Pennsylvania's Department of Banking and Securities says that General Payment Systems, formerly known as Continental Prison Systems, has been offering its products without a money transmitter license. As such, the
company will pay $25,000 and settle a number of administrative responsibilities.
So, while this is not earth-shattering news, it does provide a moment to look in to the world of prisoner payments.
General Payment Systems ("GPS") has built out a system of kiosks that work in conjunction with a prepaid card to serve as the go-between for prisoners and their families. The kiosks create an easy way for family members to send cash to a prison commissary so that their loved ones can buy potato chips and brand-name toothpaste. Likewise, given that most prisoners do earn wages while serving time, it also lets a prisoner remain a contributor to people on the outside. Too many families are broken when a parent is incarcerated. Sending a few dollars, even if it makes very little difference in a budget, still helps to nurture a bond.
This is a bi-furcated system built upon a system of in-prison money transmitting kiosks and a prepaid card for re-entry. The kiosks are held by General Payment Systems, the corresponding prepaid card is delivered through a turnkey relationship with an independent program manager known as mFunds. mFunds manages payroll cards, release cards, and then a variety of incentive cards. mFund manages the issuer relationship.
GPS does a lot more than handle payments. They try to think holistically about the needs of their account holders. For example, they will send a card to "a loved one." In fact, they will send that card for only $5.95.
The case details what it describes as a "unique settlements account" for each prison. The key point of differentiation stems from the nature of the naming. Accounts are held by the prison and not by the individual.
"All funds collected by EZ Card and Kiosk on behalf of the Prisons, except for the convenience fee, are assets of the Prison and at no point become assets of any other party."
This means that it is only upon release that a prisoner can make a claim to funds held in the system. But although deposits become an obligation to the prison, all transaction fees are charged to consumers and given to GPS.
Then Comes the EZ Exit Card
Prisoners get an EZ Exit Card upon release. Jails arrange the contract, most likely because handling payments for released prisoners can become difficult. Release cards are one example of niche products serving captive audiences. They exist in locations where market forces are not in play. Often that effect is compounded by a mismatch in user and buyer. Cruise ships are another example of such a niche, albeit one driven by an inverse problem. Unlike prisoners, cruise ship workers suffer from too much mobility. Cruise cards have to address the needs of card users that want to make payments in multiple countries.
The first problem faced by a person leaving prison is security.
"It is safer for the prisoner when getting out," said a person at mFunds, "especially for the ones that have a ton of cash. Even if they look at is as an inconvenience. I have picked up a friend and it was three in the morning. Kind of scary."
The representative at mFunds was suprised to learn about "Commonwealth of Pennsylvania Department of Banking and Securities, Bureau of Compliance and Licensing v. General Payment Systems d/b/a EZ Card and Kiosk."
The EZ Exit Card is currently issued by First California Bank. The temporary nature of the issuer relationship reflects a change at First California Bank. Pacific Western Bank recently purchased First California. In doing so, Pacific Western decided to exit prepaid. Thus, program managers working with First California are finding new partnerships. Pacific Western has let each have a bit of lead time. Kaiku was one of First California's larger clients and they sent notices to account holders (including me!) that their customers will face a change shortly. As an aside, Kaiku cannot continue to facilitate direct deposits as currently arranged. Each existing client has to re-establish a new direct deposit with Bancorp. Kaiku is offering customers a bonus payment if they do that.
Thirty days after release, the prisoner is charged with the first $4.95 monthly fee, although the fee is not As such, most EZ Exit Card cardholders drop their accounts shortly after re-entry.
But the bank is getting a few prizes before they get out the door. First California exacts $2.99 for each ATM withdrawal, another $1.99 for a balance inquiry or an ATM decline, and 99 cents for balance inquiries and declines at the point-of-sale. There is a 99 cent charge for a POS purchase. There is even a fee if you mistakenly enter the wrong PIN at the point of sale.
mFunds says that they have an as-yet finalized plan to switch over to Central Bank of Kansas City. CBKC is a state-chartered bank regulated by the FDIC. mFunds says that CBKC will have the prerogative to reset any of the fees as well as the disclosures, although it would not be unusual if things remained the same.
Perhaps the most worrisome fact is the mechanism for setting up a PIN. The T&C states the PIN at the top of its page. "THE PIN FOR YOUR CARD IS THE YEAR YOU WERE BORN (ALL FOUR DIGITS)" This is complemented by a 99 cent fee for a PIN change. If you attempt to make that PIN change with a real live person, then there's another two dollar fee.
The T&X says that the bank reserves the right to charge a "Negative Balance" fee, although this function is not currently in place.
I'm going to estimate that a prisoner pays at least seven dollars by the time he or she sees a paper dollar. That's a lot of change if you have been earning forty cents a day stamping plates for the DMV.