California's Welfare Families Paid Banks Millions In Fees For Public Assistance

Rodney Robinson, a single father in Los Angeles, needs government help to pay his rent. But getting that help from the state of California involves sharing the money with some of the nation’s largest banks or check cashing services.

The state distributes public assistance through so-called EBT cards, which look and work much like debit cards. But Robinson's neighborhood in South Los Angeles has only three places that allow him to use that card to withdraw enough cash to cover his monthly rent free of charge. He can visit any bank ATM, but that entails charges of as much as four dollars per transaction. A local check cashing chain charges $1.75. Grocery stores will let him withdraw cash, but only after a purchase.

"Those are your options, in this neighborhood anyway," said Robinson, 43, who has resigned himself to surrendering part of his $317-per-month check for lack of other options. "I can either pay the fee, or go buy several packs of gum to get the money and suck up a different kind of waste."

Across much of the nation, administering relief programs such as unemployment benefits and emergency rental assistance has become an increasingly substantial profit center for banks and other financial services firms, according to analysts. Like California, many states have contracted with private companies to distribute these funds. While the contracts have saved states millions of dollars in costs previously incurred for printing and mailing out checks, the agreements often give companies the ability to extract fees from recipients -- some of the nation’s most vulnerable families

Read on.