Senate Democrats raise concerns about debit cards used for stimulus payments

A group of Senate Democrats on Wednesday raised concerns about the coronavirus relief payments sent to taxpayers via prepaid debit cards, saying the cards have posed challenges for taxpayers.

“We are concerned that this decision has imposed unnecessary burdens — including fees — on individuals who would have preferred to receive their stimulus payments by check, and that the process of activating these prepaid debit cards requires individuals to provide personal information that could be shared with third parties for marketing and other commercial purposes,” the senators wrote in a letter dated Wednesday to Treasury Secretary Steven Mnuchin and IRS Commissioner Charles Rettig.

Under legislation enacted in March, most Americans are entitled to one-time direct payments of up to $1,200 per adult and $500 per child. Treasury said earlier this month that it’s distributed 159 million payments.

The Treasury Department announced in May that it was distributing nearly 4 million of the payments via prepaid debit cards. The department said that it was sending the cards to people whose bank information was not on file with the IRS and who had their tax returns processed at IRS service centers in Andover, Mass., and Austin, Texas.

Treasury said that it decided to issue some of the payments via prepaid debit cards, rather than by paper check, in an effort to get the payments in a more prompt and secure manner.

But the debit cards have caused confusion for some of their recipients, since they were not expecting to receive a card and the cards came in a plain envelope from Money Network Cardholder Services, without any reference to the IRS. As a result, some taxpayers thought the cards were a scam and discarded them.

The IRS has said that there won’t be a fee for a taxpayer’s first replacement of their card. But the Democratic senators said they were worried because the free replacements take seven to 10 business days to arrive, and if people want them in four to seven business days instead they have to pay a $17 fee.

“We are seriously concerned about imposing these fees on individuals who urgently need the direct cash assistance to which they are entitled under the CARES Act,” the senators wrote.

The senators also said that many recipients could have trouble accessing the money on their cards. Recipients may face daily limits on the amount they can withdraw from an ATM, and there is a $2 fee for out-of-network ATM withdrawals and a $5 fee for over-the-counter bank withdrawals on the fee schedule for the cards. Additionally, people need to provide personal information in order to transfer money online from their prepaid debit cards to their bank accounts, the lawmakers said.

The Democratic senators further expressed concerns about the fact that the cardholder agreement for the debit cards states that Money Network Financial can share informations about people’s accounts and transactions pertaining to the card with affiliates and 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 senators wrote.

The senators asked the Treasury Department and the IRS to provide information about how the administration determined which taxpayers would get their direct payments on prepaid debit cards, how the fee schedules were set and whether Money Network Financial can send cardholders commercial correspondence.

Fifteen Democratic senators signed the letter, including Sens. Maggie Hassan (N.H.), Sherrod Brown (Ohio) and Jack Reed (R.I.).