Banking and Financial Services

Banks and other financial services companies are involved in mass incarceration through providing services to the private prisons companies and through providing financial services in prisons and for incarceration facilities.

Financial Services in Prisons
Prison Accounts
While in prison, incarcerated people are assigned an account that holds the cash they were arrested with, as well as any money transfers or work pay. The funds are used for commissary purchases or savings. In some cases, facilities charge for toiletries, winter clothes, or shoes.

Until 2002, prisons managed incarcerated people’s accounts and families could send money directly to the prisons. In 2002, the private company JPay set up accounts through its “commissions” incentive — which offered financially-strapped prisons an opportunity to make money through privatizing money management. The prisons receive a percentage of the profits and the costs are shifted from the prisons to the incarcerated people and their families. When family members send money to the prison, they are required to pay a fee that can range from 3.7 to 45 percent of the deposit amount, depending on the provider or state contract. For instance, in 2014, correctional facilities in Virginia charged a $6.95 deposit fee to put $50 in the account.

Corrections agencies argue that the move towards outsourcing incarcerated individual’s accounts to “prison bankers” creates a faster, transparent, and more efficient monetary transaction. However, families who send money through prison bankers experience more extended processing periods, higher fees, and have limited alternatives to the electronic transfers.  In the case of industry giant JPay, families that opt out of using electronic or phone transactions have to wait a month for the money order to be transferred to an incarcerated family member’s account. While JPay has stopped charging a $1 to $2 fee for accepting money orders in all states but Kansas, seven states still lack a free option for inmates to receive money, including Florida, Arizona, Colorado, Kentucky, Mississippi, Utah, and Wyoming.

The problem with this expanding model of prison banking is that it places low-income families in an even more financially stressful and vulnerable situation. The majority of incarcerated people are from low-income families, and these families report foregoing paying utility bills, accessing medical care, or eating on a regular basis to send money to their incarcerated family members.

As prices for necessary goods continue to escalate, together with prison banker fees, incarcerated individuals can quickly accumulate debt. There are cases where newly admitted individuals cannot pay for the initial cost of prison booking fees or basic goods. These costs are then put on the incarcerated individual's account and creates a debt that must be paid off before receiving any future money from their families. This creates a backlog of debt and makes it harder for families to send money for the  incarcerated people to use.

Release Cards
When released from prison, formerly incarcerated people are issued a release card that contains the money left from their prison accounts. These are prepaid cards that are to be used as regular debit cards. The cards are controversial for their predatory lending practices and lack of alternatives or regulation.

Depending on the service provider and location user, these cards may incur charges for checking the account balance, a monthly maintenance fee, a transaction fee, a low-balance fee, cash withdrawal fee, or inactive account fees. For instance, in 2015, JPay charged users in Tennessee .50 cents to check their account balance, .70 cents per transaction, .50 cents for balance inquiry, and $2.99 for 90-day inactivity fee.

Numi Financial, a private company located in Carlsbad, California,  is one of the largest providers of release cards. The company issues more than 600,000 release cards each year, making it one of the top 10 providers of prepaid cards in the nation. The release cards from Numi Financial come with similar fees as the JPay release cards, with people losing 7 percent to 67 percent of their money to fees.

In October 2016, the Consumer Financial Protection Bureau (CFPB) finalized federal protections for prepaid account users. The protections came after significant public scrutiny, including recommendations from several Senators and two class action lawsuits against JPMorgan Chase and Bank of America.  The protections include free and easy access to account information, error resolution rights, and protections for lost cards and unauthorized transactions. In addition, the new rule includes a “Know Before You Owe” disclosure that provides all of the information on fees for the accounts. Through these new protections, prison release cards were recognized as prepaid cards. However, the CFPB’s new rules neglect the fact that there is no opt-out option for these release cards for incarcerated people.

Prison Bankers
The largest prison bankers are General Payment Systems, JPay, Keefe Group, Numi Financial, Bank of America, JPMorgan Chase, SunTrust, and Wells Fargo. JPay alone manages 70 percent of incarcerated people’s accounts in the industry, servicing over 1.6 million accounts across 30 states. In 2013, JPay generated $50 million in fee revenue alone. 

Investments and Loans
Another role banks have in the criminal justice system is acting as major investors and lenders for private prison companies. The two largest private prison companies are CoreCivic, Inc. (formerly Corrections Corporation of America or CCA) and the GEO Group (GEO). Banks offer CoreCivic, Inc. and GEO billions in revolving credit limits, term loans, and bonds that aid these companies in expanding their control of the criminal justice system. The six major lenders are Bank of America, Wells Fargo, JPMorgan Chase, BNP Paribas, SunTrust, and U.S. Bancorp.

CoreCivic, Inc. and GEO are $1.5 billion and $1.9 billion in debt, respectively. One source of the debt arises from revolving credit limits. Both CoreCivic, Inc. and GEO have $900 million credit limits. Bank of America, CoreCivic, Inc.’s administrative agent, secures the loans and credit limit for CoreCivic, Inc.. BNP Paribas is GEO’s administrative agent. When CoreCivic, Inc. and GEO wanted to increase their credit limits, Bank of America and BNP Paribas brought together the other major lenders to negotiate an agreement. As of June 2016, CoreCivic, Inc. has used 49 percent of its credit limit and GEO has used 50 percent.

Banks also provide loans and bonds to CoreCivic, Inc. and GEO. In October 2015, CoreCivic, Inc. was given a loan of $100 million, and in August 2014, GEO was given a loan of $296,250,000. As of June 2016, CoreCivic, Inc. has paid $2.5 million and GEO has paid $5,250,000 of their loans. For bonds, CoreCivic, Inc. and GEO have issued $925 million and $1.5 billion bonds, respectively, as of June 2016.

Debt financing allows private prisons to purchase smaller companies and increase their control on the criminal justice system. GEO has acquired nine new companies since 2005, eight of which were obtained through debt financing totaling $2 billion. CoreCivic, Inc. has used debt financing to purchase two of the three companies it has acquired since 2013.

There are 33 U.S.-based major investors in the for-profit prison industry who own over one million shares in CoreCivic, Inc. and GEO. Activists groups refer to the 33 investors as the “million shares club.” Wells Fargo is a major investor in both CoreCivic, Inc. and GEO Group. As of its 2015 filings with the Securities and Exchange Commission, Wells Fargo owned 779,902 shares in CCA and 438,648 shares in GEO Group.

Companies