January 2017
Prison Bank Accounts
While in prison, incarcerated people are assigned an account that holds the cash they were arrested with, money transfers from outside, and work pay. Prisoners and detainees can use these funds for commissary purchases or savings. In some cases, incarceration 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 these financial services. The prisons receive a percentage of the profits and the associated 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 deposit $50 in the account.
Corrections agencies argue that the move towards outsourcing incarcerated individuals’ accounts to “prison bankers” creates faster, transparent, and more efficient monetary transactions. However, families who send money through prison bankers experience extended processing periods, higher fees, and 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 their incarcerated family member’s account.
In November 2014, JPay eliminated fees for sending money orders to incarcerated people in Indiana, Ohio, and Oklahoma supposedly after facing questions about the impact of these policies on “the company’s poorest customer.” This created a free deposit option for more than 100,000 incarcerated people. Some states, including Arizona, Colorado, Florida, Kentucky, Mississippi, Utah, and Wyoming, still charge fees ranging from 50 cents to two dollars. These states do not offer a way to transfer money to incarcerated people without additional fees.
This expanding model of prison banking places low-income families in an even more financially stressful and vulnerable situation. A high proportion 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, along with prison banker fees, incarcerated individuals can quickly accumulate debt. There are cases where newly admitted individuals cannot pay for the initial costs of prison booking fees or basic goods. These costs are then put on the incarcerated person’s account, creating a debt that must be paid off before being able to use any future money transfers.
Release Cards
When released from prison, formerly incarcerated people are issued a release card in a form of a debit card that contains the money left in their prison account. The cards are controversial for their predatory lending practices and lack of alternatives or regulation.
Depending on the company that issued the card and the location of the person using it, release cards may incur a variety of fees, such as monthly maintenance fees, individual transaction fees, charges for checking the account balance, low-balance fees, cash withdrawal fees, and 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 a $2.99 fee for 90-day inactivity.
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 ten providers of prepaid cards in the nation. The Numi Financial release cards come with similar fees as the JPay release cards, with people losing between seven and 67 percent of their money to fees.
In October 2016, the Consumer Financial Protection Bureau (CFPB) issued federal protections for prepaid account users, including release cards. 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 rules include 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 failed to address the fact that formerly incarcerated people are a captive market of these cards, as they cannot receive their money in any other way.
Prison Bankers
The largest prison bankers are Bank of America, General Payment Systems, JPay, JPMorgan Chase, Keefe Group, Numi Financial, SunTrust, and Wells Fargo. JPay is an industry leader, managing 1.6 million accounts in thirty states, which are seventy percent of all incarcerated people’s accounts in the U.S. In 2013, JPay generated $50 million from fee revenue alone.