The prepaid debit cards that most people use to receive unemployment insurance carry fewer fees than they did two years ago, but some states are likely breaking federal law by foisting the cards on workers, according to a new report by the National Consumer Law Center.

The majority of states have switched their unemployment system from paper checks to prepaid debit cards issued by banks, making for cheaper distribution for the state and saving money for people without bank accounts, since they would no longer have to pay check-cashing costs.

The catch is that consumers pay for the new system through bank fees. In 2011, more than half of the cards came with ATM fees, balance inquiry fees and inactivity fees, according to the law center's report that year. And a handful had overdraft fees as high as $20.

Now the overdrafts are gone and "other fees have come down considerably, saving workers millions of dollars a year," the NCLC's new report says. (HuffPost's Janell Ross reported on the junk-fee racket in 2011.)

Tuesday's report says states don't make it easy enough for unemployment claimants to bypass the cards and have their benefits deposited directly into their bank accounts. Of the 42 states using prepaid cards, 36 also offer direct deposit, but the rates at which consumers use direct deposit vary wildly depending on how easy the state makes it to do so.

Five states -- California, Indiana, Kansas, Maryland and Nevada -- apparently violate federal law by requiring beneficiaries to use the cards, according to the report. (Wyoming doesn't offer direct deposit, but most claimants there still receive paper checks.) California, Kansas and Maryland, however, do allow workers to set up automatic transfers from the cards to their bank accounts, but less than a quarter of recipients do so. The transfers can cause delays as long as four days.

Nevertheless, California joins Pennsylvania and New Jersey as the only states to receive a "two-thumbs up" rating in the report, which calculated that California's system earns Bank of America $1.8 million per year.

The Dodd-Frank Wall Street reform bill passed by Congress in 2010 is to thank for the death of overdraft fees on the prepaid cards. "That law caps the interchange fees that merchants must pay when they accept debit cards, but exempts prepaid cards from that cap on certain conditions," the law center said. "The absence of overdraft fees is one of the conditions."

HuffPost readers: Unemployed? Back to work but making less money? Tell us about it -- email arthur@huffingtonpost.com. Please include your phone number if you're willing to be interviewed.

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