Alabama to rein in third-party payment profit sharing in prison telephone industry

Alabama’s new rules will force prison phone industry to end kickbacks from Western Union/MoneyGram.

by Peter Wagner, July 21, 2014

On July 7, the Alabama Public Service Commission announced new rules to go into effect on October 1 to cap the rates and fees charged by the prison and jail telephone industry operating in that state.

The new rules are notable for addressing not just the high rates charged to families for each phone call, but also for the comprehensive way in which Alabama addresses the additional fees that families must pay to open accounts, deposit money, have accounts, and receive refunds. Fees are complicated and get less attention than the rates, but fees are important. As we explain in our Please Deposit All Your Money report, we found that fees account for 38% of the money spent on calls from correctional facilities.

The final rules largely resemble the proposed rules we analyzed and praised last year. And the new order confirms that the phone companies are not somehow exempt from unclaimed property laws, and must refund unused pre-paid funds to the customers or hand it over to the State as well as imposing new rules that discourage jails from banning in-person visitation to replace it with paid video visitation.

And most notably, the new rules significantly strengthen the Alabama Public Service Commission’s finding that many parts of the industry are receiving secret kickbacks from payment processors like Western Union and MoneyGram and creates a solution that should have an immediate nation-wide impact.

The final rules require all companies operating in Alabama to submit to the Commission by October 1 the fees charged by third party companies like Western Union and MoneyGram to send payments to that company. If the fee is more than the more typical charge of $5.95:

the provider shall submit a sworn affidavit signed by the provider’s Owner, President, or Chief Executive Officer and notarized, affirming that the ICS provider, its parent company, nor any subsidiary/affiliate of the provider or its parent company receives no portion of the revenue charged the provider’s customers by the listed third-party payment transfer services. For any payment transfer fee that exceeds $5.95, the ICS provider shall also provide to the Commission a copy of the provider’s contract with the third-party payment transfer service and shall justify to the Commission in writing, signed by the provider’s Owner, President, or Chief Executive Officer, why it is unable to arrange for payment transfer services at fees that do not exceed $5.95. (¶ 8.20)

Assuming that the companies aren’t willing to commit perjury, the companies will have three choices:

  1. Renegotiate the contract like NCIC did to lower the price charged to families.
  2. Renegotiate the contact just for payments in Alabama, thereby admitting to every other state that kickbacks are in place elsewhere.
  3. Give up the Western Union and MoneyGram kickbacks nation-wide.

Given that poor people often don’t have access to banks and credit cards and must instead rely on services like Western Union and MoneyGram, this order will have a massive impact, leaving families with more money to spend on the actual phone calls or other family needs. Bravo Alabama!

Other states: What are you waiting for?

Peter Wagner is Executive Director of the Prison Policy Initiative. (Other articles | Full bio | Contact)

3 responses:

  1. Doug Dillard says:

    Thank you for bringing this to light and sharing it with your associates. Bravo Prison Policy Initiative!

    Best regards,

    Doug Dillard
    Alabama Public Service Commission

    1. And thank you all for making Alabama a leader on this issue, and for ensuring such a positive and immediate change for families in your state.

  2. Michelle says:

    These things need to be changed, anything that I say has not already been said a million times, people that typically go to jail or prison come from lower income families and when they want to talk to their loved one they can barely afford to pay for their phone calls, 20 minute calls are outrageous. I live in WI and my husband was gone for 12 years and I could not always afford those expensive calls. I had 3 children to support but we wanted to talk to our loved one!!! Thank you AL for making this happen in your state, other states need to follow suit.

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  • Feb 21, 2019:
    Volunteer Attorney Stephen Raher will be presenting his paper “The Company Store and the Literally Captive Market: Consumer Law in Prisons and Jails” at the Consumer Law Conference at Berkeley Law School. The paper will be presented and discussed at 4:00pm.

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