PHOENIX (CN) - Arizona appears to be violating a federal law that "prohibits states from requiring workers to have an account at a particular institution as a condition of unemployment benefits," the National Consumer Law Center said in a new report.
Arizona's worker participation ranks last among the 44 states that offer direct-deposit of unemployment benefits, according to the report, "2013 Survey of Unemployment Prepaid Cards," which was released this week.
"Arizona's rock bottom direct deposit rate is clearly due to the fact that the state does not give workers the initial choice of direct deposit," the report states. "Workers are automatically enrolled in the prepaid card whether they want it or not. After they receive their card, they must take the initiative to find and fill out a form to set up direct deposit. The form must be sent in by mail; it cannot be completed online or over the phone.
"Though better than not offering direct deposit at all, this process likely violates the federal law that prohibits states from requiring workers to have an account at a particular institution as a condition of unemployment benefits. Workers are initially required to have a prepaid card account with the state's vendor, and must take additional steps to disenroll from that account."
The National Consumer Law Center takes the Arizona Department of Economic Security to task for not explaining on its website that workers may have to pay fees to use the prepaid card.
Arizona workers "will pay $0.25 per call if they use the automated menu to check their balance or talk to customer service more than eight times a month, $0.75 if they check their balance at an out-of-network ATM, and $1.50 per withdrawal if they use out-of-network ATMs more than four times per month," the report states says.
Arizona's direct deposit rate of 16 percent "is clearly due to the fact that the state does not give workers the initial choice of direct deposit," the report states.
Of the states that allow direct deposits of unemployment check, the median rate of worker participation is 57 percent. Minnesota has the highest rate, at 82 percent. Eighty-one percent of Arizona workers use the prepaid card, and 3 percent receive a check, according to the report.
The NCLC report, however, gave prepaid card a "thumbs up," however, because it has "no fees at network ATMs and no penalty fees," and "includes some free out-of-network ATM withdrawals and the option of monthly account statements."
Wyoming, Nevada, Maryland, Indiana, Kansas and California do not offer direct deposit for unemployment benefits, according to the report.