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Model Release Card Legislation

Correctional facilities are increasingly using fee-riddled cards to repay people they release for money in their possession when initially arrested, money earned working in the facility, or money sent by friends and relatives. Before the rise of these release cards, people were given cash or a check. Now, they are instead given a mandatory prepaid card, which comes with high fees that eat into their balance. For example, the cards charge for basic things like having an account, making a purchase, checking your balance, or closing the account.

This state model legislation bans release card fees and requires that incarcerated people be given the option to have their funds returned by cash or check.

Bill

§ 1. Definitions.

As used in this act:

(1) "Criminal justice agency" means an agency authorized by law to arrest, prosecute, incarcerate, parole, supervise, or rehabilitate criminal suspects or offenders, as well as any agents acting on behalf of such agencies.

(2) "Release funds" means money owed by a criminal justice agency to an incarcerated person and paid to the obligee upon that person's release from custody, including:

(a) funds that an incarcerated person had in his possession at the time he is taken into custody, and over which the incarcerated person retains equitable title;

If state law already includes statutes addressing return of arrestee funds and/or inmate trust funds, then cross references may be appropriate in place of paragraphs (a) or (b) respectively.

(b) wages, gifts, or public assistance received by an incarcerated person during his term of incarceration and held by a criminal justice agency for the benefit of the recipient;

(3) "Incarcerated person" means a person who is: taken into custody in connection with an arrest; incarcerated awaiting trial; or, sentenced to a term of incarceration in a correctional facility.

(4) "Prepaid device" means a card, code, or other means of access to an consumer's account held by a financial institution or other financial service provider.

This definition is based on the definition of "access device" found in CFPB Regulation E (12 C.F.R. § 1005.2(a)(1)). It covers prepaid debit cards, but is broad enough to also cover future variations (e.g., an online prepaid account without a tangible card).

§ 2. Disbursement methods. A criminal justice agency may not disburse release funds by means of a prepaid device unless the agency also provides the payee with the option of receiving the funds by cash or check.

There are three simple substantive provisions of this legislation. First, § 2 prohibits mandatory use of prepaid cards, by requiring consumer choice.

§ 3. Prepaid device fees. If a criminal justice agency disburses release funds by means of a prepaid device, neither the criminal justice agency nor the issuer of the prepaid device may impose, or cause to be imposed, any fee payable by the holder of the prepaid device.

Second, if prepaid cards are offered in compliance with § 2, then neither the agency nor the card issuer can impose user fees. This section does not prohibit fees charged by bona fide third parties, such as out-of-network fees charged by a third-party ATM operator.

§ 4. Unclaimed property. Notwithstanding any other provision of law, any instrument or prepaid device used to disburse release funds is "property" for purposes of [state's unclaimed property law].

Third, the legislation removes release cards from the "gift card loophole" that allows card issuers to keep unused funds.

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