Wouldn't this be more complicated and more expensive then printing a check? (e.g. the debit card has to have an associated account opened for it)
Yes and no. A prepaid debit card does, technically, have an "account" of sorts backing it, but this is not really a traditional checking account. It may or may not be possible to "reload" more money onto the card, but full banking services are generally not available. Depending on the card, it may entitle the consumer to deposit checks and use an ATM, but it probably will not give the consumer access to ACH transactions or the ability to write their own personal checks.
On the other hand, the money is usually FDIC insured, meaning that the government will reimburse cardholders if the bank goes bust. US law also caps the consumer's liability for fraudulent debit card transactions at $50, and many banks voluntarily lower this cap to $0 (effectively meaning, if the card is lost or stolen, the bank will eat any losses).
Also, I looked up MetaBank on Wikipedia and, relatively speaking, it's a smallish bank. Why would the government partner with MetaBank instead of a larger more established bank like e.g. Bank of America?
The normal process for this sort of thing is, greatly simplified:
- The government publishes a set of minimum requirements that it wants a contractor (in this case, a bank) to meet.
- Various banks submit sealed bids for how cheaply they can do it, and also describe how they are going to do it and what compromises they are going to make.
- The government (usually) picks the cheapest bid. However, if a bid does not appear to be credible, or the government feels it makes too many compromises, the government may reject that bid altogether.
Step #3 is complicated and bureaucratic, as you would expect. What probably happened in this case is that MetaBank submitted a "better" bid than any of the larger banks. This is not too surprising, actually. Filling government contracts is a very different sort of business model than "normal" consumer banking. It might be the case that the large banks do not want to get involved with a government contract of this sort, because they feel that the profit margin would be unacceptably low, or because they did not want to go through additional compliance requirements that the government may have imposed.
This bidding process is frequently accused of various forms of favoritism or nepotism. The credibility of those allegations varies widely, and the whole thing tends to be clouded by political and economic considerations (i.e. everyone involved has either a political or economic conflict of interest, and they all tend to tell contradictory stories about what happened). So it's not clear to me whether this is actually a problem, either in general or with respect to MetaBank in particular.
Is the government getting some kind of kickback from MetaBank or VISA for issuing these cards?
It's impossible to categorically rule out bribery, because the parties would probably not tell anyone about a bribe. But such kickbacks are illegal and very much frowned upon in the US. If such a thing were to emerge, it would be considered a serious scandal.
Nevertheless, MetaBank and Visa have obviously contracted with one another, and it's entirely possible that Visa gave MetaBank a below-market price for these debit cards, and that MetaBank then used those savings to lower its bid. Economically, that would be equivalent to a payment from Visa to MetaBank, and from MetaBank to the government. But that wouldn't be a bribe; it would be a large customer (the US government) getting a bulk discount. There is nothing unethical about this, and it's actually good for the taxpayer because it lowers the cost of providing a government service.
The main difference is that, in the case of a bribe, the person receiving the money is usually an individual or (occasionally) a private organization. That's considered unethical because it is taking advantage of the US government's negotiating position for private gain. On the other hand, lowering the cost to the US government is not a bribe at all, because it benefits the public.
To be clear, my question is, why mail debit cards instead of checks for people the IRS don't have direct deposit info for?
Many Americans are unbanked or underbanked. You can take a debit card directly to the store and immediately spend money from it. It's the next best thing to cash. On the other hand, checks must be deposited. If the consumer does not have a bank account, they will likely need to pay a fee for this service. These fees can be quite substantial, and would make the stimulus payments less effective. As such, the government would prefer to pay the upfront cost of a prepaid debit card on behalf of (some) low-income Americans, rather than leaving those Americans with the Hobson's choice of paying for check-cashing out of their stimulus payment.
