Big banks scalp massive amounts of money from customers and account holders every year through transaction and ATM fees. The California Reinvestment Coalition (CRC) released a report showing that big banks cost Californian, low-income families about $19 million a year in ATM fees in 2012, and that money has all come from public assistance funds.

Money from CalWORKS, a state government assistance program, has taken the brunt of lost public assistance in ATM fees at 85 percent. Currently, CalWORKS helps 450,000 low-income families in California with public assistance funds. The money wasted on ATM fees, as the CRC has found, is enough to purchase a year’s worth of school supplies ($688) for over 2,300 kids.

Families in Los Angeles County alone lost approximately $450,000 on ATM fees imposed by big banks. On average, a CalWORKS-funded family receives about $510 per month, which equals to just over $6,000 a year. Though small on paper, these seemingly small fees occur multiple times leading to an exponentially increasing loss.

“For families trying to escape poverty, these fees siphon away money that could be used for school supplies, transportation or medicine,” said report author Andrea Luquetta. “The current system leads too many people to pay fees just to access the very benefits they need to survive. It is a diversion of taxpayer dollars away from their intended use of supporting families.”

EBT cards are set up and spend money similarly to debit cards, one can swipe at the store, get cash back, and punch in a PIN. The EBT cards themselves, however, are not distributed by any banks, but rather contract companies Xerox State and Local Solutions Inc. These companies subcontract to ATM system operating company MoneyPass, and charges only $0.80 per ATM withdrawals.

The downside is that MoneyPass only processes nine percent of, and most others are processed by big banks, which charge two to four times more than MoneyPass. ATM fees on the EBT cards then run the same as typical, bank-issued cards: $2, $3, and $4. Altogether, needy Californians lost $19.4 million on frivolous fees.

Not surprisingly, the biggest acquisition of fees went to Bank of America. According to the CRC, Bank of America collected $3.6 million in fees in 2012. Mother Jones reported that Bank of America has a history of syphoning for fees. In 2004, Social Security recipients filed a class action lawsuit against the bank because it seized federal retirement money and disability benefits from customers’ accounts to pay for overdraft fees.  

The Obama Administration sided with Bank of America all the way to the Supreme Court, which ruled in Bank of America’s favor.

Many low-income families do not have bank accounts, but rely on prepaid cards, so as to avoid any potential overdraft fees. However, the practice of charging ATM fees on public assistance money is perpetuating the problem that these families have sought to avoid. Banks continue to profit off of low-income families even if these low-income families have absolutely no ties with the banks.

Josh is a writer and researcher with Ring of Fire. Follow him on Twitter @dnJdeli.