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Dan Marshall quoted in article about debit card loaded with service fees

Oregonian, March 20, 2020. https://www.oregonlive.com/crime/2020/03/portla...

Portland woman went to jail with $30.97 in cash. She’s suing after getting debit card in return loaded with service fees

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When Danica L. Brown was arrested in Portland during a 2014 protest, the downtown jail confiscated the $30.97 in cash she carried with her.

Upon her release the next morning, she was handed a Numi Financial MasterCard debit card loaded with the same amount.

Brown soon learned the card came with service fees – a $5.95 monthly maintenance charge subtracted five days after she got the card and then a 95-cent charge for a declined transaction for insufficient funds. In total, she lost 22 percent, or $6.97, of the card’s value.

Brown – who wasn’t convicted on any charges in her case -- sued Numi Financial on behalf of all released inmates who have had to pay fees on the cards. Her lawyers argued they were denied “just compensation’’ for their seized property.

A federal judge in Oregon dismissed Brown’s case. But this week the 9th U.S. Circuit Court of Appeals revived it.

A three-judge panel sent the case back to U.S. District Judge Michael W. Mosman with direction to decide the merits of the case, noting the issues it raises could have far-reaching implications because Numi provides prepaid release cards to inmates around the country.

“There can be little doubt that Multnomah County’s release card program with Numi has changed the simple government function of returning confiscated money to a released inmate into a venture in which the released inmate’s money can be eroded or lost by the charge of profit-oriented fees,” the panel wrote in a strongly worded opinion.

While the judges said Numi is entitled to fair compensation for its services, the company shouldn’t be able to provide cards without restriction to inmates who haven’t requested them and who end up with less money than they had.

“Similarly, the government of Multnomah County should not so easily be able to shift the burden of securing and returning released inmates’ funds to the released inmates themselves, many of whom, like Brown, are never charged with a crime,” they said.

***

Multnomah County used to return cash to inmates released from jail if they arrived with less than $60. The county would provide a check if the total was greater than $60.

But handling the cash proved expensive and time-consuming, with the county estimating it spent about $275,000 in labor costs annually on the process, according to court documents.

The county first subcontracted with Carlsbad, Calif.-based Numi Financial in 2014. Multnomah County doesn’t pay anything to Numi. Instead, Numi contracts with the Oklahoma-based Central National Bank &Trust Co. to issue the cards and hold the money in a master account.

When inmates leave a Multnomah County jail, they get a prepaid debit card holding the amount of money seized from them – activated and ready to use, according to jail officials. They also typically get a two-page cardholder agreement, a handout with card usage tips and other information, said Hans Urhausen, an equipment and property technician at the downtown jail.

Brown was arrested in November 2014 by Portland police on allegations of interfering with an officer and disorderly conduct. She was released at 2 a.m. the next day. She walked to a friend’s house to stay overnight before her arraignment later that morning. She didn’t read the material because she didn’t have her glasses with her at the time.

Though Numi allows the inmates to transfer the money on the card from an online Numi account to their own bank account without fees, Brown said she didn’t feel comfortable providing personal information to a company that she didn’t know, trust or wish to do business with, she said in a court filing.

Her lawyers allege Numi, also known as Stored Value Cards Inc., and the Oklahoma bank are violating the federal Electronic Funds Transfer Act and the Oregon Unfair Trade Practices Act and are engaging in “unjust enrichment.”

Lawyers for Numi and the bank argue their release cards are exempt from the Electronic Funds Transfer Act, partly because the cards aren’t marketed to the general public. They also contend the unjust enrichment claim fails because they have the right to charge fees to compensate them for the operation and management of the cards.

But the appeals panel pointed out that Numi doesn’t charge most local governments for the services.

“Instead, Numi earns revenue by charging fees to the cardholders,” Circuit Judge Ronald M. Gould wrote in the opinion. “This case illustrates some of the hazards and risks that may arise when prisons transfer what formerly were government functions to for-profit enterprises.”

The appeals panel also found that the Electronic Funds Transfer Act should apply. When Numi marketed the cards to Multnomah County, it indirectly marketed them to released inmates, who are reentering the general public, it concluded.

***

Under Multnomah County’s arrangement with Numi, the company charges the monthly maintenance fee within five days of the card’s activation by the jail. There’s also a $2.95 fee for every ATM withdrawal and fees for requesting a check for the balance of the card.

Yet the tip sheet doesn’t disclose that not all retailers provide cash back or that bank withdrawals are free only at MasterCard-affiliated banks, the appeals panel noted. Multnomah County also gave Brown an inaccurate list of banks with ATMS that would be free of surcharges.

Unlike Multnomah County, other counties that give Numi cards to inmates, including Napa in California and Broward in Florida, pay a flat fee to subsidize each card instead of passing on the fees to cardholders, Gould pointed out.

The appeals court found the dismissal of Brown’s case inappropriate under the Fifth Amendment’s “Takings Clause,” which says private property shall not be taken for public use without just compensation, as well as under the Electronic Fund Transfers Act and Oregon state law.

“Because the release card deteriorates in value quickly and permanently, the district court was incorrect to conclude that the release card is the functional equivalent of cash or of a check,’’ the federal panel ruled.

The appeals judges also found Mosman, without written explanation, wrongly denied Brown a chance to amend her complaint based on new information her lawyers obtained in litigation -- the presence of Numi’s “large, color posters” in each jail extolling the card’s benefits as a way for released inmates to access their money “immediately.”

“A liberal approach to amendment seems particularly appropriate where other persons throughout the nation could benefit from a resolution of novel issues that also apply to them,” the opinion said, “especially when there is a vast mismatch of resources between released inmates and well-funded national companies and the amendment does not prejudice defendants.”

Karla Gilbride, an attorney for Public Justice, a national non-profit legal advocacy group that works to combat predatory corporate behavior and argued Brown’s case on appeal, said she hopes the 9th Circuit Court’s ruling sends a message to Numi that it should change how it operates these debit cards for people getting out of jail or prison. Gilbride worked on Brown’s appeal along with attorneys from the non-profit Human Rights Defense Center.

In 2010, Numi issued 1,000 release cards a month. That jumped to 50,000 release cards a month in 2015. In 2014, Numi netted $2.85 million in revenue from their release card business nationally, according to court documents.

"This is an expanding industry. More and more counties and prisons are outsourcing this work to private, for-profit companies,'' Gilbride said. "We’re hoping this decision shines a light on these practices and the significant constitutional concerns they raise.''

Daniel Marshall, general counsel of the Human Right Defense Center said, “With this ruling the Court recognized that corporations cannot exploit prisoners with impunity. We look forward to holding the defendants accountable in the trial court.”

 


 


 

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