Govt. benefit card disbursements up in 2013

As a condition of the Dodd-Frank Act of 2010, the Federal Reserve Board is mandated to make an annual report to Congress concerning the state of the market for federal, state and local government-administered prepaid card programs. In its July 2014 report, the Fed said that general-purpose reloadable (GPR) prepaid cards accounted for 14 percent of the $1.1 trillion in government benefit payments disbursed in 2013.

In comparing 2013 data to 2012 data collected from government agencies, the Fed found that a slight increase in GPR card disbursements occurred last year. “This increase is consistent with an ongoing shift toward electronic payment methods within the government sector,” the Fed said.

Prepaid card issuers of GPR government benefit cards collected over $502 million in fee revenue during 2013, with 65 percent of that revenue coming from interchange fees and the remainder from cardholder fees, according to the Fed. The board noted that interchange fees on GPR cards equated to 1.2 percent of the value of purchase transactions.

The Fed said government-administered GPR card programs made 58 percent of its cardholder fee-related revenue from ATM cash withdrawals, even though those programs usually offer cardholders one or more free withdrawals per month. Additionally, customer service fees accounted for 15 percent of revenue, while monthly maintenance fees made up 14 percent.

However, revenue from overdraft fees decreased by 83 percent in 2013. The Fed stated that the apparent reason for this decrease was the result of a provision of the Electronic Fund Transfer Act which strips away interchange fee cap exemptions from GPR card programs that charge overdraft fees. The interchange fee cap originated from the Durbin Amendment to the Dodd-Frank Act. The amendment, which amended the EFTA, went into effect in July 2012.

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