BILL ANALYSIS Ó
AB 1280
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 1280 (John A. Pérez)
As Amended August 20, 2013
Majority vote
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|ASSEMBLY: |74-0 |(May 23, 2013) |SENATE: |37-0 |(August 22, |
| | | | | |2013) |
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Original Committee Reference: HUM. S.
SUMMARY : Extends federal consumer protection standards to state
benefits deposited into prepaid card accounts. Specifically,
this bill :
1)Requires that unemployment compensation benefit payments only
be deposited into an account that meets the requirements of a
qualifying account for deposit of public assistance payments,
as specified, when direct deposit is requested by a recipient
of unemployment compensation benefits.
2)Requires direct deposit of public assistance benefits, when
direct deposit is requested by a recipient, to only be made to
the recipient's qualifying account at a financial institution,
as defined.
3)Defines qualifying account as one of the following:
a) A demand deposit or savings account at an insured
financial institution in the name of the person entitled to
receipt of public assistance payments; or
b) A prepaid card account that meets all of the following:
i) The account is held at an insured financial
institution;
ii) The account is set up to meet the requirements for
pass through deposit or share insurance so that the funds
accessible through the account are eligible for insurance
for the benefit of the person entitled to the receipt of
public assistance payments, as specified;
iii) The account is not attached to any credit or
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overdraft feature that is automatically repaid from the
account after delivery of the payment; and
iv) The issuer of the card complies with all of the
requirements and provides the holder of the card with all
of the consumer protections that apply to a payroll card
account under federal law, as specified.
4)Prohibits a person or entity that issues, maintains or manages
a prepaid card account from accepting or facilitating direct
deposit of public assistance payments or unemployment
compensation benefit payments to a prepaid card account that
does not meet the definition of qualifying account, as
specified.
5)Defines financial institution as a state or national bank, a
state or federal savings and loan associations, a mutual
savings bank, or a state or federal credit union.
6)Defines a payroll card account as an account that is
established through an employer and to which electronic funds
transfers of the consumer's wages, salary or other employee
compensation are made on a recurring basis, as provided in the
regulations implementing the federal Electronic Funds Transfer
Act (EFTA).
7)Defines issuer as a person or entity that issues a prepaid
card.
8)Provides that prepaid card or prepaid card account shall have
the same definition as provided in EFTA regulations regarding
general use reloadable cards, or shall be defined as a card,
code or other means of access to a recipient's funds that is
usable at automated teller machines, or for goods or services
from multiple, unaffiliated merchants.
The Senate amendments :
1)Clarify that the Employment Development Department (EDD) has
no obligation to determine whether an account at the financial
institution of the unemployment compensation recipient's
choice is a qualifying account, as defined. For purposes of
this bill, prohibits EDD from being held liable for
authorizing a direct deposit of unemployment compensation
benefit payments into a prepaid card account designated by the
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recipient that does not meet the requirements of a qualifying
account.
2)Repeal the requirement for the Department of Social Services
(DSS) to cooperate with county treasurers and private
financial service providers, including depository
institutions, licensed check sellers, data processing service
vendors, and retail merchants, in developing and implementing
an electronically based system for delivering public
assistance payments to those recipients who do not have
individual deposit accounts with financial institutions.
3)Clarify that each county treasurer has no obligation to
determine whether the account at the financial institution of
the public assistance recipient's choice is a qualifying
account, as defined.
4)Prohibit each county treasurer and county welfare department
from being held liable for authorizing a direct deposit of
public assistance payments into a prepaid card account,
designated by the person entitled to receipt of public
assistance benefits, that does not meet the requirements of a
qualifying account.
FISCAL EFFECT : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS : 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 into which
state benefits are transferred or deposited, this bill protects
families receiving those benefits and helps them avoid being
subjected to the inappropriate practices of certain financial
institutions.
California Work Opportunity and Responsibility to Kids
(CalWORKs) : The CalWORKs program provides monthly income
assistance and employment-related services aimed at moving
children out of poverty and helping families meet basic needs.
Federal funding for CalWORKs comes from the Temporary Assistance
for Needy Families (TANF) block grant. The average monthly cash
grant for a family of three (one parent and two children) on
CalWORKs is $461. CalWORKs grants are used to pay rent, buy
clothing, pay utilities bills, and pay for other basic needs to
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ensure children can be cared for at home and remain safely with
their families. According to recent DSS data, 550,952 families
rely on CalWORKs, including over one million children.
Electronic Benefits Transfers (EBT) programs : An EBT program is
one in which needs-tested benefits are distributed by a
government agency through accounts that can be accessed
electronically by recipients through automated teller machines
(ATMs), and point-of-sale (POS) terminals. EBT cards are not
authorized for payment of employment-related payments, such as
salaries, unemployment benefits, pension benefits, or retirement
payments from federal, state or local governments. California's
official move from a paper-based system to an electronic system
for the distribution and use of public assistance benefits
occurred in 2002. This shift was essential in helping the
CalWORKs and CalFresh (then Food Stamps) programs keep pace with
technological advances in POS and ATMs.
In California, recipients of CalWORKs cash aid often receive
their benefits on an EBT card and use the card as they would any
other debit card for ATM withdrawals and purchases to meet their
families' basic needs. Unlike CalFresh benefits, which can only
be accessed through use of an EBT card and are not eligible for
cash withdrawal or purchase of basic necessities that do not
qualify as food, CalWORKs benefits can also be directly
deposited into a personal bank account at the request of a
CalWORKs recipient.
The appeal of prepaid cards for a CalWORKs recipient may be the
flexibility the card allows to meet basic needs. For example,
whereas an EBT card cannot be used to make an online utility
bill payment, a prepaid card often can be used for that purpose.
Because this would also allow a CalWORKs recipient to complete
this necessary transaction without having to make a cash
withdrawal at an ATM or other POS machine, the recipient may be
able to avoid the fees charged as a result of that withdrawal;
fees that reduce the already minimal amount of funds available
to the recipient's family.
Unemployment insurance (UI) benefits : In order to be eligible
for payment of UI benefits, an individual has to meet a number
of eligibility criteria for each week he or she claims benefits,
including being unemployed through no fault of his or her own,
and being physically able to work and actively looking for work.
Unless extended by Congress or the Legislature during a time of
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high unemployment, a UI claim is effective for one year, during
which a claimant can receive from 12 to 26 weeks of full
benefits. The benefit amount for each week in which a claimant
receives a payment can range from a minimum of $40 to a maximum
of $450, based on the claimant's quarterly earnings. The most a
claimant can be eligible to receive for the year the claim is
effective is $11,700.
EDD began paying UI benefits through the EDD Debit Card in July
2011, which, like EBT for CalWORKs benefits, offers a direct
deposit or electronic transfer option of funds that would
otherwise be accessible through the card. The EDD Debit Card
was also a major shift in providing benefits to UI claimants; it
eliminated both check disruption due to mail delays and check
cashing fees for people without personal bank accounts.
Additionally, the EDD Debit Card grants claimants the same
access to POS purchases and ATM withdrawals as people with
commercial debit cards.
Federal Electronic Fund Transfer Act : The Electronic Fund
Transfer Act (EFTA) (15 United States Code (USC) 1693 et seq.)
was established in 1978 to protect individual consumers engaging
in fund transfers through an electronic terminal, telephone,
computer, or magnetic tape that instruct a financial institution
to either credit or debit a consumer's asset account
electronically.
Prepaid cards : Under the federal EFTA, 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 do not
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
they would otherwise experience with a commercial debit or
credit card.
In 2010, the federal Department of the Treasury ruled to allow
the receipt of federal payments through an electronic method.
In response to concerns about which electronic means, and
essentially which types of card accounts, would be eligible for
the receipt of federal funds, the new rule contained a number of
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criteria that prepaid cards would have to meet to be qualified
to receive federal funds. Those criteria include not having an
attached line of credit or loan feature that would cause
automatic repayment from the card account and providing for
liability protections for loss, theft, or unauthorized charges.
Need for the bill : According to the author, "The lack of
consumer protections for families receiving work supports or
basic needs assistance not only endangers the subsistence of
California families experiencing hardship, it undermines the
security of the State's investment. By applying federal
standards, AB 1280 will ensure federal protections exist for
state investments and low-income families alike."
Analysis Prepared by : Myesha Jackson / HUM. S. / (916)
319-2089
FN: 0001903