Regulator Explores Financial Exploitation in Prisons

The government says predatory practices are pervasive in jail

Cook County Jail Inmates Take Part In Early Voting Ahead Of Illinois Primary

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The government’s predatory lending watchdog is turning its attention to the exploitation of prisoners and their families, people it says are often left with no choice but to deal with companies that overcharge them for basic financial services. 

Key Takeaways

  • A recent report by the Consumer Financial Protection Bureau highlights the financial obstacles that prisoners face.
  • Monopolies within the prison system exploit inmates and their families by overcharging for basic services like money transfers and phone calls, the bureau said in its report. 
  • People leaving prison shouldn’t be put at an unfair advantage when it comes to financial prospects, the bureau said.

The Consumer Financial Protection Bureau recently issued a report outlining various ways that private companies take advantage of inmates and their families—a literally captive market—to overcharge for transferring money, making phone calls, and other services. The bureau on Tuesday issued a reminder that financial companies are prohibited from forcing recipients of government benefits to use their services—for instance, making prisoners get their release money (jail wages, money that’s returned to them, and in many states, a small amount of cash to help with necessities) on a prepaid debit card that charges fees.

At each stage, the costs associated with going to jail can be unfair and damaging both for prisoners and their families, whether it’s paying bail and court fees, charging for access to funds while in prison, or siphoning fees from the benefits they receive upon release, the CFPB said in the report. Bureau officials said their review of the issue will continue, and they’re particularly interested in preventing someone’s criminal history from being used to restrict their economic prospects once they’re out of jail.

“Many incarcerated individuals and their families pay exorbitant fees for basic financial services,” CFPB Director Rohit Chopra said in a press release accompanying the report, which drew upon a wide variety of previous research. “Private companies undermine the ability for individuals to successfully transition from incarceration.”

What’s more, the financial effects of incarceration can persist long after an inmate has served their sentence. The lack of stable income can make it harder to pass credit and background checks, making loans more expensive or hard to even obtain. One study found the average credit score of a former prisoner was 50 points lower than those who hadn’t been in jail, the bureau said, making it harder to find a job or a place to live. Being unable to access finances while in prison can also cause debt and delinquencies to mount and bills to go unpaid, compounding the credit score challenges. 

‘Predatory Practices’

Prisoners are the target of pervasive “predatory practices,” the CFPB said, citing the prepaid debit cards as one example. (In October, the bureau ordered JPay, a prison financial services company, to pay $6 million for illegally charging people exiting prison fees to access their own money. At the time, JPay’s parent company, Aventiv Technologies, said it was cooperating with regulators and “reforming certain past business practices.”)

A few companies also monopolize money transfers, the bureau said, making it hard for relatives to send money to commissary accounts without being charged. For example, families in Louisiana were charged $6.50 to send $40 to a relative in a state penitentiary, a 16% take for the companies that handled the transfers.

Other examples included access to phone calls, email, and digital music, where companies’ exclusive contracts with prisons may allow them to charge outsized fees.

Prison reform advocates said that while the CFPB’s focus is a step forward, a broader government effort is needed. 

“We need to go beyond punishing companies for lying to consumers and start to regulate the rates they charge, the extraneous fees, and the poor-quality services. And for that to happen, Congress and agencies like the Federal Trade Commission will have to start being as tenacious as the CFPB has been lately,” Wanda Bertram, a spokesperson for the Prison Policy Initiative, wrote in an email.

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  1. CFPB. "Justice-Involved Individuals and the Consumer Financial Marketplace.

  2. CFPB. "CFPB Takes Action to Halt Prepaid Card Providers Siphoning Government Benefits."

  3. CFPB. "CFPB Report Shows Criminal Justice Financial Ecosystem Exploits Families at Every Stage."

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