TRENTON — Weekly checks for New Jersey’s unemployed are about to disappear, as the state shifts to mandatory debit cards or direct deposit to save $7 million to $8 million annually on printing and mailing. People about to start collecting unemployment benefits must choose how they receive their payments starting Oct. 31. The Department of Labor and Workforce Development...
Newark Firefighter Latina Byrd, left, speaks to Manuel Rodriguez, of Newark, a veteran, at the Newark Fire Department's recruiting table at the "Year of the Vet" Job Fair held on the campus of Rutgers-Newark. Both public and private sector employers were on hand to meet with veterans and agencies providing outreach for veterans were there, as well.TRENTON — Weekly checks for New Jersey’s unemployed are about to disappear, as the state shifts to mandatory debit cards or direct deposit to save $7 million to $8 million annually on printing and mailing.
People about to start collecting unemployment benefits must choose how they receive their payments starting Oct. 31. The Department of Labor and Workforce Development expects to send the last paper check by February, forcing 460,000 recipients to send the benefits to their bank accounts or to a Bank of America card that is replenished electronically.
New Jersey’s unemployment rate last month fell to 9.4 percent, from 9.6 percent. The national rate remained 9.6 percent. About 45 percent of unemployment recipients now opt for checks, according to the Labor Department.
“We think it’s a much more secure and user-friendly system by going with direct deposit,” said Labor Commissioner Harold J. Wirths. “We’re pretty confident we have the best deal in the nation on the debit cards, which we negotiated with Bank of America.”
But for-profit check-cashing businesses — which collect a state-set maximum 2.21 percent of each check’s face value — say the savings to taxpayers will inconvenience their customers and cut into their profits.
Irwin Sablonsky, who owns three check-cashing outlets in Belleville, Newark and North Plainfield, said he stands to lose $3,000 to $4,000 a month.
“They keep eroding my business a little bit at a time,” Sablonsky said. “I understand the state’s aim to try to save dollars but you have to give people a choice. A heck of a lot of people are going to have to scramble.”
New Jersey Financial Service Centers, a trade group representing about half of New Jersey’s 375 commercial check cashers, has compiled a petition with the signatures of 4,700 customers who would prefer to receive checks, according to Scott McClain, counsel for the organization.
“We’re not asking the state to abandon its debit-card program,” McClain said. “For some folks, direct deposit and debit cards make sense. But for our customers, often they don’t. We want the state to preserve a paper-check option for them.”
The average weekly unemployment payout is $393, according to the New Jersey Department of Labor. The trade group’s members process checks for about 60,000 people, McClain said. That translates to $521,118 each week in fees collected by the check cashers.
Critics said the new rules could take more money from the unemployed, in the form of out-of-network ATM fees and overdraft charges.
“Bank of America ATMs are not located in every neighborhood, particularly the areas where our membership serves the ‘unbanked’ and the ‘underbanked,’Ÿ” said McClain, referring people who don’t have accounts with commercial banks or credit unions, or who use them in conjunction with check-cashing services, rent-to-own businesses, payday loans and pawn shops.
In New Jersey, 7.4 percent of the population lack savings or checking accounts, according to the Federal Deposit Insurance Corp. In addition, 23.5 percent of blacks and 21.9 percent of Hispanics do not have bank accounts, compared with 1.9 percent of whites. The majority of non-banking residents have an income of less than $15,000 and lack a high school diploma.
Bank of America maintains 433 branches and 638 ATMs in New Jersey, according to its state fact sheet.
The agreement with New Jersey stipulates no fees for withdrawals at Bank of America ATMs, cash transactions involving a teller, ATM and online balance inquiries and live customer service. Cardholders also will be permitted two no-fee withdrawals per month at ATMs not operated by Bank of America, and will not pay fees for purchases from stores that accept Visa debit cards.
Debit accounts also will not permit overdrafts, negating the possibility for related fees.
Wirths, the Labor commissioner, said New Jersey is the 30th state to phase out unemployment checks.
“We’re not doing something strange here,” he said. “We learned from [other states’] mistakes.”
McClain, representing the check cashers, said that is little consolation to his members.
“I see some absolutely going out of business or contracting hours or numbers of employees,” he said. “It will have a serious effect on the industry.”
Related coverage:
• N.J. unemployment rate drops to 9.4 percent
• N.J. jobless figures show employers are not firing, but not hiring, either
• N.J. unemployment rate drops to 9.6 percent, officials say
• Rep. Rush Holt slams opponent for proposal to reduce unemployment benefits below minimum wage