Debit cards slam released prisoners with sky-high fees, few protections

Introduction

When Clarence Justin Aldred was released from Macomb Correctional Facility in New Haven, Michigan, in July 2013, he left with the balance of his inmate account, which consisted of his prison wages and any leftover money sent by family.

Aldred received no cash. The money was accessible via a debit card issued by JPay Inc., a Miami-based company that provides financial services to inmates. After 29 years inside, the card was Aldred’s only way to make most purchases. After using it a few times, Aldred, 57, noticed that $15 was missing.

“They kept charging me every time I used it. Nobody told me that,” he said.

Michigan is one of at least 15 states where prisoners are given their inmate account balance on a prepaid card when they are released. The cards usually carry a variety of fees that eat away at the small amount of money most former inmates are left with to restart their lives. Inmate release cards have drawn criticism from consumer lawyers and faced litigation in at least two states.

One county in Arkansas agreed to pay $71,609.58 to settle charges that the fees illegally deprived people of access to their own money. A federal judge refused to approve the proposed settlement and invited the parties to submit a modified agreement.

JPay provides the cards in at least 11 states. In most cases, the fees exceed what consumers would pay for similar services.

In Michigan, for example, JPay charges users 50 cents to check the card’s balance at an ATM, $2 to withdraw cash, 70 cents to make a purchase and 50 cents a month for a maintenance fee. Even not using the card costs money. Doing nothing draws a $2.99 fee after 60 days. To cancel the card, it costs $9.95.

Alred said he doesn’t recall if the list of fees was included in the piles of paperwork he received when he was released from Macomb.

JPay CEO Ryan Shapiro says his company doesn’t make money on the cards, because the fees go to middlemen that run prepaid card programs for JPay.

“[The cards are] not really a revenue-generating or a money-making business for us,” Shapiro said in an interview. The company uses the release cards to offer a more complete suite of services to prisons, so they will be more likely to contract with JPay for other services like money transfers to inmates and prison email, he said.

Fees aren’t unique to inmate release cards. Prepaid cards issued by companies like Green Dot and American Express also charge users for a range of services.

The difference is choice: Many consumers who choose to use a prepaid card, often instead of a bank account, can shop around for the least costly option. Released inmates like Aldred can’t.

“They told me there was no check option,” said Timothy Jon “TJ” Spytma, of Ann Arbor, Michigan.

Spytma left G. Robert Cotton Correctional Facility in Jackson, Michigan, in July after 39 years. He had $170 on a JPay card, money he spent on clothing. Once he saw the fees, he decided to cash out as soon as his July pay was deposited onto the card.

“I’ll go to an ATM and remove it all,” he said. “They charge a small service fee every time you even check your balance or make a withdrawal.”

Prisons and jails say the cards save the institutions money and help prevent inmates from paying exorbitant fees charged by storefront check-cashers.

The cards also guard against fraud, said Marty E. Moore, a Utah-based lawyer who represented a bank that issued prepaid cards given to inmates at Ramsey County Law Enforcement Center in St. Paul, Minnesota.

The cards “are quick and leave a complete auditing trail,” Moore said. “If you’re a sheriff, you don’t want your personnel skimming funds. You want the inmate to get every penny he put in.”

That doesn’t happen, however, when they’re forced to use debit cards, according to former Ramsey County inmates who last year sued the county, the bank and Keefe Commissary Network, which provides the cards to the jail.

The former prisoners said they were hit with a $25 booking fee that is deducted from every inmate’s account in addition to the “unavoidable” fees that are charged to inmate release cards. They said the deductions violated their constitutional right to due process. A federal judge has dismissed the lawsuit.

“[Avoiding the fees] is doable, but it’s incredibly onerous,” said Joshua Williams, the plaintiffs’ attorney. He has filed an appeal in the case.

Keefe Commissary Network is the nation’s biggest operator of stores inside prisons. It charges marked-up prices for items sold to inmates and often returns a share to the prisons that contract with it. Keefe’s parent company, St. Louis-based Centric Group, did not respond to requests for comment.

Prison release cards appear to fall between the cracks of existing consumer protection rules, said Dee Pridgen, professor of law and social responsibility at the University of Wyoming. Because the cards are issued to a “captive” customer base, she said, the companies can “exploit the prisoners who find themselves with these cards, but who don’t have the knowledge or experience to use them wisely.”

Federal law forbids forcing consumers to create an account as a condition of getting paid or receiving government benefits like Social Security. Companies that want to pay their employees using debit cards must also offer alternatives such as paper checks or direct deposit to a checking account.

Prisoners don’t enjoy those protections, several consumer law experts said, because the law does not address their specific situation: Prison wages and benefits are deposited first into an inmate’s prison account, and only transferred to the debit card later, when the inmate is released.

The trust account is required not as a condition of employment but as a condition of being a prisoner, a situation not addressed by the law, said Lauren Saunders, associate director of the National Consumer Law Center’s Washington, D.C., office.

Daniel Wagner contributed to this report.