How “Jail Banks” and the US Treasury Gave New Meaning to the Term “Bank Robber”
Date:  10-06-2014

People in prison, and their loved ones, are gouged by a growing number of banks and businesses that thrive on mass incarceration
The Center for Public Integrity (CPI) released a two-part series on the way big banks and so-called “prison banks” rip off prisoners and their families. In the first part of the series Daniel Wagner reveals how some corrections departments are using companies such as JPay, Inc. to handle the payments families send to their incarcerated loved ones. The article tells of the hardship inflicted on Pat Taylor whenever she can afford to send her incarcerated son some money: To get cash to her son, Pat used to purchase a money order at the post office for $1.25 and mail it to the prison, for a total cost of less than $2. But in March of last year, the Virginia Department of Corrections informed her that JPay Inc., a private company in Florida, would begin handling all deposits into inmates’ accounts. Sending a money order through JPay takes too long, so Taylor started using her debit card to get him funds instead. To send Eddie $50, Taylor must pay $6.95 to JPay. Depending on how much she can afford to send, the fee can be as high as 35 percent. In other states, JPay’s fees approach 45 percent. After the fee, the state takes out another 15 percent of her money for court fees and a mandatory savings account, which Eddie will receive upon his release in 2021, minus the interest, which goes to the Department of Corrections.

JPay, according to CPI, is getting very rich while most people in prison and their loved ones, face financial hardships:

JPay handled nearly 7 million transactions in 2013, generating well over $50 million in revenue. It expects to transfer more than $1 billion this year. (The company declined to provide any financial details; those included in this article are culled from public records and interviews with current and former employees.)

But it is not just JPay that is profiting from people who are locked up. Other businesses have been created to squeeze money from prisoners and their families. Read more of Part One.

In the second part of the CPI investigative series, Daniel Wagner reports on how the Government hands out no-bid contracts to some of the biggest financial institutions including Bank of America and JP Morgan.

Wagner found:

For the 790 federal prisoners incarcerated at MCC, Bank of America controls the provision of money transfers, e-messaging and some telephone services. The bank’s monopoly extends across the federal Bureau of Prisons system — 121 institutions housing 214,365 inmates. Since 2000, Bank of America has collected at least $76.3 million for its work on the program.

When inmates are released, JPMorgan steps in, issuing high-fee payment cards to distribute money from their prison accounts, which include earnings from jobs and money their families send them.

The banks’ exclusive deals came not from the Bureau of Prisons, but from the U.S. Treasury. The agency awarded the contracts using a 150-year-old authority that allows it to sidestep the oversight, transparency and competition typically required for federal contracting.

The deals that the government makes with banks and businesses that feed off of America’s policy of mass incarceration “invites opportunities for waste and fraud,” and it is doubtful that without investigations such as the one undertaken by CPI the public would not know that prisoners, the poorest of the poor, have to pay not only with the months or years of their sentences, but also with fees tacked on to their meager funds by banks and businesses using their own form of “capital” punishment.

Read Part Two of the CPI investigation here.

Update: After CPI posted their article on how the U.S. Treasury offered a no bid deal to Bank Of America, Sen. Charles Grassley, R-Iowa asked the Treasury Department pointed questions on no bid deals and the lack of transparency. Read more