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Good-Government Groups Endorse Prepaid Stimulus Cards

Posted on May 20, 2020

Consumer groups welcomed Treasury’s announcement that it will be sending almost 4 million economic impact payments (EIP) on prepaid debit cards.

“It’s a good thing for the recipients,” said Susan Grant of the Consumer Federation of America. “It’s great that the stimulus funds are finally being made available in an easy-to-use and cost-free form to people who desperately need the money and don’t have bank accounts.”

Treasury said May 18 that it will start sending the prepaid EIP cards to people with no bank information on file with the IRS, and whose last tax return was processed at service centers in Austin, Texas, or Andover, Massachusetts.

While the IRS met its goal of distributing coronavirus emergency EIPs starting April 13, getting the money into the hands of America’s unbanked millions has proved difficult. Democratic senators complained to Treasury Secretary Steven Mnuchin that the stimulus money was taking too long to reach the unbanked. Mnuchin reportedly told a House member that distributing paper checks could take up to 20 weeks.

Lauren Saunders of the National Consumer Law Center said using prepaid debit cards will allow Treasury to send more payments, more quickly, than it could by printing checks.

MetaBank, Treasury’s financial agent, will start mailing prepaid EIP cards this week, along with instructions on how to activate them.

Saunders noted that Treasury materials showing an image of the card and accompanying instructions indicate there are no usage fees for in-network ATM withdrawals. However, out-of-network ATM withdrawals and balance inquiries, and lost, stolen, or replacement cards may prompt fees, she said.

Watch and Wait

The IRS and Treasury didn’t respond to requests for more information about the EIP debit card program.

“I don’t have concerns about the program, but our ears will be open,” Saunders said.

“All aspects of the government’s response to the COVID-19 pandemic should be thoroughly transparent so that taxpayers can have confidence that their money is being used for the common good and not to line anyone’s pockets,” Grant added.

However, Saunders noted, “It’s not clear who’s paying the bills for this.” Because the card carries a Visa brand, the bank will get an interchange fee every time it’s used for a purchase, she said. But many people are expected simply to withdraw the entire payment as cash, in which case the bank wouldn’t get that fee, she said.

It’s also unclear what protections are being instituted to guard against card or identity theft, or even what those risks are.

The EIP card’s summary of terms and fees specifies that withdrawal amounts may be limited “for security and regulatory reasons,” although what those might be is unexplained.

“Prepaid cards are the equivalent of cash,” Grant said. “There may be [fee] protections offered if they are lost or stolen, but I don’t know if that is the case here.”

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