New England Biz Law Update
The U.S. Department of Labor (DOL) has released revised guidance on how state workforce agencies should deliver unemployment payments, aiming to enhance consumer protections and reduce unnecessary fees.
The updated Unemployment Insurance Program Letter incorporates recent research from the Consumer Financial Protection Bureau (CFPB) on “junk fees” and other consumer issues associated with public benefits and prepaid cards.
About 12 million unemployment insurance claims were filed in 2023. The new guidance addresses concerns that many recipients face challenges in accessing their full benefits due to fees and limited payment options.
Key points of the DOL’s guidance include:
- Access to benefits at no cost: States must provide a reasonable option for recipients to receive the entire amount of their unemployment payment without fee.
- Mandatory consumer choice: States are prohibited from requiring recipients to receive unemployment payments solely on state-administered debit cards. Recipients must be offered at least one alternative, typically direct deposit or paper checks.
- Elimination of revenue sharing: The DOL advises states to avoid revenue-sharing agreements with card providers, as these can create conflicting financial incentives. Instead, states are encouraged to select debit card providers based on lowest costs and highest service quality for consumers.
- Fee reduction: States are urged to negotiate prepaid debit card contracts to minimize or eliminate fees for common transactions such as ATM usage, balance inquiries, and bill payments.
- Improved customer service: The guidance directs states to provide free telephone customer assistance for recipients who may have difficulty resolving issues online.
The CFPB has indicated that they will be monitoring how states and prepaid card companies respond to these changes. States are expected to review and potentially renegotiate their contracts with card providers.
