BILL ANALYSIS Ó AB 1614 Page 1 Date of Hearing: May 7, 2014 ASSEMBLY COMMITTEE ON APPROPRIATIONS Mike Gatto, Chair AB 1614 (Stone) - As Amended: April 22, 2014 Policy Committee: Human ServicesVote:5 - 0 Urgency: No State Mandated Local Program: Yes Reimbursable: Yes SUMMARY This bill ensures access to information about benefits usage and protection for electronic benefits transfer (EBT) consumers. Specifically, this bill: 1)Requires the CalWORKs/CalFresh 24-hour toll-free telephone hotline to provide recipients, at no additional cost, access to transaction history detail (at least 10 transactions on the phone), and to request at least two months of transactions by phone. 2)Requires the EBT system to have a website to provide recipients, at no additional cost, information on how to replace a lost or stolen EBT card and pin number. 3)Requires the EBT system be designed to inform recipients that access to electronic benefits is temporarily unavailable if the system does not function or is expected to function for more than a one-hour period between 6 a.m. and midnight during any 24-hour period. 4)Creates the Electronic Benefits Transfer System Consumer Protection, Financial Empowerment, and Cash Access Fund in the State Treasury for the purpose of ensuring CalWORKs recipients are educated about their consumer rights and financial management tools and services available to them. The fund may contain federal, state, and private funds. FISCAL EFFECT Many of the proposals in the bill are already implemented and AB 1614 Page 2 part of the current EBT system. All other costs to DSS are minor and absorbable. COMMENTS 1)Purpose of the bill . This bill seeks to improve EBT consumers' access to information about their EBT transactions and promote financial education to ensure recipients can maximize the benefits they are provided to meet basic needs and maintain the safety and wellbeing of their families. The bill codifies several existing practices regarding the telephone hotline, access to transaction history and information supplied to consumers regarding minimizing bank fees. 2)Background . AB 1542 (Ducheny), Chapter 270, Statutes of 1997, implemented federal welfare reform and established the CalWORKs program, and conformed to federal law in establishing the Electronic Benefits Transfer (EBT) Act. California moved from a paper-based system to an electronic system for the distribution and use of public assistance benefits in 2002. Today, 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 basic needs. Because EBT cards are not credit cards, use is limited and CalWORKs recipients often withdraw cash to pay utility bills, for example. Unlike CalWORKs benefits, CalFresh benefits are only accessible through use of an EBT card and can only be used to purchase food items and cannot be used for cash withdrawals. 3)Bank surcharges for EBT cash withdrawals . CalWORKs recipients pay four types of surcharges on EBT card usage. These include ATM and POS machine surcharge fees for cash withdrawal, ATM balance inquiry fees, and an $0.85 transaction fee paid to the state's EBT vendor when cash is withdrawn from ATM or POS machines more than four times within a single month. Recipients' grant amounts do not account for potential fees or surcharges, thus every bank fee charge directly reduces a recipient's grant amount. The Los Angeles Times reported that $18.9 million in EBT dollars went to banks through ATM fees in 2013, and $19.4 million came from EBT transactions at ATMs in 2012. In the absence of policies to eliminate fees and surcharges on EBT cards, this bill seeks to provide EBT consumers with AB 1614 Page 3 information about how to improve the efficiency and effectiveness of their EBT usage to minimize their loss of grant money to bank fees. 4)System Outages . In October 2013, Xerox, the state's EBT system vendor, reported that all EBT systems in states with Xerox contracts were down. While many stores put up signs notifying customers of the EBT outage as they were notified, CalWORKs and CalFresh recipients were left without any ability to pay for basic necessities. The system was back up after a number of hours, but some recipients had no forewarning of the outage, and were left holding unpurchased groceries and questioning why their EBT cards weren't functioning. To mitigate the effects of future outages on consumers, this bill explicitly requires the EBT system to be designed to notify recipients of prolonged system outages. 5)Prior Legislation . a) AB 1280 (John A. Pérez), Chapter 557, Statutes of 2013, made state law consistent with federal protections for direct deposit of public assistance benefits and unemployment compensation benefits. b) AB 2035 (Bradford), Chapter 319, Statutes of 2012, protects against electronic theft of benefits delivered electronically. Analysis Prepared by : Jennifer Swenson / APPR. / (916) 319-2081