March 1, 2023

CFPB: New CFPB Issue Spotlight Examines High Fees that Chip Away at Public Benefits

Recipients of public cash assistance programs can be subjected to inadequate customer service and fees that cut into benefits

The Consumer Financial Protection Bureau (CFPB) released a new issue spotlight examining how the financial products used to deliver public benefits, like Social Security and unemployment compensation, affect individuals’ ability to fully access the assistance provided through those programs. The issue spotlight outlines how governments often choose to deliver public benefits through financial products, particularly prepaid cards, that may subject recipients to high fees and cut into the amount of funds the consumer receives. Differences in states’ decisions about how to deliver benefits can make the receipt of benefits, like unemployment compensation, uneven across similarly situated individuals in different states. The issue spotlight also highlights that inadequate customer service can leave consumers unable to rectify problems with their accounts, as well as can render them unable to access critical funds.

“When cash assistance programs are drained by unnecessary fees and poor customer service, it hurts individual recipients and taxpayers,” said CFPB Director Rohit Chopra. “The CFPB will continue to ensure that companies delivering public benefits obey federal consumer financial laws and continue to work with federal and state officials to make public benefits delivery more effective.”

The issue spotlight highlights that:

Although the concerns that the CFPB has identified are not limited to cash assistance provided by prepaid cards, the issue spotlight focuses in particular on cash assistance provided by prepaid cards because of specific recurring issues arising with the provision of benefits by that method. Prepaid cards often have numerous fees that reduce the amount of funds available for consumers who are most in need.

In order to ensure that those involved in the delivery of cash assistance comply with their obligations under the law, the CFPB will monitor and take action against entities who violate federal consumer financial protection laws. The CFPB has previously brought action against entities that left distressed consumers receiving government assistance in a lurch during the height of the pandemic.

Additionally, the findings of this issue spotlight will be shared with federal and state agencies that administer public benefits programs to support efforts to increase competition or otherwise address the findings of this spotlight.

Read the issue spotlight, Public Benefits & Consumer Protection.

Consumers can submit complaints about financial products and services, by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).

This post was originally published here.