T.O., Manitoba push debit cards for welfare recipients

Posted on June 1, 2011 in Social Security Delivery System

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Canoe.ca – money/business/canada
May 30, 2011.   Stefania Moretti

Proponents say the cards are cheaper than issuing paper cheques and help recipients avoid excessive fees charged at payday advance lenders.

Critics say the cards give government a way to track how welfare dollars are spent and single out beneficiaries to store clerks.

Welfare is already a highly charged issue for the general public, said policy expert and former public servant John Stapleton.

“There will be the suspicion that we are making it too convenient,” he said.

But after pouring over information submitted by a number of potential partners, Joe Manion, director of program development with Toronto Employment and Social Services, said his team is confident the plan to modernize the system makes financial sense for both government and clients.

“We are certainly keen on it,” Manion said. “Cheques can be both expensive and cumbersome.”

Only a small minority of welfare recipients don’t have bank accounts and still receive cheques.

Since banks don’t have to cash welfare cheques, this group has a tough time with tellers because of their appearance, behavioural issues or lack of identification, Stapleton said. As a result, many are forced to pay high fees at dedicated cheque-cashing joints.

Manitoba is also considering issuing debit cards to its 12% of clients who do not receive their welfare benefits via direct deposit.

If it gets off the ground, Toronto’s will likely be the first such program in the country after failed attempts in B.C. and Alberta.

Manion said those programs got the boot for various reasons that the city has already considered. Pay Links, the card issuer in the 2006 Alberta pilot project, for instance, was having financial difficulties.

The initiative was cancelled for a number of reasons, said Fiona Wiseman, a spokesperson with the Alberta Ministry of Employment and Immigration.

For one, Pay Links, which later went bankrupt, could not meet the province’s privacy standards and the project came at a time of fiscal restraint. The program would have cost an additional $1.5 million to implement.

The B.C. government found that a pilot project with 20,000 benefit holders in Victoria cost more than the traditional cheque process.

Since scrapping the plan, the Alberta government has teamed up with CIBC to get more welfare recipients bank accounts for direct deposit.

Manion said his team has also studied success stories south of the border where debit cards have been issued to welfare recipients for years.

Big Brother is watching

Though electronic benefits transfer cards for welfare recipients in some U.S. states have been around since the late 1990s, they’re still making headlines.

Earlier this month, leaders at the U.S. Senate finance committee introduced a bill to ban welfare recipients from using their government-issued debit cards at casinos, strip clubs and liquor stores.

Last year, former California Governor Arnold Schwarzenegger banned the use of the cards at casino machines and issued an executive order requiring welfare recipients to promise they will use cash benefits only to “meet the basic subsistence needs” of their families.

An estimated $5 million in California cash benefits was spent or withdrawn from ATMs at casinos and poker rooms between January 2007 and May 2010.

Through an access to information request, a local news outlet in New York also recently found thousand of dollars are regularly being withdrawn from ATMs at casinos, bingo halls, strip clubs and liquor stores.


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