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HRDC response to CFPB re JPay release debit cards - Sept. 2015

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Human Rights Defense Center

September 10, 2015

Submitted Online

Monica Jackson
Office of the Executive Secretary
Consumer Financial Protection Bureau
1700 G Street N.W.
Washington, DC 20552

RE: Response to JPay’s May 27, 2015 Filing, re: Notice of Proposed Rulemaking
to Amend Regulation E – Docket No. CFPB-2014-0031, RIN 3170-AA22
Dear Ms. Jackson,
The Human Rights Defense Center (HRDC) submits this letter in response to a comment by JPay
Inc. (JPay), dated May 27, 2015, which posted to the CFPB docket on June 3, 2015 – more than
two months following closure of the comment period on proposed rulemaking to amend 12
C.F.R. Part 1005 (Regulation E).
In addition to the extreme untimeliness of JPay’s filing, information contained in the company’s
ex-parte submission is not consistent with the terms of their contracts with correctional
agencies, as explained below in greater detail.
Further, a recent significant development was not mentioned by JPay. On July 31, 2015, JPay
was purchased by Securus Technologies for $250 million.1 Securus is a prison telecom company
owned by ABRY Partners, a private equity hedge fund, that pays correctional agencies millions
of dollars in “commission” kickbacks in exchange for monopoly phone contracts. Consumers
seeking to communicate with imprisoned loved ones have no choice but to pay extortionate
and outrageous rates for telephone communication with prisoners.

“Securus Technologies, Inc. Completes Transaction to Acquire JPay Inc.” See

P.O. Box 1151
Lake Worth, FL 33460
Phone: 561.360.2523 Fax: 866.735.7136
Paul Wright, Executive Director:

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As examples, a 15-minute intrastate call from the Lincoln County Jail in Montana costs $14.44
($4.09 connection fee + $0.69/min.) and a 15-minute intrastate call from the Kimball County
Sheriff’s Office in Nebraska costs $13.52 ($3.75 connection fee + $0.65/min.). Four 15-minute
calls per month from either of these facilities will cost more than what many of us pay for
monthly cell phone plans with unlimited calling.
Faced with the prospect of regulatory action by the Federal Communications Commission which
may limit its ability to continue to price gouge and exploit prisoners and their families via prison
and jail phone systems, Securus has purchased JPay with the express intention of expanding its
predatory business model into areas that are not regulated, including release debit cards. See
Attachment A.
How much is the ability to continue financially exploiting prisoners and their families worth to
Securus? At least $250 million – JPay’s purchase price. This illustrates the urgent need for the
CFPB to protect prisoners, ex-prisoners and arrestees who are exploited by having release debit
cards foisted on them with no choice in the matter.
Consumer choice is a key issue in these pending regulations. JPay’s recent merger illustrates
that their priority is in securing the ability of hedge funds to profit at the expense of the poorest
and most vulnerable members of our society. This re-affirms our efforts to ensure regulations
are in place to protect consumers from exploitive products such as their release cards.
After reviewing contracts and related public records from several states which JPay cites in its
ex-parte filing, not only have we been unable to verify statements the company presents in its
defense, we have found outright contradictions in the existing contracts obtained by HRDC
through public records requests in close proximity to the date of JPay’s ex-parte letter.
For example, on page 4 of its filing, JPay says it has “not charged for customer service and
account cancellation in any state for over one year.” Yet current contracts which include fee
schedules do not indicate this is the case.
Georgia Department of Corrections (GDOC) contract information provided to HRDC on April 28,
2015 indicates that JPay charges a customer service fee of either $0.25 per minute (automated)
or $1.00 per minute (live) for phone calls. If JPay has voluntarily removed this fee over the past
year it has not stated that in any amendment to the contract, which the GDOC was required to
produce pursuant to our public records request. See Attachment B.
The most recent amended JPay contract made available by the Colorado Department of
Corrections (CO DOC) also indicates a customer service charge of $.25 if automated and $1.00
for live customer service (not specified as “per minute”). This contract also includes a $1.50
“print statement” fee which is not listed in JPay’s ex-parte letter. See Attachment C.
JPay alleged: “In some states, including Florida and Louisiana, no fees apply to activating or
using JPay's release cards.” Additionally, the Louisiana Department of Corrections fee table in

Page |3

the ex-parte letter indicates there are no fees aside from $5.00 for a replacement card, yet the
contract language we received from the Louisiana DOC pursuant to a public records request
includes a $12.95 “fee per card issued.” See Attachment D. We found no specific mention
either way regarding activation fees in Florida’s JPay contract.
These fees could easily amount to a significant cost to release debit card users, particularly if
they are not receiving accurate information about the fees they are being assessed for basic
functions of debit card use.
Even if JPay has changed or reduced certain fees as alleged – essentially admitting that its prior
practices were predatory – the absence of contractual language related to those changes offers
no assurance that consumers will be protected in the future.
While misrepresenting multiple fee schedules may be telling of JPay’s business practices, the
broader issues relating to the proposed regulation are much larger than specific fees associated
with individual contracts between correctional agencies and private companies. It is the
compulsory nature of release debit cards which HRDC’s initial filing was intended to address.
JPay is the only company in the release card industry to attempt to defend itself, untimely as it
was. In our review of the 6,000+ filings on the docket, we found no other company which was
listed in our initial comment that weighed in on the propriety of the regulation they are facing.
As such, we are responding to JPay’s comment broadly, viewing it as representative of the prepaid prisoner release debit card industry at large.
JPay states in its ex parte filing: “HRDC's statements illustrate that they have not thoroughly
investigated the details of JPay’s release card program and have a general lack of understanding
regarding the facts and circumstances underlying the need for states to utilize release card
programs such as those offered by JPay.”
We beg to differ, and trust that our research into the matter speaks for itself. Yet at the same
time, there are significant questions about this industry that remain unanswered. Despite our
extensive research on the topic, we’ve found that many important financial details needed to
fully understand the scope and scale of the problem with release debit cards are simply not
being made available by the privately-held companies that hold exclusive monopoly contracts
with correctional agencies to provide released prisoners with prepaid debit cards.
The following issues cited in JPay’s ex-parte letter deserve to be explored further in the process
of the much-needed rulemaking to amend Regulation E, and we urge the CFPB to look into
these matters when determining language for these rules.

JPay claims that “released prisoners are forced to pay excessive check cashing fees,
which can amount to over 10% of the face value of the check,” that “[c]hecks are often
issued days and sometimes months after inmates are released,” and that “release cards
should not be subject to the compulsory use provision because the other primary

Page |4

options for disbursing release funds – cash or check – have proven to be problematic for
correctional agencies and released inmates.”
If there is data to indicate that the extent of these allegations provides justification for
the compulsory and predatory business practices of release debit cards, HRDC has not
seen it. JPay provides no source or citation to these extraordinary claims. In HRDC’s
experience, released prisoners are typically provided with cash or a check upon their
release from prison or jail. We have yet to hear of cash being a problem in America for
anyone, much less newly-released prisoners. Checks can be problematic, especially for
prisoners released from jails outside of business hours. Regardless, this is not an excuse
to foist release debit cards on prisoners when they have no choice in the matter and
must pay fees to access their own money.

JPay states a hollow opinion that “extending Regulation E's compulsory use provision to
release cards would not provide significant, if any, additional protection for inmates.”
Since prisoners currently have no protection from JPay and the release debit card
industry’s predatory and compulsory use practices, this is demonstrably false.
We have found that, to the contrary, current and former prisoners who communicate
with HRDC about this issue, like all consumers, would prefer options on how to receive
their money upon release. We have also reviewed consumer reports for pre-paid debit
card options which should be available to prisoners, who may choose the option of a
pre-paid card upon release rather than being forced, or pressured, into a contract that is
not of their choosing.2 The current reality is that the vast majority of prisoners have no
choice in the matter. They simply have debit cards foisted on them whereby private
companies charge exorbitant fees to access their own money.



JPay explains, “[c]ardholders who may be subject to a service charge are given a grace
period of seven to sixty-two days before the first service fee is charged.” We found no
other pre-paid cards on the market advertising a seven-day service charge “grace
period.” This appears to be a practice that is only associated with compulsory cards
which target vulnerable people in low-income communities.


JPay claims that, “In any given state in which JPay distributes release cards, the total
cost of unavoidable fees is often $0.00, but never greater than $3.00.” The $0.00 fees
only appear to be the case in Florida, but may not be bound by contract. As mentioned
previously, the Louisiana DOC has an unavoidable $12.95 activation fee in the contract.
What is totally clear from the contracts HRDC has reviewed is that JPay and other debit
card companies view the prisons and jails, with whom they sign monopoly contracts, to
be their real “customers” – not the prisoners who are forced to use the debit cards, who
have no choice in the matter and who are the consumers actually paying the fees. It is
telling that none of the debit card companies are willing, or able, to make their

2015 Best Prepaid Debit Card Comparisons and Reviews:

Page |5

arguments on the virtues of their products directly to the affected consumer. They can
only survive and thrive in an artificial “market” that relies on the government to force
their products on a captive population that has no say in the matter and who must pay
fees to have their own money returned by a private, for-profit company after the
government has taken it from them upon their arrest or incarceration.
Not surprisingly, there is a dearth of comments on the docket from prisoners and
consumers who have had release debit cards foisted on them praising the cards or
telling the CFPB how delighted they were to pay fees to receive their own money and
having no choice in the matter. And JPay, with its hundreds of thousands of captive
“customers,” cannot cite a single satisfied customer, not employed by a prison or jail
agency, who can say anything positive about their experiences with the company’s
release cards. Businesses that actually deal with consumers who have marketplace
choices can generally provide customer testimonials when needed. Not so with the
prison and jail release debit card industry, only because they do not need to.

JPay claims “there are significant costs incurred ... in order to operate the release card
program” (Pg. 4), but they will not share how much they profit in relation to those costs
(as is required of a public agency, and should be of a company doing the business of a
public agency, as JPay is doing at prisons and jails around the country). Nothing says
they need to provide the business. As a for-profit company, JPay is in business to make
money for its owners, not to provide public services. That being said, they should not be
allowed to profit off the backs of prisoners and their families. The lack of transparency
with which JPay and its new owner, Securus, operate is legendary.


JPay states that “any fees generated under the program are used to offset these costs”;
that “Requiring cardholders to ‘opt in’ would increase the regulatory burden and
compliance costs for card issuers and correctional agencies, without providing
significant, if any, countervailing benefit to releasing inmates”; and that “HRDC does not
consider the fact that banning all such fees will effectively end the provision of a release
card program.”
The critical issue here is consumer choice. The prisons and jails forcing these debit cards
on released prisoners are not the ones paying the fees associated with them. JPay and
its fellow debit card companies could ask the government agencies to pay their fees and
pad their corporate coffers. Instead, they want to use the coercive power of the
government, free from regulation, to require people to pay debit card fees, making their
investors even richer than they already are. Their greatest fear is having to go before
informed consumers who have choices because they know if prisoners have a choice
they will not choose their exploitive products. If this business model cannot exist
without forcing or unduly pressuring customers into using it, and the companies have
not established data to justify these compulsory and often predatory arrangements,
then HRDC suggests that an end to release debit card programs is appropriate. Indeed,
we can think of no circumstance in which exploitation of a vulnerable, impoverished

Page |6

population that has no choice in their exploitation is appropriate. If requiring prisoners
to “opt in” and choose to use release debit cards and pay the related fees effectively
ends the industry, then we can say that the marketplace has spoken and consumers
have chosen. That is what happens in a competitive market.

JPay claims that they “must offer a low cost release card program in order to remain
competitive” in the bidding process for their state contracts. They then go on to say the
company has competitive rates compared to other pre-paid cards, comparing their fees
to those for similar products available at convenience stores, where people have the
freedom to make conscious choices as to what they choose to do, or not do, with their
money, and what financial contracts they enter into.
Ultimately, as we have stated previously, the matter of fees is secondary to the issue of
compulsion. The critical flaw with JPay’s claims is they are not competing for business
with the people actually paying their fees. They are seeking contracts from government
agencies that hold prisoners involuntarily and give them no choice. If JPay were charging
these fees to the government agencies, their claims might have credence. Since they
charge the government nothing and only make prisoners and arrestees pay fees to
access their own money, their claims have no validity.


Finally, JPay mentions that “HRDC incorrectly states that correctional agencies receive
commissions (or “kickbacks”) from release card providers. Not one state agency collects
a commission from JPay’s release card program.” This may be true, but only as a
Based on JPay’s financial records that have been produced to HRDC by government
agencies in response to public records requests, the commissions they pay to state
prison systems in which they supply other services provide some context about the
nature of their arrangements with those governmental agencies.
o For instance in Florida, where JPay boasts of its lowest fees on release debit cards,
the Florida DOC reported receiving $8,947,335.80 in commission kickbacks on JPay
money transfer services between 2010 and 2015. See Attachment E.
o According to commission data reported from March 2014 – March 2015, JPay
provided over $720,000 in kickbacks to the Georgia DOC for its various contracts
with that state prison system, including money transfer services.3
o In the month of March 2015 alone, the Louisiana DOC received kickbacks from JPay
totaling $47,880.07, including for money transfer services.4


Table of commissions from JPay to GA DOC, dated April 20, 2015.
Commission data provided in LA DOC public records request, pp. 182 – 212, dated April 24, 2015.

Page |7

o JPay’s 2013 contract with the Tennessee DOC includes a commission schedule that
lists the many services and products that result in kickbacks from the company to
the correctional agency, including money transfers, email services, video visits, MP3
downloads, MP3 players and tablets. See Attachment F.
JPay’s comments are not submitted under oath and, as the above examples indicate, it appears
they are at best misleading. While the company may not provide kickbacks for its release debit
cards, it does so for most of its other services – which serves as an inducement for correctional
agencies to “bundle” release cards when they contract with JPay for money transfer services,
video visits, email services, etc. Thus, release cards are the proverbial tip of the iceberg. Also,
note that with JPay’s purchase by Securus we can expect additional bundling of the combined
companies’ contracts and the rapid expansion of the exploitive release debit card model to the
1,600 detention facilities that currently contract with Securus for phone services.
Based on the foregoing and our original comment, we reiterate our request that the CFPB ban
the compulsory use of release debit cards for prisoners, arrestees and other detention facility
populations, and ban all fees associated with such cards when consumers do opt in to use
them. We ask that you consider these matters with respect to the rulemaking to amend
Regulation E, Docket No. CFPB-2014-0031, RIN 3170-AA22.
Please don’t hesitate to contact us if you have any questions concerning this response. Thank
you for your continued time and attention in this matter.

Paul Wright
Executive Director,
Human Rights Defense Center


Prisoners Pay Millions To Call Loved Ones
Every Year. Now This Company Wants Even
Ben Walsh
Posted: 06/10/2015 1:54 pm EDT Updated: 09/08/2015 5:59 pm EDT

A captive market, no competition and government contracts that make monopoly-enabled price
gouging the industry standard -- it’s never been in doubt that the prison phone business is a very
profitable model.
A presentation that the privately-held prison telecom company Securus made to investors that
The Huffington Post obtained shows just how much money there is to be made as the statesanctioned middleman between prisoners and the outside world: $404.6 million last year alone.
Securus, which provides phone services to 2,600 prisons and jails in 47 states, made $114.6
million in profit on that revenue in 2014. Securus’ gross profit margin -- a measure of the
difference between the cost to provide its services, and what it charges for them -- was a
whopping 51 percent. And Securus, with a 20 percent market share, isn’t even the biggest prison
phone company. That would be Global Tel-Link, or GTL, which has a 50 percent market share,
the New York Times reported. GTL drew national attention for its prominent role in the 2014
viral podcast Serial.
While Securus is already making massive profits off of prisoners and their families, they are also
looking for other, faster-growing revenue streams. In an April 15 presentation to investors, the
company sought $205 million in debt to fund its purchase of JPay, a telecommunications
company that provides banking, electronic communication and entertainment to over a million
prisoners in 29 states.
Buying JPay will allow Securus to move beyond the analog world of voice phone calls, and into
faster-growing businesses like money transfers, email and video chat, and selling prison-

approved tablets that allow inmates and families to purchase music and games. (Securus
announced on April 14 that they had successfully reached an agreement to purchase JPay.)
Securus has already seen major earnings growth in recent years. When the current management
team took over in 2008, earnings were at $41.7 million. Since then, they’ve grown roughly $10
million each year between 2008 and 2013. Profits soared between 2013 and 2014, jumping from
$87 million to $114.6 million in a single year.
Acquiring JPay allows Securus to increase its valuation substantially. Securus was sold to Boston
private equity firm ABRY Partners in 2013 for $640 million. The company’s 2014 earnings
suggest the company alone is now worth around $950 million. Add in the successful acquisition
of JPay, plus the 20 percent annual profit growth they’ve seen in recent years and a good banker
to talk the whole thing up, and a valuation of $1.5 billion to $2 billion isn’t outlandish.
Securus and ABRY did not immediately respond to requests for comment. JPay declined to
Like most acquisitions, it is also a boon for jargon: Securus notes that it is excited about the
“cross-sell / up-sell opportunities (alongside combination cost-savings)” which will increase
Securus’ “growth and broaden its revenue base.” More than most mergers, however, the jargon
quickly becomes nauseatingly detached from the human reality of the business both companies
are in -- forcing prisoners to pay high rates to talk to family and friends, listen to music or play
video games.
The acquisition is attractive, Securus says in the presentation, because the approximately $75
billion the U.S. spends annually on the entire corrections industry represents “a large, recessionresistant and stable market.” In the U.S., “inmate population and corrections expenditures,” the
company notes, “have grown steadily for 3 decades.” By acquiring JPay, the company will be
able to more fully exploit the business opportunity of mass incarceration, Securus leaders
pitched: “The acquisition of JPay results in a comprehensive communication and tech-enabled
solution provider” that is “well positioned for organic growth.”
As uncomfortable as that sort of business-school jargon may sound in the context of the forprofit prison telecom industry, illustrating what Securus does using stock photos only reinforces
the unease. Here’s a cheerful Securus representative and a bank of computers between a smiling
mother and children, and a faceless inmate.
Debt investors aren’t the only intended audience for this sort of management rhetoric. In an April
14 petition to The New York State Public Service Commission requesting permission to take on
the additional debt, Securus said its acquisition of JPay “will serve the public interest” by
generating market efficiencies. That petition was approved by default on May 29.
In another slide, Securus cringingly declares that it “provides a best in class set of business
attributes for facilities, inmates, friends/family members, and investors.” Inmates, family and
friends would have a less positive view of the hundreds of millions of dollars a year they are
paying to Securus.

Georgia Department of Corrections
JPay Fee Table, produced on April
28, 2015 in response to public
records request.

Colorado Department of Corrections JPay
Fee Table produced on May 2, 2015 in
response to public records request.

Louisiana Department of
Corrections JPay Fee/
Commission chart
produced on April 24, 2015
in response to public
records request.

Department of Corrections JPay
commission summary produced on
June 4, 2015 in response to public
records request.

JPay commission table excerpted
from contract with Tennessee
dated Dec. 28, 2012.




Cost per eMessaging stamp


$ 40 (Wlth discount for volume purchases)

Cost per Inmate Grievance



Video Visit (30 minute call)

$0 25 per completed v1s1t

$9 95

Inmate Scheduling Module



MP3 Price; per song

4.5% (on song sale price,
not including sales tax (if

Range from $1 06 to $1 99 (plus sales tax if
applicable, other fees included)

MP3 Price; per album
(or mini-album)

4 5% (on album sale price,
not includmg sales tax (rf

Varies - however, the inmate Will recerve a discount for
a full album purchase vs. purchasmg the songs that are
on the album rndivrdually. Sales tax (rf applicable} wrll
be additional

JP3 Player (4GB)

Not Available

Not Available

JP4 Player (8GB)

$5.00 per player sold


JP4 Player (16GB)

$5 00 per player sold

Not Available at this time

JP5- Tablet

$10.00 per player sold


Money Transfer

www I Vra800 phone number

Credit I Debit Card
$0.01 - $20.00

$0 50 per transaction

$3.90 I $4.90

$20.01 - $100.00

$0 50 per transaction

$6.90 I $7.90

$100.01 • $200.00

$0 50 per transactron

$8.90 I $9.90

$200.01 • $300.00

$0.50 per transactron

$1090 / 11 .90

$0 50 per transactron

$8 95

Walk-In Location
(Cash Deposit)
$0.01 • $5,000.00
Lobby Kiosk (up to $100)
Cash Fee

$0.50 per transactron

Credit Card Fee

$0 50 per transaction

$6.95 flat rate



$0/01 - $1,000.00

RFS 32901-31188 JPay, Inc. 12 28 2012