Stimulus Checks: Prepaid Debit Cards Come With Fees And Privacy Strings Attached

The stimulus checks directed by the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, are aimed at helping American families weather the economic impact of the coronavirus pandemic. But the 4 million Americans who received their payments on prepaid debit cards may be struggling with additional headaches, such as the card's fees for withdrawing cash and the requirement to share their personal data, a group of lawmakers says. 

The prepaid debit cards were directed by the Treasury Department as a way of getting the payments to the millions of households for whom the IRS didn't have banking information. The vast majority of taxpayers received their payments via direct deposit into their bank accounts, a free service. 

But the prepaid debit cards come with some strings attached, such as fees and a requirement to share personal data that could be disclosed to third-party marketers, according to a letter sent on Wednesday by Senator Maggie Hassan of New Hampshire and 14 additional senators to Treasury Secretary Steven Mnuchin and IRS chief Charles Rettig. 

The stimulus payments amount to $1,200 for single people who earn less than $75,000, while married couples who earn less than $150,000 get $2,400. Children under 17 are eligible to receive $500.

The rollout of the stimulus payments have been plagued with issues, such as delays in payment delivery and an IRS payment-status website that left many consumers confused and worried due to unclear messages and troubles logging in.

In some cases, consumers thought the prepaid debit cards were junk mail, an issue that the IRS highlighted last week on social media by telling taxpayers to "go through your mail carefully."

The prepaid debit cards includes a $2 fee for withdrawing money from an out-of-network ATM and $5 fee for getting cash at a bank counter, while those who wish to transfer the money on the card to their bank accounts "must navigate a complicated registration process and provide substantial personal information," the senators' letter says.

"I am very concerned by issues that Granite Staters and Americans across the country have raised, including that they missed the debit card because they thought it was a scam, or that they are struggling to use their card without having to pay extra fees or giving out personal information," Hassan said in an email to CBS MoneyWatch.

Hassan said she wants the Treasury to address the issues and "ensure that Americans can get full access to the stimulus payments that they desperately need."

Personal information

The letter questions the cardholder agreement for the stimulus payment through the prepaid debit cards, which the senators said "allows our constituents' personal information to be shared with third parties for marketing and other commercial purposes."

The cards, managed by Money Network Financial and issued by MetaBank, requires consumers to provide "significant personally identifiable information" to activate the cards or transfer the money off the cards, the letter noted. 

The cardholder agreement says that Money Network Financial "may disclose information to third parties about your Card account or the transactions you make" to "affiliates" and to "service providers." 

"This ambiguous language raises serious questions about whether Money Network Financial is permitted to sell personal information of individuals who activated stimulus payment debit cards," the letter noted. 

The senators are asking the Treasury and IRS to specify how the data could be used and whether it will be disclosed, as well as how the Treasury will protect consumers' personally identifiable information.

Replacement fees

The IRS earlier this month said it would waive the $7.50 replacement fee for lost cards — an issue for some consumers who thought the envelopes containing the cards were junk mail and tossed them in the trash. The tax agency also said it would reverse any replacement fees that had already been charged to consumers.

But replacement cards take between 7 to 10 business days to arrive, the lawmakers pointed out. In order to get the faster — within 4 to 7 days — consumers are charged a $17 fee, which the senators said they are "seriously concerned" about.