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CTA banking on extra Ventra cash

The CTA will receive a cash infusion of at least a half-million dollars a year that won't come from the farebox, and some of it will be paid by customers who are hit by fees from the new Ventra prepaid debit card.

The transit agency's Ventra fare system contract with Cubic Transportation Systems Inc. guarantees the CTA 50 percent of the net revenue generated from a number of nonfare sources. They are expected to range on the high end from advertising placed on Ventra equipment to some of the customer debit account fees on the lower end of the revenue stream, officials said, citing rough estimates.

CTA officials insist the deal with Cubic and First Data Corp., which will process debit card transactions, is carefully structured to ensure that money collected from customers of the Ventra prepaid debit MasterCard will amount to "only pennies" per transaction. CTA and Pace riders will have the option of signing up for a Ventra transit card only — without the prepaid debit card that could incur fees.

When CTA revenue director Eric Reese was asked whether he was sure "pennies'' was an accurate accounting, Reese thought for a moment, then said, "Maybe, maybe a nickel (per transaction), at best.''

The Cubic contract guarantees the CTA a minimum of about $500,000 a year. The contract states that "such amount shall not be less than $41,666 per month from and after the Go Live Date.''

The actual amount of money generated could be much higher, officials said, and they hope it will be.

It depends in part on how many CTA and Pace riders who become Ventra transit customers also sign up for the optional MasterCard account, and whether they are careful to avoid triggering several fees for services.

For instance, ATM withdrawals using the Ventra MasterCard will carry a charge of $1.50 per transaction plus up to an additional $2.40 charged by the owner or operator of the ATM.

But the CTA will receive less than half of the $1.50 ATM charge, officials said. First Data will receive "at least half'' of the fee amount. The CTA will share the remainder with Cubic after Cubic takes out its maintenance costs, the CTA said in a statement Wednesday responding to questions from the Tribune.

The same money-sharing formula will apply when a Ventra card with the prepaid debit feature becomes lost or stolen and the customer pays $5 for a replacement card.

The CTA will not be paid any money, however, when a customer pays the $5 fee for a lost or stolen Ventra transit card that does not have the retail debit account, CTA spokesman Brian Steele said.

The CTA will receive a portion of the $2 monthly inactivity fee that Ventra MasterCard customers will be charged if they don't use their retail card at least once over an 18-month period.

The $2 penalty comes on top of a $5 monthly dormancy fee that will be charged to the Ventra transit account, which is managed on the same card, for not taking a bus or train trip or loading the transit account with money over 18 months. The CTA will not earn any portion of the $5 fee, officials said.

CTA critics say the complicated deal appears structured to maximize revenue for the private companies, while forcing CTA and Pace riders to pay more by substituting a litany of service charges for a fare increase.

The Ventra prepaid debit account fees put the CTA in the position of earning money when a customer makes a mistake unrelated to transit. An example would be having to pay the $2 a month inactivity fee because the debit account owner failed to make at least one transaction over the 18-month period, as required in the fine print of account agreements.

Consumer watchdogs have long warned the public about the plethora of extra fees linked to prepaid debit cards.

"Prepaid debit cards work much like debit cards, but they are not regulated by the Consumer Financial Protection Bureau,'' said Hailey Golds, an advocate for the Illinois Public Interest Research Group. "Prepaid debit cards have no disclosure requirements or the protections of conventional checking accounts.''

Golds also said the group is concerned about a 33 percent increase in the single-ride CTA rail ticket, to $3 from the current $2.25, that will take effect when Ventra is introduced this summer. The concerns go beyond the 75-cent hike itself.

"The increased fare for paper tickets only serves the purpose of driving CTA riders toward enrollment in Ventra's program, essentially functioning as a conduit for Ventra to market prepaid debit cards to an enormous portion of Chicago's population,'' Golds said.

CTA officials said the transit agency's only interests are saving money on fare collection processing while also providing commuters with a convenient transit card that can be used seamlessly on the CTA and Pace — and perhaps eventually Metra. State legislation requires implementation by 2015 of a unified fare-payment system permitting transit riders to use common fare cards on the CTA, Metra and Pace.

CTA President Forrest Claypool has said the CTA has no interest in whether Ventra transit card customers also become Ventra MasterCard prepaid debit customers. There will be no hard-sell attempts to attract MasterCard customers, Claypool said.

Yet the $454 million contract that the CTA awarded to Cubic to develop the new fare-payment system creates a new dynamic, simply by linking the CTA name with the Ventra MasterCard.

As the Tribune documented this week, using a Ventra transit card that doubles as a prepaid debit MasterCard can be an expensive convenience. A Ventra debit account customer should expect to pay $188 a year in service charges resulting from card use, according to an analysis conducted for the newspaper by NerdWallet.com, a leading credit/debit card rating firm.

By contrast, the most consumer-friendly prepaid debit card on the market carries ancillary charges that can be expected to total $39 annually, the rating firm said.

Illinois PIRG said it is in favor of the CTA operating more efficiently, but the group believes there is a danger that low-income people who ride the CTA and who don't own credit or debit cards will sign on for a Ventra prepaid debit card and unwittingly rack up fees.

"The CTA should not engage in the business of selling Chicagoans prepaid debit cards that are largely unregulated and will leave the most vulnerable Chicagoans on the hook for hidden fees,'' Golds said.

jhilkevitch@tribune.com

Twitter @jhilkevitch

Copyright © 2015, RedEye
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