Personal Finance

Lawmakers worry debit-card stimulus payments come with high fees, compromise personal information

Key Points
  • About 4 million Americans will receive their stimulus payments via debit cards, rather than by direct deposit or paper check. 
  • Now, some senators on Capitol Hill are expressing concern that those payments may be at risk of getting thrown out because they are not clearly labelled.
  • The debit cards also come with unnecessary transaction fees and require individuals to reveal too much personal financial information, the lawmakers say.
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For millions of Americans, federal stimulus of up to $1,200 per person has been the most highly anticipated payment of the year.

But not everyone received their money the same way. Americans who were paid first generally got their money via direct deposit, while others received paper checks in the mail. The government also tried something new: sending the payments to some recipients by prepaid debit cards.

Now, a group of lawmakers on Capitol Hill is expressing concerns about those debit cards.

The stimulus payments were authorized by Congress with the $2 trillion CARES Act. Individuals may receive up to $1,200 and married couples up to $2,400, plus $500 per child under 17, provided they fall within certain income thresholds.

About 4 million Americans will receive their stimulus payments via debit card, the Treasury Department has said. A total of at least 171 million stimulus checks are expected to be deployed. So far, the government has sent out about 160 million payments.

A group of Democratic Senators, led by Maggie Hassan, D-N.H.; Sherrod Brown, D-Ohio; and Jack Reed, D-R.I., sent a letter to the Treasury Department and IRS last week regarding the debit cards.

Treasury did not notify the Americans who would receive debit cards to tell them how their payment would be sent, the senators wrote.

Because the debit cards arrive in plain envelopes labelled "Money Network Cardholder Services," many people did not recognize the payments and possibly threw them out.

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The senators also complained about high fees to replace lost cards. While the IRS has waived a $7.50 fee to replace a lost card, which usually takes seven to 10 days, getting your new card sooner will cost you $17.

"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 lawmakers wrote.

Other fees associated with the debit cards may also apply. That includes $2.00 for each out-of-network ATM withdrawal and a $5.00 per over-the-counter bank withdrawal.

The senators also expressed concern about the amount of personal information the debit cards require recipients to share. Just to register their cards, individuals must provide "substantial" personal details, the lawmakers said.

U.S. Treasury Secretary Steven Mnuchin displays a debit card used to distribute Covid-19 relief funds during a cabinet meeting in the East Room of the White House in Washington, D.C., May 19.
Kevin Dietsch | Bloomberg | Getty Images

"These burdens are all the more concerning given that these individuals did not request a prepaid debit card and are unable to request a preferred method of receiving their stimulus payment with the IRS," the senators wrote.

Further, the lawmakers expressed concern that that personal information could be shared with third parties for marketing or other commercial purposes.

The cards are issued by MetaBank N.A., the Treasury Department's financial agent, and are managed by Money Network Financial, LLC.

In order to activate their cards and move their money, individuals must divulge personal financial information.

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"The cardholder agreement states 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,'" the senators wrote. "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 are asking the Treasury and IRS officials to clarify exactly how the debit card program works, including how the recipients were identified, how the fees were decided and how recipients' personal financial information may be shared.

Other senators who signed the letter include Mark Warner, D-Va.; Sheldon Whitehouse, D-R.I.; Angus King, I-Maine; Tammy Baldwin, D-Wisc.; Elizabeth Warren, D-Mass.; Richard Blumenthal, D-Conn.; Mazie Hirono, D-Hawaii; Ed Markey, D-Mass.; Chris Van Hollen, D-Md.; Tina Smith, D-Minn.p Amy Klobuchar, D-Minn.; and Jeanne Shaheen, D-N.H.

It isn't the first time lawmakers on Capitol Hill have expressed concerns about the debit card payments. In May, members of the House Ways and Means Committee also sent a letter to Treasury, prompted by the confusion the debit cards were causing.