Greg Cavaluzzi spent four years in federal prison, eating cold oatmeal and white bread for breakfast and bologna for lunch and dinner. So the first thing he wanted to do when he was released was to eat “something normal.” When his parents picked him up from Fort Dix in New Jersey, he took them to Wendy’s.
“We didn’t really talk,” he says. “We ate. We were just so happy to be next to each other.”
He ordered two bacon, egg and cheese sandwiches, and paid for the meal with a JP Morgan Chase debit card featuring a photo of him in his prison-issued khakis, a backdrop measuring his height in the background. The cards are standard in the federal prison system for giving discharged inmates money sent by friends and family or earned at in-prison jobs.
Cavaluzzi’s meal cost around ten dollars. Or as Cavaluzzi puts it: “Everything. It was everything. I was used to making ten dollars a month.”
Cavaluzzi made that money as a librarian in prison, where wages start at $.11 an hour. But those hard-earned dollars disappeared faster than he expected, and when he called Chase, he found out the reason was fees.
“It just seemed a little…” Cavaluzzi trails off. “It was sketchy.”
The fees on prison-issued debit cards were agreed to in a contract with a branch of the Department of the Treasury in 2011, who provided the below schedule of fees.
It’s $.45 to check your balance at an ATM, $1.50 if your account is inactive for 90 days, $2.00 for withdrawing money at a non-Chase ATM, and $7.50 for replacing the card a second time within a single year.
The absolute numbers aren’t radically high, but experts say even small penalties can be both more significant—and more insidious—for newly released prisoners, who tend to have less money, less banking experience and many other barriers to reintegrating into society.
“It’s bus fare to a job, it’s a meal, it’s a room for a night,” says Karin Martin, an associate professor at the John Jay College of Criminal Justice who researches debt and fees in the criminal justice system. “There’s this split mentality—on the one hand, we are saying we would like to reintegrate people, and on the other hand, we are having lots of policies that undermine their ability to reintegrate.”
Still, contracting with private companies that charge inmates for their services is hardly exceptional.
“The Bureau of Prisons contracts out all kinds of goods and service type things,” says Jack Donson, who spent 23 years as a case manager in the federal prison system. “The institution has food vendors, vending machine vendors, halfway houses.”
In all these cases, companies have a (literally) captive market, and prisoners frequently complain about being overcharged. Though there is no competition for the business of prison inmates, there is typically competition for the contracts themselves—as there are for most such contracts with the federal government—for sound economic reasons.
“When it comes to products or service that are somewhat standard, easy to describe, where the deliverables are clear and reasonably measurable, then competitive bidding is by far the most efficient method of procurement,” says Steve Tadelis, an associate professor of business and public policy at UC Berkeley who has studied government contracts.
A good example of this kind of standardized good or service is a pencil.
“If you’re a government agency and you want to procure pencils, well there are gazillion producers of pencils,” says Tadelis. An open competitive bidding process asks all the pencil producers to make an offer, and let’s that competition drive down the pencil price.
But a Center for Public Integrity investigation found that the contract with JP Morgan Chase—as well as a contract between the Department of Treasury and the Bank of America for financial services inside of prisons—were not subject to an open, competitive bidding process.
“When I hear ‘no bid contract,’ forget prison environment, that does surprise me a little bit,” says Donson.
Tadelis says, from an economist’s point of view, it could make sense to skirt the competitive bidding process, but only if the goods or services are complicated, evolving or difficult to describe.
“From what I’ve read and heard about these issues with the bank accounts and debit cards, I think it’s pretty clear this looks as lot more like a pencil than a fighter jet or a complex IT system,” says Tadelis.
Treasury’s Office of the Inspector General is now investigating the contracts with JP Morgan Chase and the Bank of America, and is expected to issue a report later this year.
Gregg Cavaluzzi now works at the Fortune Society, helping to find jobs for other newly-released prisoners.
“Until these banks find a way to make money on the rehabilitation of people, and not the incarceration,” he warns, “this will continue.”
Stan Alcorn is a multimedia journalist in New York City. He has reported for NPR and WNYC, where he has focused on business and the New York tech scene.