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October 26, 2010


DiNapoli Rejects State Debit Card Contract

Says It's Not a Good Deal for Taxpayers

State Comptroller Thomas P. DiNapoli rejected a $2.5 million state contract that would have forced taxpayers to accept fee-laden debit cards for state income tax refunds.  DiNapoli said that while the debit cards would save the state money, the contract would be too costly for taxpayers.
“Taxpayers should not have to pay bank fees to get their tax refunds,” DiNapoli said.  “I’m all for the state looking for new ways to save taxpayer dollars, and debit cards may very well be the way to go.  But we shouldn’t let banks make money off the very taxpayers we’re trying to save money for.  We have to do this the right way or not at all.”

The state has been considering cutting administrative costs through the use of debit cards in the place of printed checks for tax returns, workers compensation payments, motor vehicle refunds and other payments to taxpayers.  However, DiNapoli noted that the Department of Taxation and Finance (DTF) has been pushing off its administrative costs onto taxpayers.  DTF has also been pushing hard for electronic return filing – but the software taxpayers have to buy can be costly.  

DiNapoli’s concerns about the debit card contract include the following:

  • Taxpayers would have to pay fees if they used the card at a bank teller station more than once.
  • Taxpayers would have to pay administrative charges if they didn’t use the debit card within a prescribed period of time.
  • The recommended contractor’s bid was non-responsive to the bid specifications.  There was a bid protest that was upheld by DiNapoli.
  • The procurement was developed in haste and the specifications were not detailed enough to garner adequate competition.
  • The contract did not provide a clear model for the flow of funds and the Office of General Services (OGS), which is administering the contract, and DTF could not explain how transfers and withdrawals would impact the interest accrued on the state treasury funds.

OGS provided no analysis of the cost individual taxpayers would incur if the debit cards were used.   Additionally, DTF has not provided its analysis of how debit cards for tax refunds would impact state residents with respect to cost and availability and ease of use. DiNapoli said he was particularly concerned about the impact on New Yorkers who do not use electronic banking as well as those in rural areas who might not have access to network banks.  J.P. Morgan Chase Bank NA was the contractor on the rejected card contract.

Click here for a copy of the rejection letter.



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