Megabanks have prison financial services market locked up
Editor’s note: This is the second in a two-part series examining how financial companies impose high costs on the families of prison inmates. Part One, which ran on Tuesday, focused on the explosive growth of JPay Inc., a private company that performs money transfers for 70 percent of U.S. offenders.
Related: Bank of America’s mission creep into federal prisons
On Wall Street, Bank of America plays a perpetual second fiddle to JPMorgan Chase & Co., the only U.S. bank that holds more assets.
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A few blocks north, however, at the New York Metropolitan Correctional Center, there exists a market that Bank of America has locked down, literally. For the 790 federal prisoners incarcerated at MCC, Bank of America controls the provision of money transfers, e-messaging and some telephone services.
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The bank’s monopoly extends across the federal Bureau of Prisons system — 121 institutions housing 214,365 inmates. Since 2000, Bank of America has collected at least $76.3 million for its work on the program.
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When inmates are released, JPMorgan steps in, issuing high-fee payment cards to distribute money from their prison accounts, which include earnings from jobs and money their families send them.
Related: Debit cards slam released prisoners with sky-high fees, few protections
The banks’ exclusive deals came not from the Bureau of Prisons, but from the U.S. Treasury.
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The agency awarded the contracts using a 150-year-old authority that allows it to sidestep the oversight, transparency and competition typically required for federal contracting. That means that for 14 years, Bank of America has never been required to compete with other vendors who might do the work better or for less money, according to Treasury documents obtained under the Freedom of Information Act.
JPMorgan’s no-bid deal to issue debit cards for various federal agencies began in 1998, was extended in 2008 and eventually expanded to include cards for federal prisons. Fees from former inmates make up most of the bank’s compensation for these cards, documents show. A separate Treasury document from 2013 said that about 50,000 released prisoners had been issued cards and listed fees of $2 for withdrawing money from an ATM and $1.50 for leaving an account inactive for three months.
JPMorgan, Treasury and the Bureau of Prisons declined to provide a current fee schedule for the cards. Bank of America, JPMorgan and the Bureau of Prisons all declined numerous requests to discuss the banks’ deals inside U.S. prisons.
There’s more to this story. Click here to read the rest at the Center for Public Integrity.
This story is part of Profiting from Prisoners. Click here to read more stories in this investigation.
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Copyright 2014 The Center for Public Integrity. This story was published by The Center for Public Integrity, a nonprofit, nonpartisan investigative news organization in Washington, D.C.
