COLORADO

PRE-PAID DEBIT CARD

Goal: To deliver all child support electronically, particularly to parents without bank accounts.

Description: The Colorado Division of Child Support Enforcement conducted a pilot project with U.S. Bank to demonstrate the feasibility and benefit of utilizing a "prepaid debit card" to deliver child support electronically to parties who receive child support (obligees). The long-term goal is to eliminate checks and deliver all child support electronically via direct deposit. Approximately, 60% of child support payments are made by check; 35% are made through direct deposit and about 5% are made through the debit card.

The product is called the "ReliaCard" and is known locally as the Family Support Registry Card (FSR Card). The project targeted obligees that did not have or could not qualify for a bank account.

The pilot began in January 2002. As of February 2003, Colorado began offering this product to all obligees receiving child support payments through Colorado's state disbursement unit, the Family Support Registry.

The FSR Card functions like a debit card, though it is not attached to a checking or savings account. The state collects court ordered payments as it has in the past, but instead of cutting a check and mailing it to the recipient, the state electronically loads the payment onto the FSR Card. The recipient can use the card to make purchases or withdraw cash from an ATM. The card carries the Visa logo and can be used anywhere that Visa is accepted.

The program is an innovation that cuts costs for the state, since no check must be produced and mailed. It brings convenience and safety to the cardholders, who no longer have to find the time and place to cash their checks or pay check cashing fees. Cardholders receive one ATM withdrawal per month at no charge. Additional ATM withdrawals can be made at a cost to the cardholder of $1.50. This is the only fee assessed the cardholder. An "Electronic Delivery Campaign" is underway to encourage child support payment through either direct deposit or debit card.

There are no fees or costs to the state for this card program. The state does pay its going rate to originate the direct deposit transaction to load the card as it would originate the direct deposit to a traditional bank account.

Results:

Pilot Program results January 2002 - January 2003.

Ten thousand promotional inserts were distributed at random in January 2002. Approximately 1000 obligees applied and were issued cards during the pilot. Of this number, only 21 were closed during the pilot. The pilot was very successful and, beginning in February 2003, the state began "rolling out" the card to all obligees currently receiving child support checks.

Pilot Program Results

	Number	Amount	Average	% of Total ($)
"Loads" to card	26,736	$3,896,818	$146
Funds withdrawn via ATM	19,037	$1,497,930	$79	42%
Funds withdrawn at Point of Sale	86,942	$2,082,623	$24	58%
Number of active cards $ balances	912	$70,086	$77	NA

Current Program Results (February 2003 - June 2003)

All obligees receiving checks were offered the card through inserts over a four month period beginning February 2003. The expectation is for the current program to perform similarly to the pilot. Results are not available at the time of this writing.

Anecdotal Comments Based on May '02 Focus Group:

Existing Cardholder Reaction

• Many stated they "love the card," especially the VISA logo. It is easy to get, easy to use, requires no bank account, no checks to write, and minimal exposure to overdraft.
• Parents have said that the card helps them enter the mainstream financial world by allowing them to make purchases wherever Visa is accepted.
• It is faster than receiving a check and cashing it and involves no check cashing fees.
• Many only use it for the child. This allows the parent to keep the child's support and expenses separate from other finances. It provides monthly statement documents of where the child support was spent.
• Many are saving amounts on the card for significant expenses of the child.

Merchant Reaction:

• Merchants who cash checks (e.g. grocery stores) no longer risk encountering check fraud.
• Its use is transparent.
• It mainstreams our clients into the commercial financial world.

Agency Reaction:

• It is very well received by clients, as it is non-qualifying, available to all, and VISA-branded.
• There is no cost to the agency and minimal cost to the client.
• It operates just like a direct deposit to a checking account with minimal system changes.
• Clients cannot overdraw the account.
• Its use is transparent to merchants.
• Merchants who cash our checks (e.g., in a grocery store) are saved the trouble and are protected from check fraud.
• It mainstreams our clients into the commercial world.
• It is easy to set up accounts via Internet (minimum data required) or file transfer.

Location: Statewide

Funding: The debit card is provided by the bank through a contracted cost structure. There is no cost to the state.

Contact:

Bilinda McKay-Johnson, (720) 947-5000,

Email: bilinda.mckayjohnson@state.co.us

Craig R. Goellner, (720) 947-5000,

Email: craig.goellner@state.co.us