BILL ANALYSIS Ó AB 1280 Page 1 Date of Hearing: May 15, 2013 ASSEMBLY COMMITTEE ON APPROPRIATIONS Mike Gatto, Chair AB 1280 (John Perez) - As Introduced: February 22, 2013 Policy Committee: Human ServicesVote:5 - 0 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill extends federal consumer protection standards to state benefits deposited into prepaid card accounts. Specifically, this bill: 1)Requires direct deposit of CalWORKs benefits, when direct deposit is requested to be made only to the recipient's qualifying account at a financial institution. 2)Requires that unemployment compensation benefit payments be deposited only into an account that meets the requirements of a qualifying account for deposit of public assistance payments when direct deposit is requested. 3)Prohibits a person or entity that issues, maintains or manages a prepaid card account from accepting or facilitating direct deposit of unemployment compensation benefits or public assistance benefits to a prepaid card account that does not meet the definition of qualifying account. 4)Provides that prepaid card or prepaid card account shall have the same definition as provided in federal Electronic Funds Transfer Act (EFTA) regulations regarding general use reloadable cards. FISCAL EFFECT Costs associated with this legislation should be minor and absorbable within existing resources. COMMENTS AB 1280 Page 2 1)Rationale . This bill seeks to align state law with federal law governing the transfer or deposit of federal benefits into prepaid card accounts. By aligning with federal requirements and establishing criteria for prepaid card accounts used for this purpose, this bill protects families receiving state cash benefits, and helps them avoid being subject to excessive fees or the inappropriate practices of certain financial institutions. 2)Prepaid cards . Under the federal Electronic Funds Transfer Act, a prepaid card is generally defined as a card or other payment code or device that is purchased or loaded, on a prepaid basis, and is redeemable for the purchase of goods or services, or cash withdrawal at an ATM. In some cases, prepaid cards can be reloaded for purchases or withdrawals. Many people who have exhausted credit cards or the ability to obtain new credit cards, or even those who don't feel comfortable using traditional bank accounts, have turned to using prepaid cards as a means of keeping their spending within feasible limits while having the purchase and withdrawal freedom of a commercial debit or credit card. The appeal of prepaid cards for a CalWORKs recipient may be the flexibility the card allows to meet basic needs. For example, whereas an electronic benefit transfer (EBT) card cannot be used to make an online utility bill payment, a prepaid card often can be used for that purpose. Analysis Prepared by : Julie Salley-Gray / APPR. / (916) 319-2081