The state is standing by its new system of paying unemployment benefits with pre-paid debit cards despite criticism of Bank of America's fees.

But the Workforce Solutions Department, which quit sending paper checks in October, also is looking into an alternative system that would directly deposit unemployment benefits.

Michele Lis of Santa Fe recently found out about the fees when she was laid off her job, applied for unemployment benefits and received a debit card from Bank of America.

The fee schedule mailed to her with the card explained that the first withdrawal per week from a Bank of America automated teller machine is free, but others that week would impose a $1.50 charge.

Bank of America also charges $1.50 for withdrawals from other banks' ATMs, 50 cents when a withdrawal is denied because there is not enough in the account and $15 for emergency cash or a withdrawal that results in a negative balance, Lis said.

"It's unconscionable and predatory," she said. "They shouldn't be making money off the backs of the unemployed. ... People who aren't real financially literate may not read the small print carefully enough and may end up with a lot of fees."

But Carrie Moritomo, public information officer for the Workforce Solutions Department, said claimants should be able to avoid the fees if they follow the rules.

"When we negotiated the contract with Bank of America, we were very diligent about the fact that we wanted our claimants to have access to their money for free," she said.

Moritomo said claimants get one free withdrawal per week on a Bank of America ATM or directly from a Bank of America teller if that bank location accepts Visa debit cards.

"It's also a point-of-sale debit card no different than probably the one that's in your wallet or mine," she said. "You go to any of those point-of-purchase vendors or places out there, and any time you use your card, you can always elect to get cash back and there's no charge for that."

Moritomo said her department is conducting a pilot program with about 400 people whose unemployment benefits are directly deposited into their bank accounts. If the new system proves worthwhile, it could be offered to all new claimants in three to six months, she said.

"We want to make sure that everything flows quickly and as it should," she said. "We had hoped to do it by now, but we have elected not to quite open the floodgates. ... It is working very smoothly right now."

Currently, the department dispenses more than 25,000 unemployment benefits each week. The state unemployment rate rose from 3.2 percent in January 2008 to 4.5 percent in December — for an average of 4 percent for all of 2008. The entire country averaged 5.8 percent for the year, compared to 3.4 percent in Santa Fe.

Last summer, the Workforce Solutions Department, formerly known as the Labor Department, quit allowing people to register for unemployment in person and required everyone to apply over the phone or online. But early this year, the department went back to having new claimants apply in person at its Workforce Connection offices after complaints that the phones at the Albuquerque call center usually were busy and that the Web site often was down for maintenance.

Moritomo said the old system of mailing paper checks to the unemployed was scrapped last fall to eliminate losing checks in the mail and the possibility of fraud. She said that the department must wait at least 15 days before ordering a bank to stop payment on a lost check.

"That's how long it would take for a turnaround to get that person their money if something actually did happen to it," she said. "Whereas with a debit card, it's almost immediately. It can be fixed by the next day."

Matt Shaffer, Bank of America's liaison with the state, said the debit card system "has been very efficient for the state," but referred other questions to a corporate office in Seattle.

Bank of America community-communications officer Britney Sheehan said fees for New Mexico unemployment-benefit recipients often are less than those charged to the bank's regular customers. For example, she said, Bank of America normally charges $2 for withdrawals from out-of-network ATM machines, and those customers also must pay any fee added by the out-of-network ATM.

"We continue to work with the Department of Workforce Solutions to provide the greatest possible clarity into the workings of this program, including the fee schedule for benefit recipients," Sheehan said. "If a recipient has been charged a fee that seems to be inconsistent with the fee schedule, those fees will be refunded to the recipient."

Contact Tom Sharpe at 986-3080 or tsharpe@sfnewmexican.com.