Nickel & Dimed
CHASE BENEFITS SERVICE KICKS JOBLESS WHILE THEY'RE DOWN
by Catherine Curan
New York Post, 03/18/2007
J.P.Morgan Chase CEO Jamie Dimon has found his organic growth - profiting handsomely off of millions of down-on-their-luck Americans.
Dimon has led a Chase stampede into government direct-payment cards, which funnel billions of dollars in unemployment benefits, child-support payments, disaster-relief payments and other kinds of state benefits in more than 30 states, a Post investigation has found.
The fast-growing payment-card program, which was expanded into New York last September - where out-of-work folks get pay via a Chase debit card instead of a paper check - has helped J.P.Morgan Chase's Treasury & Securities Services unit produce the best return on equity of any company division - 48 percent.
Two years ago, when the direct-payment card operation was smaller, the division posted the worst ROE of any of the company's six divisions.
The New York program has come under sharp criticism from recipients of the $2.1 billion in benefits Chase disperses each year. Complaints focus on:
* The $1.50 fee per use Chase charges each recipient for using non-network ATMs more than twice a month, siphoning away a slice of their benefit, already one of the lowest in the country.
* The "Direct Payment Card" insignia each debit card carries, a sort of scarlet letter clearly identifying the owner as out of work.
* The lack of a direct-deposit option that would funnel the benefits straight to the recipient's bank account. Dimon's Chase still profits, though, by pocketing a fee of about 1.5 percent whenever someone uses the Chase direct-payment card at retail.
"I am unhappy about having been stuck with Chase bank as the provider," says one unemployment-benefits recipient in Brooklyn, who spoke only on the condition of anonymity. He said the Department of Labor's card design is a dud.
"I think the logo that announces it's an unemployment benefit card is a stigma," he says.
Chase's Treasury & Securities Services unit rang up $1.1 billion in net income last year, or 7.5 percent of all corporate profits. In 2004, its profits were 6.2 percent of all profits.
Chase declined to comment for this story.
In the past, the No. 3 U.S. bank and the New York Department of Labor have trumpeted that the direct-payment card system would save the state $4 million a year - and cut down on fraud.
But many recipients - who don't bank with Chase and are being hit with multiple fees each month - can be forgiven if they feel the $4 million is coming out of their pockets instead.
"Where I live there are not that many Chase branches," says Brooklyn resident Holly Moore, 26, who started receiving benefits last September when she lost her job as an office manager and personal assistant.
"When it was a plain check I could deposit it into my own bank, and write a check whenever I wanted" without the risk of ATM fees, she said.
The rollout of the Chase card program appears to have been botched by the DoL, according to the state's contract with Morgan Chase, a copy of which has been obtained by The Post.
In a stunning example of bureaucratic bungling, the department still has not completed testing of its capability to offer claimants the option of direct deposit - more than six months into the program.
Chase was prepared to offer direct deposit from the get-go, but the DoL opted for a no-choice launch with cards only, department spokeswoman Ruth Pillettere said.
"We felt, for a broad spectrum of our customers, debit cards would better serve them," she said. "It was always our intention of also offering direct deposit."
The sloth-like DoL hopes to get direct deposit under way by May, she said. There is also a card redesign in the works, its due sometime in the next six months.
For Dimon, who has been knocked by some on Wall Street for his inability to produce meaningful organic growth - that is, growing revenues by other means than buying up rival companies - the direct-payment cards seem to be the elixir he has sought.
For out-of-work New Yorkers, though, that growth seems to come at their expense.