News

Iowa mandates electronic child support payments

December 23, 2003

DES MOINES, Iowa - U.S. Bancorp (NYSE:USB) and the State of Iowa have implemented a payment program where the state disperses child support payments on a prepaid card versus a paper check.

According to a news release, the program, which is the first of its kind to be mandated in the United States, saves the state $420,000 annually in postage alone -- and removes the need to track down lost or stolen checks.

The U.S. Bank ReliaCard Visa functions like a debit card but is not attached to a checking or savings account. The state collects court ordered child support payments, then electronically loads the payment onto the card, which the recipient can use to make purchases or withdraw cash. Iowa requires the use of the ReliaCard Visa to all customers who don't choose direct deposit or need an exemption.

The card can be used at retail locations where Visa is accepted. There are no monthly fees associated with the ReliaCard Visa, and customers receive one free ATM withdrawal per month. If the card is lost or stolen, it is backed by Visa's zero liability policy, which means the cardholder is not responsible for unauthorized purchases.

According to the news release, some customers say that the ReliaCard helps them enter the mainstream financial world by allowing them to make purchases wherever Visa is accepted. It also may be a lower-cost alternative to customers who previously paid fees to cash their checks.

However, according to a report that aired on Iowa's KCRG, not all recipients are happy with the cards. Debbie Heiar said she shouldn't be subject to fees when she withdraws money from ATMs. After her first free withdrawal, she pays $1.50 to withdraw cash.

Heiar said her child support payments come in every week, and she can't afford to wait until the end of the month to make one withdrawal. "For some people it's difficult to GET child support from the absent parent. For those of us that do receive it, I think it's wrong that we have to pay to get it," she told KCRG.

According to Iowa's Department of Human Services, a solution for people like Heiar is to set up separate bank accounts into which money can be directly deposited. Then they can withdraw at any time with no penalty.

"U.S. Bank has worked hard to partner with the State of Iowa to serve our customers. We are excited to be able to provide faster service to our customers in a less expensive manner as a result of this partnership," said Jeanne Nesbit, division administrator, Division of Child Support, Case Management, and Refugee Services for the State of Iowa.

Since U.S. Bank introduced this product, which began as a pilot in the states of Washington (DCS Card) and Colorado (Family Support Registry Card) in 2001, it has been used by more than 70,000 customers in multiple states.

(See related stories Some Minnesota child support recipients opt for prepaid card and Colorado child support recipients can access payments at ATMs)

U.S. Bank, which operates 15 branches in Des Moines, 102 branch locations and 224 ATMs in Iowa, is working with other government agencies to initiate prepaid card solutions in more states and in various capacities, according to the news release.