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Debit Card Issuers Still Prey on People Released from Prisons and Jails: HRDC Lawsuits Challenge Companies in Court

Jails and prisons across the United States have for more than a decade increasingly used prepaid debit cards, or so-called prison release cards, to return personal funds to exiting arrestees and prisoners. Hidden fees are imposed on card users, which reduces the amount of money they get back. For debit card issuers, on the other hand, it’s been a gold mine For the most part, they take money in the form of fees, from the pockets of arrestees, even those who are never formally charged or prosecuted for their alleged crimes.

Three companies dominate the field: Numi Financial, Rapid Financial Solutions, and Miami-based JPay, which is owned by Securus, one of the nation’s largest providers of prison and jail phone services that notoriously gouge prisoners.

“The big banks, like Bank of America and JPMorgan Chase have abandoned the field,” said Paul Wright, founder and executive director of the Florida-based Human Rights Defense Center (HRDC), the nonprofit that publishes PLN and which has sued debit-card companies on behalf of former prisoners.

“The companies that remain have no consumer or business operations to speak of, they exist solely to prey on and exploit prisoners,” Wright continued. “That is their sole ‘market.’ It is critical to note that this exploitation can and does occur only because the government allows it and brings these companies in.”

A 2014 survey by the Association of State Correctional Administrators of 33 state corrections agencies found that more than half used prepaid debit cards to refund trust account balances. (The California State Sheriffs’ Association lists Numi as one of 100 corporate sponsors on its website.) A 2018 estimate by Think Progress said the federal Bureau of Prisons, at least 17 state prison systems and countless county jails had issued release cards. “In Alabama, former inmates have five days to get money off their release card before being charged a fee of $1.50 a day, according to a DOC spokesperson,” said a 2019 story in The Marshall Project. “In Colorado, the JPay release card incurs a $0.70 fee for every point-of-sale transaction, a $1 fee to talk to a customer service representative, a 50-cent monthly fee, and a $2 ATM withdrawal fee... In Louisiana, according to a DOC spokesperson, JPay release cards come with a $12.95 activation fee.”

Numi, a subsidiary of Stored Value Cards Financial, formerly but no longer working in partnership with Central National Bank and Trust Co. of Oklahoma, has become a major vendor of these prepaid cards, part of a market in privatized prison services valued at $52.4 billion, according to a March 2017 story in Prison Legal News. “Numi is now in more than 400 jails across the country, including large facilities that house up to 8,500 inmates, and the company issues more than 600,000 cards a year,” the story said. “That’s enough to make Numi one of the top 10 providers nationwide of prepaid cards of all kinds.”

Numi’s vice president of business development Richard E. Deloney Jr. described its strategy as focused on “turnover,” saying, “We market to the 3,300 jails in the country. When you go to the state or federal prisons, you’re in there for a while. They don’t do us any good.”

Daren Jackson, CEO of Rapid Financial and “a serial entrepreneur” according to his LinkedIn profile, explained the company’s business model in a legal declaration. “A detention facility confiscates monies from incarcerated persons and holds them in an inmate trust account,” he said. “Upon an inmate’s release, the detention facility must return these monies to the inmate. Upon release, based solely and exclusively on the accounting and property management policies of the detention facility, the detention facility has the option to give the inmate cash, a check, or to load the remaining funds in an inmate’s trust account onto a prepaid MasterCard that is … managed by Rapid.”

In the mid-2010s, the companies involved in the prison debit-card racket got some bad press and were hit with multiple lawsuits. In response, they made some changes to cardholder agreements that they tried to pass off as “reform,” but Wright said nothing has actually changed. “On the contrary, it has expanded and gotten worse as these companies’ sales teams fan out across the country promoting their gospel of exploitation,” he said. “Jails in particular are very receptive. To date, none of the lawsuits have been very consequential. The main problem is people have their money taken at gunpoint and then have these fee-laden cards foisted on them and have no choice in the matter. Due to bank and government secrecy, we do not know the total amounts being seized by these companies.”

There is no precise accounting of who the victims are, but Wright said they roughly correspond to the people enmeshed in the criminal justice system: “Majority White men, but Black and Hispanic men are disproportionately arrested, which means the impact is heavier on those communities. Which also varies depending on the racial makeup of the jurisdiction, but to the extent the people being arrested and caged are almost uniformly poor, the poor bear the brunt of these practices.”

Challenging debit card rip-offs in the courts has yielded only mixed success. In 2017, JPMorgan Chase agreed to settle a class action by paying $446,822 to thousands of former federal prisoners in Pennsylvania who were charged $10 to withdraw money from a bank teller window and $2 for using non-network ATMs. The settlement ordered that debit card users receive a refund of all card service charges and fees, and to be paid any remaining balances from their account by check. JPMorgan agreed to pay $230,312.89 for attorneys’ fees from a separate fund. See: Krimes v. JPMorgan Chase Bank N.A., Case No. 15-5087, U.S.D.C., E.D. Pa.). [PLN, Mar. 2018]

An Ohio federal court approved a settlement in September 2019 of $550,000 in a class action against Stored Value Cards, Inc., doing business as Numi Financial, and Republic Bank & Trust, over cards they issued to prisoners exiting the Lorrain County Jail. There were an estimated 180,000 class members, which seems to be a minuscule settlement that is paying plaintiffs pennies on the dollar for money taken. To date, the relatively small payouts can be written off as merely a cost of doing business.

However, the minor lawsuits were enough to make the big banks, like Bank of America and JP Morgan, exit the prison and jail debit-card space. This leaves only prison profiteers like Numi, JPay, and Rapid Financial, whose business model is based on exploiting prisoners and their families, and monetizing mass incarceration.

Florida a Debit Card Heaven
for Prison Profiteers

Florida is a heavily policed state with higher than average arrest and incarceration rates. Population-wise, it is the third largest state in the country and has been a pioneer in the use of private prisons and paying for its police state functions on the backs of the policed.

In August 2019, HRDC filed public records requests with all 67 county sheriffs to determine policies for the return of funds to individuals who would be released from county jail custody. Not all counties adequately responded to the requests, but 35 returned funds exclusively through Numi or Rapid Financial cards. Nineteen counties offered a choice of how cash was returned, and three failed to reply to requests for information. Only eight counties said they did not use debit cards.

The public requests showed that little had changed between 2017 and earlier, when the card companies had been hammered by lawsuits and negative news stories, and 2019. The cardholder agreements differed in some counties and were still complex and difficult to understand. But, for example, Numi and Rapid Financial were still charging $2.95 and potential surcharges for an ATM withdrawal. In fact, in 2019 agreements Numi had eliminated a cheaper $2.50 option on some ATM withdrawals. The fee for a declined withdrawal had not changed: $1.95 for Numi and $2.95 for Rapid Financial. Rapid Financial still charged as much as $10 per month as an “account maintenance fee” while Numi charged as much as $5.95 for the same. One of the few fees that had apparently been eliminated by both firms was an “inactivity fee” for non-use of the debit cards. Also, Numi agreements allowed prisoners to get their balance refunded in full if they asked for it to be issued as a check before the card is used.

“It’s outrageous that jails and prisons are not returning every penny to people who are released and desperately need their funds,” says attorney Lauren Saunders, associate director at the National Consumer Law Center. “If prepaid cards are skimming their money with fees, that is really just an abuse.”

The ninth largest county jail in America, Broward County Jail in Florida, holds more than 6,600 beds and processes 70,000 arrestees per year. The county does not return cash to those it arrests, but instead had returned money through a debit card, until recently issued by EZ Card (a company which apparently no longer operates).

In April 2016, HRDC filed Pope v. EZ Card & Kiosk LLC and The Central Bank of Kansas City in the United States District Court, Southern District of Florida. John Edward Pope, the lead plaintiff, was an activist affiliated with the local chapter of Food Not Bombs. “The message of Food Not Bombs is simple and powerful: no one should be without food in a world so richly provided with land, sun, and human ingenuity,” writes the late Howard Zinn. “No consideration of money, no demand for profit, should stand in the way of any hungry or malnourished child or any adult in need. Here are people who will not be bamboozled by ‘the laws of the market’ that say only people who can afford to buy something can have it.”

The Pope class action explained that individuals released from Broward had no choice but to accept an EZ Card release card in lieu of cash or check. “They do not voluntarily engage the company, enroll in the program or take any affirmative steps to form any contractual relationship with EZ Card,” it said.

According to the lawsuit, Pope was charged with a misdemeanor. The Broward County Jail confiscated approximately $178 in cash from Pope at booking. When he was released about 17 hours later, Broward County gave him a prepaid debit card issued by EZ Card instead of giving Pope back his cash, as he wanted. The debit card had a balance of $128, with $50 deducted for bond, the booking fee, a uniform fee and a daily “subsistence fee” charged by the jail. Fees for the card included a monthly maintenance charge of $4.95; an ATM balance inquiry fee of $1.99; an ATM withdrawal fee of $2.99; a point of sale fee of $0.99; a card replacement fee of $5.95 and $4.00 to receive a paper statement.

“Mr. Pope represented a captive consumer for EZ Card and the Bank of Kansas City, and EZ Card and the Bank of Kansas City took full advantage of Mr. Pope’s complete lack of bargaining power by requiring Mr. Pope to pay various exorbitant, unreasonable fees to retrieve the money that had been taken from him,” said the lawsuit. “Of course, Mr. Pope would never have agreed to receive his money in the form of the extremely expensive EZ Card if he had been given any choice or bargaining power.”

The lawsuit said that EZ Card and the Bank of Kansas City had “engaged in a pattern of unlawful, deceptive, unfair and unconscionable profiteering and self-dealing with respect to the release cards” and EZ Card could only collect “these exorbitant fees because its exclusive contracts with state and local agencies shield it from competitive market forces.”

The case was dismissed because of an arbitration clause in the contract. It was settled in 2017 on sealed terms. Wright has called EZ Card a “predatory company that price gouges prisoners and then eliminates their ability to pursue legal action through arbitration agreements.” He added, “Mr. Pope was denied the ability to have his claims adjudicated by the courts – and the thousands of detainees who are released from the Broward County Jail each year are likewise denied justice, as they must arbitrate their claims one-by-one and cannot seek recourse through either individual or class-action lawsuits.”

HRDC Fights Debit Cards in
Oregon Class Action Suit

Danica Love Brown, 48, took to the streets of Portland, Oregon on November 25, 2014, as part of a nationwide protest movement responding to the grand jury decision to not charge Officer Darren Wilson with the shooting death of Michael Brown in Ferguson, Missouri. The demonstration brought more than 2,000 demonstrators to Multnomah County Justice Center. In an academic article, Brown wrote that she was raised in New Mexico and was a “Choctaw of the White Crane Clan and Scottish of the Ross Clan.” Her life experience had shaped her worldview “and informs my research practice, and my desire to learn more to develop ontological, epistemological, and methodological frameworks that are grounded in Indigenous knowledge, which comes out of deep love and respect for the People,” Brown wrote.

Brown was arrested during the protest and interrogated at a police station, where her backpack, phone, and medical supplies were taken. She was then transported to the Multnomah County Jail in downtown Portland, where she was charged with disorderly conduct. All of her money — $30.97 — was confiscated.

Brown was subsequently released from the jail at around 2:30 a.m. November 26. In a deposition for Brown v. Stored Value Cards, a July 2015 lawsuit filed by HRDC, Brown said Multnomah County Detention Center staff asked her to sign a piece of paper “and then I was handed my shoelaces, my wallet, and a Numi Card along with half-sheets of paper with a user agreement printed in very small type,” she explained.

Having left her glasses at home when she went to the protest, she couldn’t read the user agreement. “When I was handed the Numi Card instead of my cash and coins, I was confused, as I expected to receive my cash. I did not request or apply for the Numi Card. I did not want the Numi Card, and it was not given to me voluntarily. I wanted my cash back, but it was never returned to me,” her deposition said.

Until earlier in 2014, Multnomah County returned money to departing prisoners if they had less than $60. Prisoners were given a check if they arrived with more than that amount. But the county argued that this process was too expensive and time-consuming, so it subcontracted with Numi, which is based in Carlsbad, California.

The Detention Center area is dangerous at night, Brown said, and many who live there are drug addicts, homeless people and panhandlers. “I was scared, and my foremost concern was finding somewhere safe,” she said. “I was fortunate that my partner was waiting outside for me and I could walk with him to his home that was about a mile and a half away.”

After she was arraigned in the morning, she tracked down her property at the police station. She got her belongings from Multnomah County after a friend drove her to Portland’s warehouse district, which was not easily accessible by public transportation. She finally returned home late in the afternoon.

“Because I was preoccupied with my criminal arraignment, retrieving my personal possessions, and getting home, I did not inspect the papers handed to me with my Numi Card in the hours after my release, as I still did not have my glasses and could not read the text without them,” she said in the lawsuit. “While signing my release paperwork, I learned that I had approximately $30 on the Numi Card. I do not recall exactly when I first reviewed the materials given to me with the Numi Card, but it was some days after my release. I remember reading the back of the Numi Card and learning that the card had a monthly maintenance fee. I did not understand that this fee would be imposed 5 days after my release, and I assumed the ‘monthly’ fee would not be imposed until 30 days after my release.”

Brown was unable to figure out how to use the card based on the confusing information given to her upon release from jail, which she said looked to be photocopies of photocopies. About a week after she got out, she went online to try to find out more information and figure out how she could get the money on her card’s balance. “I found out that, in order to get my remaining money off of the card, I was going to have to provide Numi Financial with my bank account information,” she said. “I did not wish to give Numi Financial that personal information; nor did I want to do business with Numi Financial, as I did not choose to engage with this company.”

Eventually the disorderly conduct charges against Brown were dropped. However, a $5.95 service fee was charged on her debit card five days after release. She was also hit with a 95 cents charge for a declined transaction. The end result was that she lost 22 percent of the card’s original value.

HRDC filed the Brownsuit in the U.S. District Court in Portland on behalf of a proposed class of formerly incarcerated people who had received debit cards from Numi. Among the claims alleged in the complaint were conversion under Oregon state law; unjust enrichment; and a violation of the Electronic Fund Transfer Act (EFTA), which prohibits the issuance of unsolicited debit cards absent certain requirements. The EFTA was signed into law by President Jimmy Carter to provide consumers with basic protections and a regulatory framework, implemented by the Federal Reserve Board.

The case has gone back and forth in the courts. In 2016, the district court dismissed it on the grounds that release cards were “the functional equivalent of cash.” HRDC, in conjunction with Public Justice, filed an appeal in the Ninth Circuit in 2018 to challenge the ruling.

• • •

December 13, 2019 in Seattle was a brisk, cool, and clear day. At the United States Court of Appeals for the Ninth Circuit in the William K. Nakamura Courthouse, Judges Ronald M. Gould, Marsha S. Berzon, and Roger T. Benitez heard appellate arguments on Brown’s behalf from a number of attorneys, among them Karla Gilbride of Public Justice. “The appropriation of Ms. Brown’s money was a per se taking,” argued Gilbride.

Gilbride said the debit card was “programmed to begin taking Ms. Brown’s money from the account at Central National Bank and transferring it to Numi within five days of activation unless Ms. Brown took affirmative steps to intervene.” She argued that this process was a separate violation of the EFTA and a separate taking. “It’s also not the way money typically behaves,” Gilbride said. “Ms. Brown’s cash would not have spontaneously jumped out of her pocket and into the hands of a corporation five days after being arrested. And that was why the [Portland] District Court erred in finding that the card Ms. Brown was given was the functional equivalent of the cash that it replaced.”

She went on to explain a certain novelty to these carceral debit cards unlike other similar consumer financial products, which have defined laws for their fee schedules. “A general purpose prepaid card like this would only be able to charge a fee after one year of inactivity. Here there were only five days and there actually had been activity on the card. So, this was an impermissible fee.”

Judge Berzon, was adamantly unimpressed with rebuttals presented by the card company lawyer Eric Nystrom. “She’s given this two-page (to my mind) illegible thing,” Berzon said in referencing the cardholder user agreement, “and then she was given a separate card which you [the card company lawyers] represent as having told her she can go to a bank and get cash but I don’t see that it does that.”

On March 20, 2020 the Ninth Circuit ruled. It reversed the dismissal and allowed the case to proceed. “There is at least one crucial difference between the release card and cash: the ticking clock,” Judge Gould ruled. He said the case “illustrates some of the hazards and risks that may arise when prisons transfer what formerly were government functions to for-profit enterprises.”

Judge Gould added:

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. Numi is entitled to fair compensation for its services, but that does not mean that it should be able without restriction to provide cards to released inmates who have not asked for them and who are likely to end up with less money than was taken from them. 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. See Brown v. Stored Value Cards, Inc., 953 F.3d 567 (9th Cir. 2020).

“We are pleased with the court’s ruling that recognizes that prisoners and arrestees are not profit centers for banks and their government collaborators to use as their personal ATM,” said HRDC Executive Director Wright.

“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,” added HRDC General Counsel Daniel Marshall.

The case is now back in the trial court in Portland. The defendants are seeking summary judgment. The plaintiffs are seeking class certification for what would likely be hundreds of thousands of debit-card victims.

HRDC Launches New Challenge to Debit Cards in Washington State

Another recent case pertains to Jeffrey Reichert, a research test mechanic at Boeing who lives in Kingston, Washington, a part of the state made up of waterfront communities united by a network of ferry terminals. Reichert had gone to work on October 21, 2016, at 6:15 a.m. Part of the commute includes a ride on the Bainbridge Island Ferry and so, during the watery homeward-bound sojourn, he went to the onboard bar and had a single beer. After getting off the boat, he continued his drive unintoxicated, according to court filings. Later, while trying to navigate into the passing lane, his dinner container slid off the passenger seat. While grabbing at the spill and making a mess, he accidentally swerved in the lane. Another driver saw this and called the police. This led to a chain of events where he was detained at 12:15 a.m. October 22 and released four hours later, having been booked on a DUI. He had $176.77 confiscated and deposited to a Rapid Investments AccessFreedom Debit Card.

Released without even a jacket, he had to talk a cab driver into allowing him to pay the fare upon arrival at home because the debit card couldn’t even be used in the taxi, which shows how inconvenient these financial products really are. When he went to his credit union to inquire about both the balance and withdrawing the funds from the debit card, he triggered a total of $17.66 in fees, “exactly 10 percent of his cash, and after only approximately four hours in custody. Had Mr. Reichert chosen not to use the AccessFreedom Card, and to close his account and receive a check, Defendants would have charged him $10.00 to do so,” according to court documents.

In an October 2017 complaint filed with the U.S. District Court in Tacoma, HRDC wrote, “Defendants have engaged in a pattern of unlawful, deceptive, unfair, and unconscionable profiteering and self-dealing with respect to the prepaid release cards that they force upon individuals who are released from jails and prisons. In so doing, Defendants have violated the law, including the Fifth Amendment’s prohibition against the taking of property without just compensation, the Electronic Fund Transfer Act, 15 U.S.C. §1693 (2010), and the Washington Consumer Protection Act.” See: Reichert v. Keefe Commissary Network L.L.C., Case No. 3:17-cv-05848, U.S.D.C. (W.D. Wash.).

In the May 2019 opinion granting the plaintiffs class-action status, Judge Ronald Leighton wrote, “While Defendants imply that the wrongful conduct at issue is reimbursing inmates via any type of card, Reichert is only challenging the use of activated, fee-laden cards. It is difficult to imagine how some class members benefit economically by paying a fee.” See: Reichert v. Keefe Commissary Network, L.L.C., 331 F.R.D. 541 (W.D. Wash. 2019).

Joining the suit with that of another plaintiff from the same part of Washington, Gary Moyer, the suit has now been in dispute over whether to compel the parties to arbitration, a venue infamous for favoring corporations over consumers. Judge Leighton rejected this, writing, “This Court already properly concluded that “all contracts, including those to arbitrate disputes, must have mutual assent” and that no enforceable contract bound Mr. Reichert to arbitrate his claims.” The debit card companies argue that the plaintiffs had agreed to the contract within the cardholder user agreement that includes the arbitration clause. Judge Leighton dismissed this claim, saying that there was no contract executed and that instead the plaintiffs had been compelled against their will to accept the debit cards without any meaningful opportunity to either examine and agree to the terms of use or otherwise decline the card.

Being apprehended and incarcerated for any length of time is always a taxing event and one that can include fatal dimensions. Over the past half-century, we have witnessed a conversion by civic administration from a War on Poverty to a War on the Poor paradigm, criminalizing destitution in the interest of profit extraction from those with the greatest dearth of pecuniary resources. This project seeks to develop more potential revenue streams for the private and public sectors by the immiseration and policing of the poor.

There has emerged over the past several years privatized services and goods in the place of what were once public domain and mundane functions within the carceral space. One such example, these debit cards effectively privatize and deliver to the financial industry the traditionally public-sector function of cash management by jail or prison officials.

We therefore should look at recent legal victories about these cards as benchmarks in the larger struggle against mass incarceration and the encroachment of privatization forces into the carceral space.

Related legal cases

Reichert v. Keefe Commissary Network, LLC d/b/a Access Corrections

Danica Brown v. Stored Value Cards, Inc.

Krimes v. JPMorgan Chase Bank N.A.