JPMorgan To Exit Foodstamp, Other Prepaid Cards Business

Tyler Durden's picture

Mess with us, we'll mess with you. That is the message one can derive from JPMorgan's surprise announcement that it plans to "sell or wind down its business of issuing prepaid cards for corporate payrolls and government tax refunds and benefits." Which also includes the infamous Electronic Benefits Transfer, or foodstamps, card. According to Reuters, the product, which has been offered with cash and treasury services to companies and governments, "had become a headache of risks in operations and regulations, according to a person familiar with the matter who was not authorized to speak publicly."

Curiously, it was just over two years ago when JPM said this about its EBT business:

“This business is a very important business to JP Morgan,” Christopher Paton, the company’s managing director of treasury services, told Bloomberg News in 2011. “It’s an important business in terms of its size and scale. We also regard it as very important in the sense that we are delivering a very useful social function. We are a key part of this benefit delivery mechanism. Right now volumes have gone through the roof in the past couple of years or so … The good news from JP Morgan’s perspective is the infrastructure that we built has been able to cope with that increase in volume.”

Guess the social function isn't that important any more. However, along with the responsibilities, JPM is losing a substantial revenue stream:

Just how lucrative JP Morgan’s EBT state contracts are is hard to say, because total national data on EBT contracts are not reported. But thanks to a combination of public-records requests and contracts that are available online, here’s what we do know: 18 of the 24 states JP Morgan handles have been contracted to pay the bank up to $560,492,596.02 since 2004. Since 2007, Florida has been contracted to pay JP Morgan $90,351,202.22. Pennsylvania’s seven-year contract totaled $112,541,823.27. New York’s seven-year contract totaled $126,394,917.


EBT processors charge for other services as well. For example, any time TANF recipients withdraw their cash benefits or make balance inquiries through out-of-network ATM machines, the user may incur ATM transaction fees generally ranging from $.75 to $1.50. In addition, most states allow EBT processors to charge card replacement fees. Arizona cardholders, for example, are permitted one free replacement a year, after which a $5 per card fee is imposed. The same goes for customer service calls: After an EBT cardholder exceeds the state’s maximum number of free calls, EBT processors typically tack on a $.25 per call fee.

That's a lot of money that one doesn't easily give up on. But that's what JPM just did. Or in other words, JPM just told the government which has been going after it relentlessly for the past year, forcing JPM to rack up some $25 billion in litigation reserves, "you can find someone else to manage your wholesale welfare program for nearly 50 million Americans."

There is more:

Last month JPMorgan warned some 465,000 holders of the cards that their personal data may have been accessed by computer hackers who attacked its network in July.


Government regulators are focusing on whether corporate payroll programs that use the cards have sufficient safeguards against burdening employees with fees.


For the past year the company has been moving to simplify its operations after its risk controls and guards against money laundering were found deficient by regulators.

According to JPMorgan's statement, the bank "will explore a full range of options for its prepaid card business, including a sale." In the meantime, it will continue to support current clients and cardholders. The decision does not affect Chase customers holding credit, debit or prepaid "Liquid" cards, the company said. Needless to add here, the last thing the precarious "recovery" needs right now are glitches with the EBT system, which as we saw last October when the EBT system briefly went "dark" nearly plunged the nation into a wholesale panic. Then again, such is quid pro quo life when the government bites one of the biggest hands that feed it.

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centerline's picture

Outstanding.  Let the name calling progress to bitch slapping.

WarriorClass's picture


The bigger picture that takes jobs from Americans and lowers the wages of those still working are LEGAL immigration and WORK VISAS. Those are the middle class jobs that are going to foreigners at the expense of Americans. The illegal aliens tend to take the lower paying jobs that black people won't do and white kids are no longer allowed to do.

Companies would rather hire a foreign national since that person can't demand a raise or just go across the street and get another job. A foreigner would have to go back to his country of origin and then start looking for a higher paying job. This keeps wages down for both the foreign national and the American worker. The massive legal immigrants add directly to the labor pool of American workers, driving down wages generally. This is simple supply and demand for labor.

Increase the supply of labor and the price of labor goes down. All of you "law abiding" that support LEGAL immigration are cutting your own throats, and the big corporations are helping you do that with work visas.

Nevertheless, the dumbed down masses cry for "legal" immigration while their paycheck whittles down to nothing and they can't afford to send their kids to college while the aliens go for free.

Pladizow's picture

Its my ball and Im taking it home - Waaaaaaaa!

hedgeless_horseman's picture



"YOUR ball has gone flat. I want Uncle Sugar to buy me a new one." -Jamie

Divided States of America's picture

I cant believe that even JPM had to stick their greedy hands into the foodstamp business. No wonder Obama kept extending these fuckin benefits....well now that JPM is leaving this business....Obama probably wont extend them anymore since his master (Dimon & Co) wont be getting anything back from doing so.

viahj's picture

another sign of the impending collapse, JPM doesn't want the FSA coming after them when their EBT cards don't work anymore.

fonzannoon's picture

No offense...but is the FSA really going to storm JPM's (NYPD protected) headquarters when their card does not swipe or the poor guy on the other side of the cash register at 7/11?

hedgeless_horseman's picture the FSA really going to storm JPM's (NYPD protected) headquarters when their card does not swipe...?


Colonel Klink's picture

But it would have to be that obvious for the sheeple to see it.

El Vaquero's picture

OT, but this is right up your alley HH.


I wish more people would pay attention to this kind of shit.  More of them would do what you do.

Ying-Yang's picture

"rack up some $25 billion in litigation reserves"

Holy Shit......... that's alot of litigation.

When Is Disclosure Required?

If a company determines that a loss is only “reasonably possible” or that a loss is “probable,” but the amount is not reasonably estimable, the company need not establish a reserve, but it still must disclose the nature of the possible loss and give an estimate of the possible loss or range of loss. The key is to ensure that the financial statements are not misleading.

10mm's picture

Klink. That optimism will poke your eye out.


Fonz       I'm going to go with the poor guy on the ohter side of the cash register at the 7/11 will take the hit.  FSA does not have a clue who handles processing for EBT. If you conduct a poll, I'd bet 90% of Amerikans would answer "the government" handles all aspects of EBT cards.

Dr. Engali's picture

Exactly. When the FSA start storming they will be like locust devouring everything in sight. It will be us against them while TPTB sit back comfortably.laughing. 

fonestar's picture

The ZH "solution" would be to give all the poor people dirt fields with intrinsic value.

Ying-Yang's picture

would you prefer giving them bitcoins?

fonestar's picture

You could give them bitcoin cards, sure.  But that should be done through orgs, not through govs (which have no business in the welfare industry).

viahj's picture

when the collapse comes the politcals will very much (and very quickly) be pointing the finger at the banks.  count on it.  there is no honor between thieves when the walls are crumbling around the city on the hill.

turn the card over but your point is taken, the FSA will strike out everyone

PT's picture

But it's no big deal.  All JPM's competitors will come along to pick up the slack, won't they?  Won't they?

SoilMyselfRotten's picture

You guys have poor JPM all wrong. It only does these programs out of the kindness of its heart. It loses money on its altruistic tendencies and only does Gods work for the people.

 Ohhh no, i just felt something coming up the back of my throat

Colonel Klink's picture

Obama says that same last line too.


KLINK   HAHA good laugh, but there is a difference in "going down" and coming up the throat.

SilverRhino's picture

Pretty sure Obama goes both ways. 

walküre's picture

How many own XOM or RTN?

Politics and TBTF, MIC, Big Oil go hand in hand.

That is who they are serving because that is who pays them. Not much of a secret.

Unless heads roll, nothing will change.

ParkAveFlasher's picture

I'll take, "spun off to cronies" for $500, Alex.

Canadian Dirtlump's picture

I would tend to agree. The idea that these guys would walk away from bilking taxpayers of free money based on either principle or a sandy vagina is a bridge too far.


A professional thief only voluntarily abandons a mark if it becomes too risky, or he knows the well has run dry.

NEOSERF's picture

Which is the reason nobody will touch Freddie's Fannie with your 10 foot pole...mortgages are too fraught with risk in a world where you are one recession away from a portfolio of defaulting, rotting houses..

jimijon's picture

BitCoins Bitchez! 

I'll take that contract and distribute all the bitcoins they want.

Cheers. .. fonestar?

insanelysane's picture

Smells to me like JPM was most likely given a choice to either quit the business or be prosecuted and lose the business.  Most likely rife with fraud and kickbacks and someone was going to sing.

walküre's picture

Agreed. JPM is being prepard for the slaughter house. They will be cut into pieces and sold to the highest bidder in the near future.

ceilidh_trail's picture

As one personally screwed over by them, can't happen soon enough. I was given a $30 debit card by our .gov for participating in a survey of professionals with a graduate degree last spring. When I went to use it, I could not withdraw all the money. Their atms in Northern Ky only spit out 20's. The teller inside the bank could read the amount on the card as $30, but said she could not give me it because it had to come from the atm. I left and tried a different branch- same thing. When I read the balance at the atm, it was also now under thirty even though I never got a cent. Screwed over on bs fees as the boys got a few cents richer. I gave up as it was not worth the bp insult...

jerry_theking_lawler's picture

they love 'taking' money...could you have given the teller a $10 spot from your stash (or borrow it) and give to them to put on the card...then withdraw the $40? seems too easy to me. but I always think of ways to 'take it to the man'.....

duo's picture

don't worry, SNAP will now show up as Wal-Mart gift cards!

willwork4food's picture

Good call. Wal-Mart & 7/11's, you know the convenience stores that only sell fresh, nutritional foods.

GeezerGeek's picture

Perhaps Michelle wanted to steer more businees to her friend, the one with the company that did such a wonderful job with 

Can you imagine the results if EBT/SNAP worked as well as I suspect DHS would have to use some of those billions of rounds of ammo they bought.

krispkritter's picture

www, Error 404: YOUR MONEY(taken from someone else) NOT FOUND. 

Kaiser Sousa's picture

no worries....cause


poor debt coupon dollar debt slaves...

what now??????



how bout some Physical Silver........


Abitdodgie's picture

"how bout some Physical Silver." Yes please then when I have bought it the Bankers can knock the price down and steal some more wealth from me Goldcoin and Silvercoin a great investment , now the same price as it was in 2010

Kaiser Sousa's picture

"now the same price as it was in 2010..."

which is exactly the point "lost one"....

maintenance of purchasing power versus fake ass nominal dollar gains in debt coupon dollar denominated asset bubbles...

grab a inflation calculator dude...and learn the importance of discerning the distinction between the substantive versus the superficial....



wisen up.....the Matrix has u.....

MeMongo's picture


My silver dime will still buy a loaf of bread:-)

I try to explain it to the old guys I do business with.

I say " does it seem like things are more expensive now vs. When you were a kid?"

Usual answer is " HELL YES!" And they go on to say " when I was young I could get a loaf of bread for a dime and a gallon of gas for a quarter"

I then put a silver dime and quarter on the table and I say "I can still get a loaf of bread with the dime and a gallon and a half of gas for the quarter" 

Almost all of the time they look at me like I'm speaking another language!

Kaiser Sousa's picture

Mongo u r speaking a differnet language...

its called knowledge....

SilverRhino's picture

You don't sell silver like flipping a house.  

You acquire silver like you are buying a house. 


forwardho's picture

G-d help us if .gov tries to step in and handle these logistics.

50 million of the best the U.S. has to offer going hungry does not bode well for our future.

Musashi Miyamoto's picture

Long ballistic-glass window shopping from here on out, the pot is starting to simmer...

NoWayJose's picture

I hear the IT staff is looking for work - maybe they could take over the EBT program too?