tax-refund-debitA wide-ranging government modernization bill passed in 2011 required all funds disbursed from the State Treasury be sent electronically. A major effect of this provision is that the Oklahoma Tax Commission will no longer send paper checks for tax refunds. Oklahomans who did not set up a direct deposit for their refunds instead received a pre-paid MasterCard debit card.

The switch was made to save money for state agencies, but critics pointed out that these savings could come at the expense of Oklahomans who would have to pay new fees to access their money. The new costs include a 25 cent fee for using the card to pay bills online, a 75 cent fee to transfer the balance to a savings or checking account online, and a fee of $1.50 per month after 60 days of card inactivity. The cards would also be subject to ATM fees if not used at MoneyPass ATMs, which can be difficult to find outside of Oklahoma City or Tulsa. According to the Oklahoma Tax Commission, 87 percent of the debit cards issued last year accrued fees.

The fee amounts may not sound like much, but the fees are likely to disproportionately affect the poorest Oklahoma families. Almost 1 out of 9 Oklahoma households do not have a bank account and therefore are unable to receive a direct deposit. Among Blacks and Hispanics, that rises to more than 1 out of 3 households. Another 23.2 percent of Oklahoma households are “underbanked,” which means they have poor access to mainstream financial services. These families mostly have very low incomes, and they rely on a yearly tax refund or safety net programs for their basic necessities.

The issue is not confined to tax refunds. The move to electronic disbursement means that numerous forms of public assistance are being distributed via debit cards. ­­These include disability aid, payments for foster care families, child support, TANF, and SNAP (food stamps).

It’s certainly worthwhile for state agencies to find savings through electronic funds transfers. However, as we make this transition, we need to be careful that Oklahomans don’t end up paying more in fees than is saved by the state.

House Bill 2057 by Rep. Scott Inman (D-Del City) would create the tools to, at a minimum, monitor what Oklahomans are actually paying. The bill requires any private business with a contract to provide debit cards for disbursing public benefits to make annual reports showing how much they received in fees. The bill has passed the House and is currently making its way through the Senate.

If it does turn out that the fees are growing too high, Oklahoma should consider measures to expand access to low-cost bank accounts. For example, Bank On programs are public/private partnerships to “provide low-income un- and underbanked people with free or low-cost starter or’second chance’ bank accounts and access to financial education.” These programs have been established across the country, including nearby Dallas, Kansas City, and Memphis, but so far there are none in Oklahoma.

Besides access to public benefits and refunds, low-cost banking would help families improve their financial stability and avoid debt traps like predatory payday lenders. It would create tools for families to save and build assets needed to escape a cycle of poverty. Digital technology is helping to make government become more efficient; now we should help Oklahoma’s poorest families do the same.

Note: This post initially provided the wrong year for when the government modernization was enacted