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  








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          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  








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            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