California Law Bans Overdraft, Credit on Benefit Prepaid Cards (Dec. 12, 2013)
A new law in California will prohibit overdraft fees and extend other protections to recipients of state unemployment and government assistance who have their benefit funds deposited onto a prepaid card. The new statute, which goes into effect on Jan. 1, 2014, brings California’s laws in line with federal regulations, which provide similar protections for federal benefits deposited onto a prepaid card, such as the U.S. Treasury’s Direct Express program. California Assembly Bill 1280, which enacted the law, was sponsored by California State Assembly Speaker John A. Perez and signed by Governor Jerry Brown in October.
“Overdraft fees have no place on prepaid cards and are especially harmful to families struggling to live on unemployment or state benefits and who need every penny to survive,” said Lauren Saunders, managing attorney at the National Consumer Law Center. “Overdraft fees are not permitted on prepaid cards used to receive federal payments, and we applaud California for extending those protections to state benefits.”
In addition to barring overdraft fees, the California law prohibits state benefit funds from being loaded onto a card that lacks deposit insurance, fails to comply with electronic payment protections or has certain credit features. Benefits paid out under the state’s unemployment insurance program are covered under the law, along with those paid by the California Work Opportunity and Responsibility to Kids (CalWORKs) and Temporary Aid to Needy Families (TANF) programs.