Journal. July 15, 2014.

Activists Oppose Banc of California Acquisitions CRC’s opposition to Banc of California’s acquisition of 20 Banco Popular branches is cited in this article. Andrew Edwards. Los Angeles Business Journal. July 14, 2014.

Overdraft fees are still hitting us hard, and hitting lower income, nonwhites the hardest

The solution is for banks to remove the overdraft feature. Period.

Back in 2010, federal regulators responded to public outrage over the “$35 cup of coffee” – the result of a debit card charge that went over by $5 and triggered a $30 fee – by requiring that banks give customers the choice to “opt in” for overdraft service or not. Some consumer advocates called for better disclosure, urging large, bold print in clear language and simple formats so that consumers would make a more informed choice.  Four years later, new research by the Pew Charitable Trusts shows that consumers are still paying overdraft fees- now averaging $35- while over half do not remember signing up for that option.

The communities that CRC advocates for are hit hardest.

Overdraft fees take a huge chunk out of people’s pockets. People who pay them usually pay 3 or more and most report that their last overdraft ended up costing them at least $30 , sometimes over $100 to over $200 in fees while their account was negative. Predictably, the communities that CRC advocates for are hit hardest: people who earn under $100,000 are more than twice as likely to pay these fees, and nonwhites are 85% more likely than whites to pay them.

The fees cause a ripple effect: over a quarter of overdrafters go on to close their checking account because of overdrafts, thereby increasing the rate of unbanked and underbanked households who to turn to check cashers and prepaid cards for basic financial services. No wonder the members of our community with the least amount of money to spare- welfare recipients-  tend to have an attitude of “we don’t do banks.”

Clearly, requiring banks to give customers the choice to “opt-in” and to provide better disclosure did not reduce the harmful effects of overdraft, so what will?

Most overdrafters say they would rather be declined at the register than be allowed to overspend and charged a $35 overdraft fee.

The simplest answer is this: banks should remove overdraft from their accounts. This is not a pipe dream. Major banks are finally getting the idea that people don’t want bank accounts that will cause them to fall into fee traps. Bank of America, Citibank and Union Bank all have accounts now that either do not allow overdrafts for debit card purchases (the biggest source of these charges) or not at all.

With these options, customers do not have to turn to unregulated products like prepaid cards. Customers can use their debit cards in major ATM networks so they can avoid out of network fees that can also add up. And most importantly, customers can use their debit cards with the security that if they try to buy something without enough money in the account, they won’t get charged a fee because the bank will just decline the transaction.

Simple. Affordable. Safe.

CRC has developed a set of standards for bank accounts called “SafeMoney” that advocates, service providers and everyday people can use to evaluate potential bank accounts. We are using it with welfare administrators and financial education providers to help welfare recipients avoid ATM and overdraft fees all at once. Advocates working to reduce the rate of unbanked and underbanked households should also use it. After all, there is no point to helping someone open a bank account, only to watch them drown in overdraft fees and close their account. No overdraft accounts just make more sense.


Why we need Operation Choke Point to stop Illegal Online Payday Lenders

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

Operation Choke Point is the name given to the Department of Justice’s increased focus on banks and other enablers of illegal online payday loans and other scams.

Wondering why this focus is necessary?  Take a look at a recent DOJ settlement with Four Oaks Bank.

According to the complaint against Four Oaks Bank, its business relationship with a payment processor essentially allowed illegal online lenders access to customer’s bank accounts to make illegal loans, charges, and withdrawals:

As of today, approximately 97 percent of TPPP-TX’s merchants for which Four Oaks Bank permits debits to consumers’ accounts are Internet payday lenders. A payday loan typically is a short-term, high interest loan that is not secured (made without collateral) and that has a repayment date coinciding with or close to the borrower’s next payday. Most payday loans are for $250 to $700. Annualized interest rates for Internet payday loans frequently range from 400 percent to 1,800 percent or more – far in excess of most states’ usury laws.

Wonder how these loans affect the consumer? Read more from the complaint:

The design, intent, and effect of these fraudulent Internet payday lenders’ conduct
creates a false pretext to withdraw money from borrowers’ bank accounts in amounts far exceeding the reasonable understanding and expectations of borrowers. Through this process of misleading and deceptive Internet payday lending, many of the borrowers are sucked into a vortex of debt and their bank accounts are debited until they are bled dry. Moreover, as a consequence of unanticipated loan extensions, rollovers, and unanticipated interest payments debited from their bank accounts, many of the borrowers incur further harm in the form of substantial overdraft or “insufficient funds” fees from their own banks.

If you want to see the personal impacts, read these stories from the complaint:

During the 20-month period from January 2011 until August 2012, Four Oaks Bank
received at least hundreds of Requests for Proof of Authorization from borrowers’ banks in connection with debits originated by TPPP-TX on behalf of some of its Internet payday lenders. In nearly all cases, the only evidence that a debit had been authorized is an Internet payday loan contract with the kind of facially misleading and deceptive loan repayment language described above.

The borrowers who have stated under penalty of perjury that their bank accounts have been debited without authority include:

a. A.H. is a resident of Arizona, which prohibits loans with an annualized
interest rate above 36 percent. Over the Internet, A.H. received a $400
loan from Payday Lender 2, purportedly of Montana, at an annualized
interest rate of 664.38 percent.

b. L.N. is a resident of Colorado, which effectively prohibits payday lending.
Over the Internet, L.N. received a $355 loan from Payday Lender 3,
purportedly of Montana, at an annualized interest rate of 664.38 percent.

c. C.D. is a resident of Georgia, which prohibits payday lending. Over the
Internet, C.D. received a $305 loan from Payday Lender 4, at an annualized
interest rate of 762.14 percent.

d. D.H. is a resident of Maryland, which prohibits loans with an annualized
interest rate above 33 percent. Over the Internet, D.H. received a $1,000 loan
from Payday Lender 1, purportedly located in Belize, Central America,
at an annualized interest rate of 995.45 percent.

e. I.C. is a resident of Massachusetts, which prohibits loans with annualized
interest rates above 23 percent. Over the Internet, I.C. received a $305
loan from Payday Lender 5, at an annualized interest rate of 644.12 percent.

f. A.H. is a resident of Missouri, which prohibits loans in which the interest
and fees exceed 75 percent of the loan amount, and loans of less than 14
days in duration. Over the Internet, A.H. received a $500 loan from
Payday Lender 6 (operating under a fictitious name), purportedly of San
Jose, Costa Rica, at an annualized interest rate of 1,825 percent for a term of
seven days.

g. D.A. is a resident of New Jersey, which prohibits loans with an annualized
interest rate above 30 percent. Over the Internet, D.A. received a $200
loan from Payday Lender 7, at an annualized interest rate of 612.13 percent.

h. A.W. is a resident of New York, which prohibits loans with an annualized
interest rate above 25 percent. Over the Internet, A.W. received a $305
loan from Payday Lender 4, at an annualized interest rate of 1,095 percent.

i. D.M. is a resident of New York, which prohibits loans with an annualized
interest rate above 25 percent. Over the Internet, D.M. received a $500
loan from Payday Lender 8, at an annualized interest rate of 1,161.36

j. D.H. is a resident of New York, which prohibits loans with an annualized
interest rate above 25 percent. Over the Internet, D.H. received a $200
loan from Payday Lender 7, purportedly of Utah, at an annualized interest
rate of 1,804.72 percent.

k. D.G. is a resident of New York, which prohibits loans with an annualized
interest rate above 25 percent. Over the Internet, D.G. received a $500
loan from Payday Lender 6, at an annualized interest rate of 1,825 percent.

l. D.R. is a resident of New York, which prohibits loans with an annualized
interest rate above 25 percent. Over the Internet, D.R. received a $200
loan from Payday Lender 7, at an annualized interest of 1,804.72 percent.

m. A.F. is a resident of North Carolina, which prohibits loans with an
annualized interest rate above 36 percent. Over the Internet, A.F. received
a $600 loan from Payday Lender 1, purportedly of Belize, Central America,
at an annualized interest rate of 608.33 percent.

The California Reinvestment Coalition recently signed onto a letter with 26 other state and national consumer protection organizations, calling on the US Senate to support the efforts of Operation Choke Point, you can read the letter here.

UPDATE: If you’re angry about the damage caused by payday loans, consider signing our new petition to the Consumer Financial Protection Bureau, calling on Richard Cordray to implement strong consumer safeguards in the new rules they’re designing for payday loans.  You can sign it here: CFPB Petition

To stay up to date on financial justice issues in California, especially as they relate to low income communities, and communities of color, you can follow the California Reinvestment Coalition on our Facebook page, via TwitterGoogle+, watch our movies on our YouTube Channelsign up to receive our newsletter and action alerts, and of course, visit our website.

ATM Fees Charged to CalWORKs and other Public Assistance Recipients

What ATM fees could have paid for instead

THE $19 MILLION ATM FEE: How Better Banking Services Would Protect  Our Public Investment in Families

A new report by the California Reinvestment Coalition reveals that in 2012, over $19 million of state funds meant for family household needs through public assistance programs went instead to ATM fees charged to access the aid provided. The report calls on banks, the State of California, local counties, and nonprofit partners to work together to reduce the amount of money being lost to ATM fees through the CalWORKs program, which serves families with children and accounts for about 85% of the ATM fees.  A PDF version of the report is available here.


The cost of basic financial services has never been higher. Checking account fees nationwide now cost account owners about $52 billion a year.[i] Those who either don’t have accounts or have accounts that are insufficient to their needs are paying $4.4 billion a year to cash checks, buy money orders, use prepaid cards and pay bills in person. [ii]  Money that could otherwise be used to pay for food, medicine, school supplies, utility bills, transportation to work and school or to save for emergencies is instead used to pay fees for the most common and necessary financial transactions.

Families are even spending public benefits to pay these fees. In California, approximately $19 million a year is going to pay ATM fees with money generated by taxpayers and provided to struggling families through public assistance programs such as the CalWORKs program. CalWORKs is the state’s program intended to “provide for protection, care, and assistance to the people of the state in need.”  This report focuses on CalWORKs recipients because they paying the majority (over 85%) of these fees.  The state delivers CalWORKs and other cash aid programs primarily through Electronic Benefit Transfer (EBT) cards. The current EBT program provides recipients limited access to ATMs before charging fees to withdraw cash while most banks and other ATM owners charge a fee of up to $4 every time someone uses an EBT cards in their machines. As a result, families that receive an average CalWORKs benefit of only $510 a month use a significant portion of that money just to pay ATM fees.

Unfortunately, the $19 million captures only the cost of using EBT cards. CalWORKs recipients who don’t have access to affordable, full service bank or credit union accounts are paying additional fees to pay bills and make purchases using prepaid cards, money orders, check cashers and in-person pay locations. We estimate that an additional $6.7 million of the state’s CalWORKs funds is going to pay for these services.[iii] In total, $25.7 million of the state’s aid meant to support the wellbeing of families is instead going to fees charged to conduct the most basic financial transactions.

CRC is working with state officials, county officials in Los Angeles County and Alameda County (in the San Francisco Bay Area) – two of California’s most expensive areas where CalWORKs assistance is stretched the furthest, and with some of the largest financial institutions to reduce the amount of cash aid used to pay fees rather than to support families. We are building on existing efforts by state and county agencies to alert recipients to the prevalence of fees and ways to avoid them. With co-sponsor Western Center on Law and Poverty, we have introduced AB 1614, a bill that would make sure every CalWORKs recipients gets a monthly statement of transactions and clear information about their right to receive aid by direct deposit to a personal account and the comparative costs and benefits of doing so. We are working with large banks and other financial institutions to market to CalWORKs recipients accounts that avoid the most common and expensive fees, such as monthly service fees and overdraft fees.

Our goals are to:

  1. Increase the use of free cash withdrawals options for EBT cards,
  2. Increase access to fee-avoidant financial services, such as bank and credit union services that are free with direct deposit of CalWORKs cash aid, and,
  3. Provide practical and ongoing support to CalWORKs recipients to help them save on fees.

This report presents proposals to achieve those goals developed through conversations from July 2013 to February 2014 with county and state administrators, financial institutions, and advocates and financial education providers that work with CalWORKs recipients. We invite stakeholders and allies to give us feedback and help us implement our plans by filling out the $19 Million Fee Survey or by contacting Andrea Luquetta directly by phone at 415-864-3980 or by email at

ATM Fees Cost California $19 million of Public Assistance Funds

CalWORKs grants are a public investment in the wellbeing of California’s poorest families. Only families with children qualify to receive CalWORKs aid. Having to pay fees for basic and necessary financial services erodes both our government’s investment and the families’ ability to thrive. Yet, that is exactly what is happening.

“I pay $3 to use my EBT at the ATM, so I take it out in just two withdrawals every month. I’ve been doing that since I started getting CalWORKs when my son was born and he’s two now.” Dominique, Alameda County

Roughly 450,000 California families receive cash aid through the CalWORKs program. The average family receiving aid consists of one adult and two children and receives a grant of $510 per month, totaling about $6,120 a year. To put this in perspective, the same family would need over 10 times that, $65,519 a year, to meet basic needs for housing, health care, childcare, transportation, food, taxes and miscellaneous expenses in Los Angeles County, and $66,326 in Alameda County.[iv]

In 2012, over $19 million a year of the state’s public assistance funds went to pay for access to ATM services. The amount spent in just one month is enough to buy a year of school supplies, estimated at $688, for 2,349 children. In Alameda County alone, families lost $60,000 in CalWORKs funds a month to ATM fees in 2012- enough for over 25,500 round trip bus rides on AC Transit. In Los Angeles County, recipients lost over $450,000 a month to fees- enough to pay $5 co-pays for 90,000 prescriptions. These totals only include ATM fees. It does not include fees for cashing checks, paying bills through money orders, fees to load and use prepaid cards, or other fees charged by financial services providers that target unbanked households.

EBT Cards Provide Limited Services at a High Price

EBT cards look like bank-issued debit cards. A recipient gets access to her CalWORKs aid electronically through an EBT card just as those who access income directly deposited to a bank account through a debit card. A person can pay for goods at a register and get cash back with her EBT card by punching in a PIN, just like a person paying with a debit card would. However, that is where the similarities end.

California’s EBT program is administered by Xerox State and Local Solutions, Inc., under a contract set to expire in 2015 unless the state exercises any of the three available one-year extensions. Xerox has subcontracted with MoneyPass, an ATM system owned by US Bank to provide EBT users with four withdrawals per month, after which EBT users must pay 80¢ per ATM withdrawal. Xerox also charges 25¢ to check the card’s balance at MoneyPass locations. However, MoneyPass processes less than 9% of all EBT transactions.  Most EBT transactions are processed by banks and other ATM owners that charge EBT users a significant fee, typically $2 to $3 per use or as high as $4.00 per use. Check cashing stores also charge a fee to withdraw money using EBT cards- usually 1 to 2% of the amount withdrawn. In total, over $19.4 million a year of CalWORKs and other public assistance funds are spent on fees and charges.

“It is critical for consumers to have a choice of how to receive government payments… [W]e think that states should mandate that consumers have the option of direct deposit into a bank account and, if they do choose a [benefits] card, it should include the option to easily switch to direct deposit at any time.…Additional considerations could include the type and amount of fees, broad access to a robust set of in-network ATMs, and terms that make it easier for card users to access information about their accounts without cost.”    Richard Cordray, Director of the Consumer Financial protection Bureau (March 18, 2014)

Other EBT services are also limited. EBT users are excluded from protections provided by the federal Electronic Funds Transfer Act, which among other protections limits liability for money spent by debit and credit card thieves. Although recent changes in state law protect benefits taken by electronic fraud, the state does not have to reimburse benefits taken when a thief steals and uses the EBT card itself. In addition, EBT cards can only receive and spend CalWORKs cash aid.  CalWORKs recipients must manage all other income received from work, gifts or other sources using a different financial instrument, such as a prepaid card or check casher, which can cost additional fees.

The EBT system also does not provide regular monthly statements to recipients so they can verify purchases and track fees. Most recipients who wish to check their balance or review past transactions call a toll-free customer service number that can provide up to two months of activity. The state provides an “EBT Client” website that can provide a much longer history but few recipients know about it, have registered to use it, or use it regularly. The state has tried to increase awareness of the website through EBT training material, card sleeves, card mailers and correspondence to the counties, however, despite the system’s five-year existence, less than 30% of CalWORKs recipients currently have registered accounts and less than 1% used it during the month of January 2014. The state Department of Social Services is now considering a webinar to train county workers and advocates on the benefits of the system.

By contrast, many bank and credit union accounts offer free phone service, online account management through website and mobile phone apps, as well as monthly statements that include both the detail of each transaction as well as a summary of fees paid that month. Account owners use these services extensively. As of August 2013, 51% of U.S. adults now bank online and 32% use mobile banking services.

Finally, the EBT system does not help CalWORKs recipients build a personal financial history. Without this, recipients cannot access safe and affordable financing for household purchases that support family functioning and development, such as a computer, a refrigerator, or a car. Recipients who do not have recognized financial history, such as that provided by a bank or credit union account, have a much harder time establishing good credit. Without this, families must resort to dramatically more expensive methods of financing, such as payday lenders and rent-to-own.

In truth, EBT cards are more similar to commercial prepaid cards than to bank- or credit union-issued debit cards. Prepaid card companies aggressively market to lower income households. They are much easier to obtain than bank or credit union accounts because there is no background check using credit reporting bureaus like ChexSystems, which reports on past account activity and effectively blocks millions of people from being able to open an account at most major financial institutions.

EBT Card Prepaid Card Bank or Credit Union Account
o Receive CalWORKs and other state assistance income electronically o Receive any and as many sources of income, electronically o Receive any and as many sources of income, electronically
o Get cash back for free with purchases o Get cash back for free with purchases o Get cash back for free with purchases
o Pay for purchases using a PIN o Pay for purchases using a PIN or with Visa/MasterCard o Pay for purchases using a PIN, Visa/MasterCard, checks, electronic funds transfer or bill pay
o Get 4 free in-network ATM withdrawals a month o May not offer free in-network ATM access o Get unlimited free in-network ATM withdrawals
o Review transactions for two month by phone or longer online o Review all recent transactions  free online or for a charge by phone o Review most transactions free online, by phone, or in person
o Monthly statements available to be mailed upon request o Monthly statements free online or mailed for a fee o Monthly statements free online and sometimes free by mail
o Multiple accounts available but money may not be transferred o Transfer money between sub-accounts where available o Transfer money free between accounts
o Money stolen using physical EBT and PIN will not always be replaced o Money stolen from a prepaid card does not have to be replaced o Most money stolen will be replaced if reported right away
o Does not build a personal financial record o Does not build a personal financial record o Builds a personal financial record


Like users of prepaid cards, EBT card users can isolate a source of income from any other household money received and spent. An EBT card can only hold CalWORKs aid, thereby protecting it from possible garnishments or liens on bank accounts. Like with many prepaid cards, it is also impossible to use an EBT card to spend more money than is available. This avoids hefty overdraft fees that are possible with many bank accounts that can add up and spiral out of control, leaving the person in a lot of debt and possibly with an involuntarily closed account.

However, prepaid cards can be both expensive and unsafe to use. There are no state, federal or even industry standards for prices, which allows card fee schedules to be dizzying and incomparable. Some cards appear less expensive because they do not charge a monthly fee, but ultimately can cost more depending on how they are used, how often they are used and which types of uses trigger fees.Money loaded on a pre-paid card is not always insured by the FDIC or protected by Regulation E, which limits a person’s liability to $50 for theft or fraudulent use by another person of her card if reported within two days. A person can pay many fees to buy, load and use a prepaid card and be out of luck if the card is lost or stolen or if the card provider goes under.

Who benefits from the status quo?

After federal law required the delivery of food stamp benefits by EBT, many states including California, also shifted to using EBT delivery of CalWORKs cash aid to save money on writing, mailing and processing paper checks. The contract to administer the state’s EBT systems is lucrative: Xerox State and Local Solutions, Inc., has a $69 million seven-year contract through 2015, with three year-long extensions available. All 58 California counties have adapted to new infrastructure to deliver aid via Xerox’s systems. This infrastructure of computer systems and forms helps make EBT cards the default method of aid delivery.

Although CalWORKs recipients have the legal right to have aid directly deposited to a personal bank or credit union account, there is no comparable single statewide infrastructure to facilitate it. Counties do not have standardized forms to process requests for direct deposit. A request for direct deposit can take six weeks for a county to process. As a result, very few CalWORKs recipients use direct deposit. For the month of August 2013, only 14,669 recipients got direct deposit statewide, 2,258 received their benefits via paper checks and 430,320 – 96.2% of all recipients used EBT card delivery.

Many CalWORKs recipients are also suspicious of banks. Many have had accounts and had bad experiences with overdraft fees, which can run as high as $35 apiece, and which can accumulate quickly, racking up hundreds of dollars in debt to the bank. Frequent or unpaid overdraft fees are also a major reason for involuntary account closure and for being reported to ChexSystems as a potentially undesirable customer. Most banks will not open an account for those reported to ChexSystems.

Share of EBT Transactions FY 2012/13 CalWORKs Funds Received via ATM Fees
Bank of America 12.43% $3.6 million
JPMorgan Chase 9.02% $2.8 million
Wells Fargo 7.18% $2.3 million
Rabobank 1.38% $35,451
Union Bank 0.88% $274,977
Total 30.89% $9,067,283


Attempts by banks to provide so-called “second chance accounts” have had limited success. Programs like BankOn encourage people to open accounts but they do not prohibit participating banks from selling overdraft service and charging high fees to those who can least afford it. Though BankOn programs ask banks to voluntarily waive ChexSystems reports older than a year, or more recent ones if the person receives financial education, many branch level bank staff fail to do so consistently or perhaps ever without significant and repeated training by the BankOn municipal or non-profit partners.

Finally, because CalWORKs can be the only source of income for a family, many recipients avoid doing anything that might jeopardize eligibility.  For example, program rules make anyone with more than $2,000 in assets ineligible to receive aid. There are exceptions to the asset limit rule, but few people know what they are, much less want to do anything that might provoke an investigation into their eligibility. This makes owning a bank account a perceived potential liability rather than a benefit.

Yet CalWORKs recipients continue to use EBT cards at bank owned ATMs to access their grants. Almost a third of ATM transactions made in fiscal year 2012/13 were at five banks that charge for EBT use: Bank of America, Chase, Wells Fargo, Union Bank and Rabobank.  Together they received over $9 million in CalWORKs and other public assistance funds by charging EBT users fees for using their ATMs. The three largest banks in the state received the vast majority of fees: Bank of America made over $3.6 million, Chase made over $2.8 million, and Wells Fargo made over $2.2 million. Union Bank received almost $275,000. Rabobank, which in May of 2013 switched from not charging EBT users to charging them $3 for each use, received over $35,000 in CalWORKs aid in just the last two months of the fiscal year.  Unfortunately, the fact that so many EBT users pay high fees to use bank ATMs reinforces the perception that banks are too expensive for CalWORKs recipients to use.

CalWORKs Should Help Families, not ATM Owners

CRC is working with state and county CalWORKs administrators, financial education providers and financial institutions to safeguard CalWORKs aid for family needs- not for high fees for basic financial services. Our goal is to provide CalWORKs recipients a better selection of fee-avoidant financial services and help each family make choices that will best save them money.

We believe that a partnership between these three stakeholders is key to achieving this goal.  CalWORKs state and county administrators have the best information available about CalWORKs recipients and are in the strongest position possible to reach them directly while respecting privacy. Financial institutions, particularly large banks and credit unions, have the power to offer better products and the incentives to do so, including improving their public image, increasing their customer base and adding to the community support activities that gain them credit among regulators. Financial educators have proven to be effective in helping low income families create and manage household budgets, build and repair credit histories and otherwise save money to meet household needs and goals.

Banks and Credit Unions Should Offer No and Low Fee Direct Deposit Options

Rather than charging CalWORKs recipients to use their ATMs, California’s largest banks could offer accounts that help them save money. CRC is working with some of the largest financial institutions to offer accounts that meet the needs of CalWORKs recipients, using our SafeMoney™ standards as a starting line.[1]

A good account should be affordable, provide convenient ways to pay for goods and services safely, help people keep track of and manage spending, and help build a person’s financial record.   Recipients of CalWORKs should be able to open an account easily, with a low or no initial deposit, and use them to exercise their legal right to receive benefits via direct deposit. There should be no monthly service fee; if there is a fee, it should be easily waived with direct deposit or other easily achievable action, or be the only fee a customer will pay while using the account. There should be no minimum balance requirement. Critically, debit card purchases should never lead to a negative balance or overdraft fees.

CalWORKs recipients who open accounts to avoid paying excessive ATM and check cashing fees should not then face a high risk of overdraft fees and negative balances that must be paid quickly to avoid involuntary account closure. Prohibiting overdraft on debit card purchases dramatically lowers customer fees. The Federal Deposit Insurance Corporation found that debit card purchases that overdraw accounts cause over 40% of all overdraft fees.The Consumer Financial protection Bureau found that accounts that allow debit card use to overdraw accounts cost customers an average of $196 in 2011, while those that did not allow debit card overdrafts cost only $28 on average for the whole year. Reducing overdraft fees will also keep customers in successful banking relationships longer: accounts with overdraft have an involuntary closure rate 2.5 times higher than those without.

CRC SafeMoney™ Standards for CalWorks Accounts
Services and Benefits Full Service Personal AccountAccount owners should be able to pay for goods and services, get federal consumer protections, manage their money easily and build a stable financial history.No Monthly Service Fee with Direct DepositFree In-Network ATM, Branch and Teller AccessMailed Monthly Statements Free

No Monthly Balance Requirement

Opening Requirements No or Low Opening DepositCalWORKs recipients should be able to open an account with no or only a very low initial deposit.U.S. or Foreign Government Photo IDRecent ChexSystems history except fraud ok 
Account Terms and Services Free Visa/MasterCard Debit CardNo Overdrafts Possible with Debit Card PaymentsMoney Orders and Checks AvailableFree Online Bill Pay


Banks and CalWORKs county and state administrators should work together to help CalWORKs recipients easily set up direct deposit. One way to do this is to develop and adopt standardized forms that are easy to fill out and that both banks and counties can use. For example, Bank of America already provides customers with direct deposit forms already filled out with the account owners’ name, the bank’s name, routing number, the customer’s account number and other necessary information. The account owner provides only

CRC proposes that banks and credit unions help protect CalWORKs investments in families by:

  • Offering checking accounts that satisfy SafeMoney™ standards,
  • Working with state and county agencies to create easy setup for direct deposit of CalWORKs benefits, and,
  • Advertising with attractive, easy to use materials that are distributed via state and county agencies and nonprofits that serve families receiving CalWORKs.

Banks should notify the state Department of Social Services and county CalWORKs administrators of their commitment to offering fee-avoidant accounts to CalWORKs recipients and work with those agencies to help recipients gain access to the products. They should develop online and print materials that are attractive, easy to read, and advertise the low account costs, the variety of financial services and benefits, the ease of direct deposit set up, and convenient locations.  Ideally, participating banks would pay to create co-branded materials that are prominently available in county offices and non-profit organizations that serve families that receive CalWORKs assistance.

The State and Counties Can Help Recipients Avoid Fees

California’s Department of Social Services, the Alameda County Social Service Agency and the Los Angeles County Department of Public Social Services have already made efforts to reduce the amount of CalWORKs aid spent on fees. All of them can build on these efforts by working together, with financial institutions and non-profit service providers.

Provide Personal Monthly Statements of EBT Fees and Transactions

The California Department of Social Services and the state’s EBT contractor, Xerox State and Local Solutions, Inc., can work together to notify recipients exactly how much they are spending on fees. Both the state and Xerox have information about each fee a CalWORKs recipient pays using her EBT card. The state is using this information as part of a pilot program targeting recipients who pay more than five fees in a month. Every month, those recipients will receive a phone call playing a recorded message informing them that they have spent a lot of money on ATM fees (but not how much), that they can use MoneyPass ATMs for free or sign up for direct deposit, and that they can visit the state website or their county worker for more information.

The state’s next step should be to provide every CalWORKs EBT user a monthly statement of transactions, including a summary of fees paid every month. The state currently offers transaction history passively: recipients must call the customer service number or register a separate account on the EBT Client website. A monthly statement mailed to each recipient would more actively notify her about her transactions, giving her a better opportunity to verify charges.

The statement should include a highlighted summary of the amount and type of fees a recipient has paid in the month. They should also include generic information about how to avoid future fees, such as the locations of the MoneyPass ATMs and other bank and credit union owned ATMs that are free for EBT card users and of stores that offer cash back free with purchase.

For a full chart of how checking accounts and prepaid cards offered by Bank of America, Citibank, Union Bank, Chase, and Community Financial Resources

Tell Recipients About Fee-Avoidant Account Options

CalWORKs recipients need to know what alternatives exist to lower the amount of money they spend on financial service fees. Currently, most recipients do not know that they can get CalWORKs aid by direct deposit to a bank or credit union account or that doing so can help avoid fees. The state Department of Social Services can change this by informing recipients about fee-avoidant bank and credit union account options to receive CalWORKs aid by direct deposit.

The state could take on an annual task of collecting information about accounts that help customers avoid fees, such as those that are free or low cost, offer waived monthly service fees to recipients with direct deposit, and do not allow debit card purchases to overdraft the account. This can be collected through a public, voluntary request for information to banks and credit unions inviting them to provide their account features. The state could ask direct questions for the banks to answer, such as “Which of the bank’s or credit union’s accounts are free? Which cost under $5 a month? Which offer waived monthly service fees for recipients of direct deposit?” and “Which accounts ensure that debit card purchases do not exceed available funds?” Once collected, the state should distribute the information to the counties through All County Information Notices.

Emphasize Choice and Facilitate Opportunities to Lower Fees

Counties can also build on existing efforts to reduce the amount of money spent on financial service fees. Both Alameda and Los Angeles Counties can support their staff and clients by building the capacity of staff who regularly interact with recipients, such as eligibility workers and employment counselors, to help recipients avoid financial service fees. In fact, county staff are likely to have many of their own questions about bank fees, prepaid cards, and ways to save money on basic financial transactions. Counties should offer staff financial training they can use personally, using materials that explain common financial service fees, how to avoid overdraft and prepaid card fees, and which consumer protections to look for. The goal is not to make county employees expert financial advisors, but to help them confidently conversant about mundane financial issues like how to avoid fees.

Counties should then take three additional steps: establish protocols to ensure that conversations about financial service fees are taking place during opportunities where recipients have in-depth interactions with county staff, such as employment counseling; develop better supporting materials; and provide recipients with a more deliberate approach to selecting EBT or direct deposit.

For example, both counties currently provide written materials explaining where and how to use EBT cards and an overview of direct deposit. However, recipients receive these as part of a much larger packet of information and there is no guarantee that a county worker has discussed fee-avoidant ways to use the EBT card or get direct deposit.  The recipient’s opportunity to select EBT or direct deposit passes quickly and without consideration of the pros and cons of each choice. This is how EBT has become the default choice for the vast majority of recipients.

Both counties could alter application and recertification processes to include a step for discussing the fees a recipient would face if she chooses EBT or direct deposit before asking her to make a selection. Forms should frame the choice of direct deposit or EBT affirmatively, i.e., stating in bold letters, “You Have a Choice between EBT and Direct Deposit”.

Counties should work with employees who interact frequently, and/or in-depth with recipients (such as employment counselors) and with non-profit financial educators, to develop a protocol for discussing the factors affecting a recipients choice between EBT and direct deposit.  The conversation must be fast and effective: county staff must be able to integrate it into already lengthy meetings with recipients, and recipients must be able to hear and process the information and opportunities presented.

County staff could ask key questions to help recipients make the best choice, such as:

  • Which ATMs are you most likely to use to withdraw cash? If those are not free for EBT users, can you easily get to ATMs that are free for EBT?
  • Do you need more than four ATM withdrawals a month?
  • Do you already have a bank account? Could you get that account – or a new account – free if you get CalWORKs directly deposited? Does your bank make sure you do not overdraft when you use a debit card?
  • Do you want to keep CalWORKs aid separate from other income? Do you want to manage all income in one place?
How much will it cost to pay bills? A mom who makes $230 a month from a part-time job and receives $510 cash aid from CalWORKs has options for how to get cash and pay bills.In the best-case scenario, this is how much it would cost her to pay bills and get cash using… An EBT Card and the Check Casher-2% of her paycheck to cash it, $4.60

-$1.50 for a money order for rent

-$1.50 to pay a utility bill with cash at the check casher

-$1.50 to pay a mobile phone bill with cash at the check casher

-$1.50 for a money order that will be mailed to pay car insurance

-$0 to use the EBT card to get cash 5 times, including 4 times at a MoneyPass ATM and once by getting cash-back when paying at the grocery store.

= $10.60

An EBT Card and a Prepaid Card

-$0 to directly deposit her paycheck to the prepaid card

-$0 to pay the utility, mobile phone and car insurance bills online using the prepaid card’s Visa or MasterCard number

-$4.95 monthly service fee for the prepaid card

-$1.50 to buy a money order to pay rent

-$0 to use the EBT card to get cash 5 times during the month, including 4 times at a MoneyPass ATM and once by getting cash-back when paying at the grocery store.

= $6.45

A Bank or Credit Union Account

-$0 to direct deposit both her paycheck and CalWORKs income to her account

-$0 to pay the utility bill, mobile phone bill and car insurance online using the debit card Visa or MasterCard number

-$0 to pay rent with a check

-$0 to use the bank or credit union’s ATM as many times as she wants


Counties should develop attractive, easily understood supporting materials, such as flyers, brochures, website pages, and videos that effectively explain the costs and benefits of different financial services. County social service agencies could collaborate with consumer protection agencies and programs, such as Los Angeles County’s Department of Consumer Affairs, to develop these materials.  A colorful, glossy handout could illustrate how much it would cost to pay a set of bills using a combination of EBT and check casher services, EBT and prepaid card, EBT and bank account or only a bank account. Banners in county offices could promote no- and low-fee banking services and direct deposit.

Other information to provide includes:

  • Neither the state or the county will ever be able to see into a person’s bank or credit union account or know how they use the money in it,
  • The state does know when EBT cards are used, the amount spent or withdrawn or the location,
  • Many banks and credit unions offer free accounts to people who use direct deposit, and common bank fees can be avoided (for example, many overdraft fees can be avoided by telling the bank not to pay for debit card purchases for more than the amount in the account),
  • Bank or credit union account owners will be reimbursed for thefts from the account and will not lose more than $50 if the account owner reports the loss within 24 hours and is not committing fraud,
  • EBT users may not be reimbursed if someone steals their card and uses the correct PIN to get cash or pay for a purchase,
  • Though CalWORKs cash aid cannot be garnished, it may be more difficult to protect this money once it is mixed with other money in a bank account, and
  • Recipients can decide to use either EBT or direct deposit and can change their mind at any time.

Finally, counties should repeat the message that recipients can avoid using CalWORKs money to pay financial service fees wherever recipients are likely to see it: on their web sites, in written materials in county waiting areas, and through videos displayed in county offices.

Make Signing up for Direct Deposit Easy

Both state and county administrators should work with banks to make setting up direct deposit simple and fast. Currently it can take some counties six weeks in some areas to set it up and it may not be clear to the recipient what will happen to her grant during this process. At minimum, recipients should be able to use an EBT card immediately and without interruption and know when the first deposit will arrive in the account she has chosen. Ideally, recipients should be able to sign up for direct deposit through their county worker, online or using standardized forms developed by the state or county in partnership with banks.

Make the Next EBT Contractor Provide Lower Cost Services

The state’s current contract with Xerox State and Local Solutions, Inc. is set to expire in 2015 unless the state uses one of the three available one-year extensions. CRC is in the process of researching best practices by other states that provide benefits electronically and do so without passing on costs to recipients or siphoning benefits away from families. We hope that the state Department of Social Services will consider these and apply the state’s negotiating power to create a benefits delivery system that helps recipients avoid fees and save money.

CRC Proposes State and County CalWORKs administrators Protect CalWORKs Investments in families by:

  • Informing CalWORKs recipients of the fees they pay by sending a regular, monthly statement of transactions,
  • Emphasizing to recipients that they can choose to receive aid via EBT or direct deposit, describing the pros and cons so each recipient can decide for herself what she needs and wants,
  • Educating county staff about fees so they and their clients can avoid them,
  • Providing recipients information about fee-avoidant accounts,
  • Working with banks to simplify and speed up setting up direct deposit, and
  • Negotiating the next EBT contract so that it is more affordable to recipients.

Financial Education and Asset-Building Programs Are Key Resources

State and county agencies, banks and credit unions should work with non-profit community organizations to provide all recipients ongoing support to avoid fees, whether they choose EBT or direct deposit. Counties already contract with service providers on a variety of issues, including financial education and planning. Banks also support financial education efforts. These programs need and deserve stronger financial support from all partners to reach more people.

Many proven and highly respected organizations offer sophisticated financial education programs such as the Money Smart curriculum developed by the FDIC, the “Your Money, Your Goals” developed by the Consumer Financial Protection Bureau, and the “Savvy Consumer Toolkit” developed the Alameda County Community Assets Network. Many of these organizations also offer credit building, credit repair, debt settlement and expungement assistance, access to micro-loans for self-employment, and help saving towards self-sufficiency in ways that will not jeopardize eligibility for CalWORKs and other programs that use asset rules.

With the support of banks and government agencies, these organizations could reach many of the 450,000 CalWORKs recipients across the state. To do so, providers would need to adapt their existing financial education curriculum to include information on avoiding EBT fees. Unfortunately, a search for existing models engaging EBT fees directly yielded no results. On a positive note, organizations can be creative about how to integrate the material in ways that are most relevant to their client’s experiences.

For example, community colleges could also be great partners given their high contact with the over 35,000 CalWORKs recipients who are students. The California Community College CalWORKs Association includes students, college counselors and administrators who work together to ensure the success of CalWORKs recipients attending college. Colleges often deliver student financial aid through free student bank accounts offered by banks contracted by the college to do so. Few students are also aware that they can use these accounts to receive their CalWORKs grant. As a result, students may be paying fees to use their EBT card at an ATM where they already have an account.

Counselors can help students sign up for direct deposit of CalWORKs in the same accounts they receive financial aid. Alternatively, the colleges could engage students more proactively about their choice of financial services, helping them to choose a provider that is most convenient and affordable whether it is the institution contracted by the school or otherwise.

CRC Proposes that financial Education Providers help protect CalWorks Investments in famlies by:

  • Reaching out to CalWORKs recipients with support from government agencies and financial institutions,
  • Adapting financial education materials to include EBT fees and how to avoid them, and
  • Integrating these services where they are most relevant to clients.

Additional partners could include organizations already contracted to provide other services, such as employment training, child care referral and placement centers, domestic violence prevention, and financial literacy to name a few. Many of these organizations have classes or one-on-one services that can be adapted to integrate engagement on the choice of financial services and its effects on financial stability.

The Washington State Department of Commerce and The Prosperity Agenda are working together to connect households on public assistance with affordable banking services. The focus of this work includes the promotion of future EBT service contracts that provide no-fee bank accounts to recipients.
Successes to Build On and Models to Learn From The work we need to do to protect CalWORKs funds from costly fees is not without precedent. The California Department of Social Services, Alameda County and Los Angeles County have all taken strong steps to help CalWORKs recipients avoid fees and gain financial stability. In other states, effective advocacy and partnerships between government agencies, non-profit organizations, and financial institutions yield critical lessons.
The Center for Hunger-Free Communities at Drexel University and the Pennsylvania Department of Public Welfare are working to develop the “Building Wealth and Health Network.” The project involves a peer-oriented, asset-building model that helps women break the cycle of poverty through matched savings accounts, financial literacy classes and peer support groups using the Sanctuary® trauma-informed approach to social services.
California Department of Social Services “EBT Working Group” has brought together state and county administrators and advocates across the state to reduce the fees EBT users pay. The Group is now developing materials that explain the choice between EBT and direct deposit.


The Los Angeles Department of Public Social Services has developed a mobile app counterpart to its “Your Benefits Now” website. The app, now available on iPhone and being developed for Android, provides ongoing EBT balance information and the ability to upload reports for continued eligibility.


The Alameda County Social Services Agency has launched an “Asset Building Pilot” that is showing early success. Twenty recipients of CalWORKs and General Assistance are now participating in financial education workshops and one-on-one credit coaching sessions. Preliminary findings show participation is most consistent when Employment Counselors conduct direct outreach to potential participants and sessions occur during paid work hours.

Next Steps

The catalyst for this campaign emerged from CRC’s participation in the EBT Working Group formed by the California Department of Social Services. Our first reaction to learning that ATM providers including the largest banks in the state were extracting fee revenue of over $19.4 million a year in CalWORKs and other aid was to ask the banks to waive the fees. Though thankfully several banks do waive the fees, this answer would not meet the broader need that CalWORKs recipients have for financial services. We believe that by working together, state and county CalWORKs administrators, financial institutions and financial education providers can do both: protect CalWORKs aid for the purpose it is intended, and provide the necessary financial services every California family needs to maintain a household.

This report reflects the ideas generated during dozens of conversations with stakeholders in Sacramento, Alameda County, and Los Angeles County. We invite feedback from stakeholders and thought leaders, CalWORKs recipients and advocates, and allies across the state and country. We will use this feedback to fashion our work in the coming months.

Our next step is to convene the stakeholders in two meetings, one in Alameda County and the other in Los Angeles County to,

  • Develop a shared understanding among stakeholders of the cost and other impact to families and the state of CalWORKs and other programs money being used to pay avoidable financial service fees, including the $19.4 million spent by EBT users on ATM fees alone in 2012,
  • Learn from existing efforts in California, Pennsylvania and Washington State to reduce financial service fees and increase access to better financial services,
  • Prioritize specific administrative and programmatic interventions to increase awareness and avoidance of financial service fees among CalWORKs recipients through breakout group discussions that will report back, and,
  • Develop a timeline for program development and implementation.

We invite all stakeholders and allies to respond to this report with your feedback, insights and recommendations. To do so, please fill out the $19 Million Fee Survey or contact Andrea Luquetta directly by phone at 415-864-3980 or by email at

Please join us, support our efforts and help make sure all of CalWORKs aid is not spent on fees but for what it was intended, to “provide for protection, care, and assistance to the people of the state in need.”


[1] We developed the SafeMoney™ standards in 2012 to respond to increasing fees for basic accounts. For more information, please visit

[i] A white paper by the CFPB noted that overdraft fees account for 61% of checking account fee revenue. Moebs Services, Inc. estimated 2013 overdraft revenue at $31.8 billion.

[ii] The CFSI 2012 Financially Underserve Market Study breaks out industry revenue by product segment.

[iii] This figure results from California’s share of national GDP (13%), the amount spent on these services nationally, and the number of Californians receiving CalWORKs cash aid.

[iv] According to the Self-Sufficiency Standard developed by the Insight Center for Community Economic Development.

Solving the $19 Million ATM Fee Problem in California

Earlier this week, CRC released a report focused on the $19.4 million in public assistance money that went to paying ATM fees so recipients could withdrawal their benefits.

While one possible solution to this problem is for banks to simply stop charging these fees, we also believe that connecting Californians who receive CalWORKs to safe, low-cost banking accounts can help create future financial stability.

CRC is working with state officials, county officials in Los Angeles County and Alameda County and with some of the largest financial institutions to reduce the amount of cash aid used to pay fees rather than to support families. We are building on existing efforts by state and county agencies to alert recipients to the prevalence of fees and ways to avoid them.

With co-sponsor Western Center on Law and Poverty, we have introduced AB 1614, a bill that would make sure every CalWORKs recipients gets a monthly statement of transactions and clear information about their right to receive aid by direct deposit to a personal account and the comparative costs and benefits of doing so. We are working with large banks and other financial institutions to market to CalWORKs recipients accounts that avoid the most common and expensive fees, such as monthly service fees and overdraft fees.

Our goals are to:

  1. Increase the use of free cash withdrawal options for EBT cards,
  2. Increase access to fee-avoidant financial services, such as bank and credit union services that are free with direct deposit of CalWORKs cash aid, and,
  3. Provide practical and ongoing support to CalWORKs recipients to help them save on fees.

We are convening many of the major stakeholders on May 1st in Los Angeles to roll up our sleeves and create a plan to solve this problem. We are inviting thought-leaders, experts and anyone with insight to help us by responding to the $19 Million Fee Survey or by contacting Andrea Luquetta directly by phone at 415-864-3980 or by email at

Banks That Are Helping to Create Solutions

Major financial institutions have created accounts that we think will go a long way to helping CalWORKs recipients save on fees. Bank of America, Chase, Union, Citibank and Community Financial Resources all offer accounts and prepaid cards that meet several of CRC’s SafeMoney™ standards and we are working with them to get them to 100%. We are asking these banks to work with the government agencies to get information about the accounts out to CalWORKs recipients and streamline the direct deposit process so that more CalWORKs recipients can take advantage of the potential savings.

To see a chart of how these accounts meet CRC’s SafeMoney™ standards, turn to page 8 of the report.

The State Department of Social Services, Alameda County and Los Angeles County Are Laying the Ground Work

In February, the California Department of Social Services began calling thousands of CalWORKs recipients to alert them of alternative ways to access cash without paying fees. The Department is also developing a guide for distribution to CalWORKs recipients that will compare the benefits of signing up for direct deposit or continuing to use EBT cards so that recipients can choose for themselves what is best for their personal situation. The Alameda County Social Services Agency and the Los Angeles County Department of Public Social Services already support financial education to help CalWORKs recipients save money. All three agencies have committed staff leaders to work with CRC and other partners to develop solutions that meet local needs.

Financial Education Providers are Ready to Serve More People with Better Tools
Non-profit community organizations in both Alameda County and Los Angeles County are eager to reach more CalWORKs recipients, help them identify banking strategies to save money, and help them reach financial self-sufficiency. They need the support of the government and the banks to fund increased outreach and to develop the materials needed to address the specific challenges of choosing the best financial service tool for one’s needs.

CRC has been meeting with all stakeholders for many months to develop the proposals in the report. We are confident that each sector- public, private and non-profit- has critical resources to contribute and that by working together, we can eliminate the $19 million ATM fee.


Intimidated by Banks: A GTA Student Perspective

Editor’s note: The blog below is cross-posted from Game Theory Academy’s blog, as part of an American Banker BANKTHINK series on what customers want from their banks.


Intimidated by Banks: A GTA Student Perspective

I opened my very first bank account during my sophomore year in high school, when I was receiving a paycheck ranging from $7 to $30 every two weeks for my job as a tutor at my school. I opened the account because my mother read an advertisement outside a bank that claimed to give $100 to anyone opening a new bank account during a certain time period if they put $50 in the account.

As the daughter of two very hard working parents, a sibling to five others, and a minority student from a low-income household, I saw this incentive as a great way for me to save a little cash for school necessities while also being able to save what I was earning from tutoring. However, when I went to the bank to open my new account that I so long anticipated, I was told that the $100 only applied to customers who were 18 or older. What a scam, I thought!

My first interaction with a bank was not at all satisfying because I felt that it did not provide detailed information that was customer-friendly, easy to read and interpret, since my parents misunderstood and so did other Hispanic customers. Later on when I went to cash my checks, I had to wait in line because I was unsure about how to use the ATM machines. I didn’t want to look dumb in front a large line, so I would rush to the bank after school and get there just in time before it closed. I wish that banks would show first-time customers how to work the machines. I felt embarrassed trying something new, five minutes before the bank closes, with a crowd behind me. If someone had taken the time to show me how the ATM machine worked, this could have been avoided.

Netsay Ramos is a student in Oakland, California, and an alumna of Game Theory Academy