The Norman Transcript

October 31, 2013

Oklahoma’s Safety-Net payment system scrutinized

By Clifton Adcock, Oklahoma Watch
The Norman Transcript

NORMAN — In recent years, at least three Oklahoma agencies have mostly stopped mailing checks for welfare and other safety-net aid to the poor, the elderly and the unemployed.

The state also has stopped sending checks for income tax returns and child support payments.

Instead, the agencies have handed off the services at no cost to an outside company — Affiliated Computer Services, a subsidiary of Xerox Corp. Instead of checks, the company sends recipients pre-paid debit cards loaded with the value of the state benefits or refunds. Recipients can opt out of the debit card and receive a direct deposit of the funds in their bank account.

The state is saving millions of dollars a year by outsourcing the function. But some lawmakers believe that the state also has effectively shifted a lot of expenses for delivering public-aid benefits to the people who receive them.

The reason is an unknown number of cardholders are using ATM machines, and thus paying fees, to access their welfare payments, child support payments and other benefits or their income tax returns. The ability to charge fees is in ACS’ contracts with the Oklahoma Department of Human Services, the Oklahoma Employment Security Commission and the Oklahoma Office of the State Treasurer.

How much Oklahomans are paying in fees is unclear. ACS is not required to disclose the numbers.

That caused state Rep. Scott Inman, D-Del City, to introduce legislation last session that would require ACS or other companies that issue such cards to disclose how much in card fees individuals were charged.

Inman said he introduced the bill after hearing complaints from constituents about being charged fees to get income-tax refunds.

“The agencies are saving millions of dollars, but I’m not sure the taxpayers are saving millions of dollars,” Inman said at a hearing last year on the issue.

His bill, sponsored in the Senate by Sen. Greg Treat, R-Oklahoma City, advanced in the Legislature but died short of passage. Inman plans to reintroduce the bill next session with a compromise that allows only certain agency heads and legislators to see the fee totals.

Inman said recently he does not know how many people incur fees for using the debit cards, but complaints have come from around the state. He said the fees target the elderly, who might not be familiar with the system.

“I would say there’s a fair amount of people out there who are paying the fees,” Inman said.

Oklahoma is not the only state using a debit-card system. Forty-one states and Washington, D.C., use pre-paid debit cards to distribute unemployment benefits, according to the National Consumer Law Center.

ACS provides 60 government card-services programs in 28 states and cities and one for the U.S. Treasury Department, according to the company.

ACS and its subcontractor banks make money from the programs in several ways, including from:

· Fees paid by recipients for certain transactions, such as when they use the debit card to withdraw cash using ATM machines or they check their card balance more than a certain number of times. Fees can run up to several dollars per transaction.

· Fees charged to retailers when users make purchases with the card.

· The “float,” or interest generated by funds deposited with banks to cover the debit-card purchases.

Many Oklahomans who pay the fees are among the state’s most vulnerable — the unemployed, the poor, single-parent families and the elderly.

Oklahoma Watch is a nonprofit, nonpartisan journalism organization that produces in-depth and investigative content on important public-policy issues facing the state. For more Oklahoma Watch content, visit oklahomawatch.org.