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Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.

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January 11, 2016


Prisoner Release Cards: How to Protect the Interests of Recently Released Inmates?

I recently watched a late-night comedian criticize prison reentry programs in the United States. The segment focused on the resources—or lack thereof—that are provided to released inmates. One of these resources, I have recently learned, is increasingly a prepaid card.

Upon imprisonment, inmates are given a trust account to hold money that they receive for prison work and from family and friends. When they are released, they may also receive start-up funds to help with the reentry process. According to the Federal Bureau of Prison's Inmate and Custody Management Policy, "an inmate being released to the community will have suitable clothing, transportation to inmate's release destination, and some funds to use until he or she begins to receive income. Based on the inmate's need and financial resources, a discretionary gratuity up to the amount permitted by statute may be granted." While the policy expands the details of what constitutes suitable clothing and the method of transportation, there is no mention of how to disburse funds to the released individuals.

Enter prison-release prepaid cards. Many state and federal prison systems enter into contracts with prepaid card providers pursuant to a public bidding process to provide prison release funds through a prepaid card as an alternative to cash or checks. This shift in disbursement methods may be attributable to concerns about cash controls in the prison setting and the high check-cashing fees some inmates who lack traditional bank accounts incur, to name a couple of possibilities. Regardless of the disbursement method that the correctional agency chooses, this vulnerable population depends on every last penny.

Some people maintain that account fees are too high on these prepaid cards and that agreements with cardholders contain forced arbitration clauses. Could the correctional agency negotiate better terms on behalf of the released prisoner? Or could the inmate possibly be given options for the trust fund distribution—cash, check, prepaid card, or even a Paypal account?

A late-night comedian may have the ability to isolate one slice of the problem with prison release programs, but our regulations shouldn't piece together a solution to an overarching issue. Likewise, there are challenges with creating blanket regulations for a product category like prepaid cards that contains many different products meeting a wide variety of distinct needs, each with unique characteristics and different users. Isn't the goal is to provide released prisoners the freedom to use money that belongs to them, as for any other citizen?

Photo of Jessica J. Trundley By Jessica J. Trundley, AAP, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

January 11, 2016 in prepaid , regulations | Permalink

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