Lawmakers Question State's “Triple Pay”

Legislators Urge State Officials to Renegotiate $1.6 Million Contract
Thursday, May 31, 2012

LANSING - A group of state lawmakers are raising serious questions about a contract that allows JPMorgan Chase Bank to profit three times off of taxpayers and unemployed Michiganders. In a letter to Steve Arwood, Director of Michigan’s Unemployment Insurance Agency, and John Nixon, Director of the state’s Department of Technology, Management & Budget; 16 legislators, led by Rep. Vicki Barnett (D-Farmington Hills) have requested answers and action on a contract with the Wall Street bank which administers state unemployment benefits by providing debit cards to out-of-work citizens. According to lawmakers, the current contract allows the bank to charge users unnecessary fees and puts taxpayers on the hook for high costs that other states with similar programs do not pay.

“JPMorgan Chase is padding its profits by nickel-and-diming the state and the unemployed workers who utilize this essential program,” said Rep. Barnett. “Chase, like other Wall Street banks, accepted billions in bailout money and it’s just not acceptable that we’d allow them to funnel more Michigan taxpayer dollars into their coffers that were intended to assist citizens in a time of need.”

Michigan’s debit card program currently has the nation’s highest fees for ATM balance inquiries and denied transactions, according to an analysis by the National Consumer Law Center. In the letter, lawmakers request information on how many Michiganders were billed such fees last year and how much they paid in total. Michigan’s unemployed citizens are already at a disadvantage because they receive the lowest maximum benefits in the Midwest, according to a recent report by the Michigan League for Human Services.

In addition, JPMorgan Chase is paid by the state of Michigan to administer the program – over $800,000 so far with authorization to bill another $800,000 – even though states such as California and Arizona have negotiated contracts in which administering the debit card services are free because banks make money through swipe fees charged to merchants when users make purchases.

“This contract allows JPMorgan Chase three different ways to profit – user fees, state payments, and swipe fees when it ought to be paid only once,” said Representative Jeff Irwin (D-Ann Arbor) “Every dollar that Chase siphons out of the unemployment system is one less dollar going to struggling families who will spend it in their local communities. So Chase gets triple-paid while Michigan’s unemployed workers, small businesses and taxpayers are losing out.”

Problems with the JPMorgan Chase contract surfaced last year when members of SEIU Local 517M who work at the Unemployment Insurance Agency recommended changes to the debit card contract as part of union member’s efforts to find new means of cost savings, accountability improvements, and better public services.

Frontline employees shared a report, Improving Michigan’s Unemployment Agency: A Proposal for Better Customer Services, with Director Arwood in August and in December rallied against an extension of the contract with JPMorgan Chase for another year.

The lawmakers’ letter requests that the department either pursue a renegotiated contract that eliminates charges to the state and to the users, or put out a request for proposals that allows Michigan banks to compete.

“It only makes sense to model this contract after those that JPMorgan Chase has signed with California and Arizona,” said State Representative Brandon Dillon (D-Grand Rapids). “It will save the taxpayers money and ensure that these dollars are used as intended as opposed to padding the profits of a Wall Street Bank.”