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Debit Express cards for Social Security disability are under fire

Since 1996, the Treasury Department has been tasked with persuading all recipients of federal benefits to accept those benefits by electronic funds transfer -- either via direct deposit or through pre-loaded debit cards. Congress ordered the change to save on costs and to fraud and benefits theft.

If you receive Social Security disability benefits, you may be aware that you have the option of receiving them on a Debit Express card through Comerica Bank. You may also have noticed Treasury using some high-handed tactics to convince paper check recipients to make the switch -- including telling beneficiaries that continuing to get paper checks puts them “out of compliance with the law.” Comerica has been aggressively recruiting people receiving federal benefits to use the Debit Express card, for which they have a sweetheart contract with the government.

Unfortunately, Comerica’s fees on the Debit Express card, though lower than those of some other banks, are costly enough to eat away at the incomes of millions of people living on fixed incomes, according to the nonprofit Center for Public Integrity. Social Security disability benefits, for example, average only around $1,000 a month. For example, Comerica charges an ATM fee of 90 cents per withdrawal after the first, and you can’t withdraw your entire monthly check at once. Out-of-network withdrawals cost at least $2.00.

Worse yet, Debit Express cards don’t necessarily cut down on benefit theft -- and Comerica isn’t helping. The Center tells the story of a 57-year-old Social Security disability beneficiary. Alarmed by Treasury Department ads saying that she would be “out of compliance with the law,” she switched to a Debit Express card. Within months, thieves had stolen six months of her income by redirecting her benefits to another bank account -- which Comerica did nothing about, despite several requests.

“I’ve learned I can’t trust those cards,” she says. She switched back to paper checks.

Unfortunately, many people receiving federal benefits don’t have bank accounts. Even those who do are being heavily pressured to choose Debit Express even if it’s not their best financial choice -- going so far as to sign people up automatically if they don’t respond to Treasury notices about the card.

What it all comes down to is that Comerica has an extremely profitable deal providing these cards, and the Treasury Department is saving millions of dollars a year using electronic payments. Unfortunately, these gains have been achieved by shifting the costs and risks to some of the most vulnerable Americans.

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