How Bank of America makes money from unemployment benefits

So…the wife of someone from Hutch who had lost their job (layoff) and hasn’t yet found a new one sent me a message this week.

Her husband is receiving unemployment benefits, which are distributed on a Bank of America debit/credit card. But there are no Bank of America branches in Hutchinson, and no Bank of America ATM machines. That means for their family to access the benefits on the card locally, they could incur up to $6 in fees. She was clear that this wasn’t going to break the bank for them, and that their family could, if needed, handle the fees.

But, she said, what about other families that are worse off? Those families for whom $6 is a meal, or something else vital.

I became curious about how this arrangement came to be, how Bank of America profits from others’ misfortune, and why we handle such transactions in this way. My initial suspicion was that Bank of America made money from the fees, or that the state signed some contract to pay Bank of America a fee to process all state benefits. (I’m tired of typing Bank of America. It’s long and I don’t like that bank because, you know, 2007 and the whole let’s help kill the whole world’s economy thing. From now on I’ll call Bank of America “BofA”).

I decided to ask Legislative Research about it, because I knew they could get the answers for me. Seriously, the people there are awesome and incredible. I ask a question, they get an answer.

Turns out that my initial thought was wrong. BofA doesn’t make money from the fees. They make money from interest on the money the state gives them.

From legislative research:

Dear Representative Probst,
Thank you for your inquiry. I spoke with the Kansas Department of Labor (KDOL) regarding the Bank of America debit cards issued for unemployment benefits. KDOL currently has a contract with Bank of America which started in August of 2014 and will end in August of 2020. The RFP was released in May of 2014, when Citibank, the Department’s previous contractor, decided not to continue to contract with KDOL for unemployment benefit services. In addition to using the debit card at a Bank of America ATM without incurring any surcharges, claimants also have unlimited access to Allpoint ATMs to avoid surcharges; however, it is true that a claimant may incur surcharges if any other ATM is used. Allpoint ATMs are located at certain gas stations, convenience stores, retail stores, and malls. You can click on the link here: https://prepaid.bankofamerica.com/kdoldebitcard/Program/ATMLocator  to see the Allpoint ATMs located in your district by entering an address, zip code, or city. There appears to be several Allpoint ATMs in the Hutchinson area.             
 
KDOL is not charged by Bank of America for its services, but instead the bank receives interest or “float” from KDOL fund deposits with Bank of America.  The contract is specific only to services it provides to KDOL for unemployment benefit services, and KDOL does not keep records of the profits earned by Bank of America for its services. The contract and contact information for the contract administrator at the Department of Administration can be found here: http://da.ks.gov/purch/Contracts/Default.aspx/0000000000000000000039435 .
So, the long and short of it is this:
1. If you get unemployment benefits, use one of the ATM locations in the map I’m providing here. Those should be free.
2. BofA makes a lot of money from the state on this. We don’t know how much, but we know it’s enough for them to sign a multi-year contract where the only money they make is from the interest from the “float.”
3. I believe this serves as an example of government providing income for a private business. So, at least for BofA, government is good for business. Probably does a little job creation, too, which by extension is government creating jobs. {Mind >>>>>Blown}
4. Ironically, the more people getting unemployment, the more money routed through this arrangement, and the more money BofA makes on the float. Hmmmmmmmmmmmm. Also, I can guess that BofA has similar contracts all over the country. So they make a mint from this.
5. Is this government subsidizing business? I can’t tell sometimes. (/start sarcasm/) My idea about the nobility of business and the evils of government is all messed up right now because it seems they’re actually friends who are working together. (/end sarcasm/)
6. I concede that there might be some benefits to letting a bank handle such transactions. Yet, the state can, and does, handle direct deposit into checking accounts, so I can’t understand why we don’t just do that. The contract with BofA includes a provision that the bank can do such deposits instead of a card.
I might ask that last one as a follow up question.
Also, if anyone has any other questions I should be asking, let me know and I’ll ask them.
Here’s the contract if you’re interested in looking it over:
 

2 Comments

  • Posted October 7, 2017
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    Dan Nagengast

    Has anyone done a cost/benefit analysis concerning the funding of attorneys in the Sec. of States office, together with his prosecutorial powers to root out voter fraud? Could that money be spent on something useful and not fantasy symbolism?

  • Posted October 8, 2017
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    Marlys Bernard

    This is some worthwhile information. I had no idea people were having to pay for that —and how the whole situation works out…that’s the most interesting part of this.

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