BILL ANALYSIS Ó AB 1614 Page 1 ASSEMBLY THIRD READING AB 1614 (Stone) As Amended April 22, 2014 Majority vote HUMAN SERVICES 5-0 APPROPRIATIONS 17-0 ----------------------------------------------------------------- |Ayes:|Stone, Ammiano, Ian |Ayes:|Gatto, Bigelow, | | |Calderon, Garcia, Grove | |Bocanegra, Bradford, Ian | | | | |Calderon, Campos, | | | | |Donnelly, Eggman, Gomez, | | | | |Holden, Jones, Linder, | | | | |Pan, Quirk, | | | | |Ridley-Thomas, Wagner, | | | | |Weber | |-----+--------------------------+-----+--------------------------| | | | | | ----------------------------------------------------------------- SUMMARY : Ensures access to information about benefits usage and benefits protection for electronic benefits transfer (EBT) consumers. Specifically, this bill : 1)Requires the 24-hour, toll-free telephone hotline for the reporting of lost or stolen EBT cards to provide recipients, at no additional cost to the recipient, information on how to replace the card and personal identification number (PIN), and requires the hotline to allow an authorized representative or head of household to access the EBT card transaction history for at least the last 10 transactions and to request that the transaction history detail for at least the past two months be sent by mail. 2)Requires the EBT system to have an Internet Web site that will provide recipients, at no additional cost to the recipient, information on how to have a lost or stolen EBT card and PIN replaced, and will allow an authorized representative or head of household to view transaction history detail, as specified. 3)Requires a county human services agency to provide an EBT authorized representative or head of household, at no additional cost, all EBT transaction history details that are available to the county within 10 business days of receiving a request for the information. AB 1614 Page 2 4)Requires EBT consumers to be informed of where they can use their EBT cards to withdraw benefits without incurring a fee, charge, or surcharge. 5)Requires the EBT system to be designed to inform recipients when the system does not function or is expected to not function, as specified, and requires the information to be made available in a recipient's preferred language if the EBT system vendor contract provides for services in that language. 6)Requires the EBT system design to ensure that California Work Opportunity and Responsibility to Kids (CalWORKs) recipients have access to using or withdrawing benefits with minimal fees or charges, including an opportunity to withdraw benefits with no fee or charges. 7)Requires counties to notify CalWORKs recipients about available methods of electronic delivery of benefits and associated fees, charges, or surcharges, benefit protection mechanisms, and potential access to alternative methods or timelines for the delivery of benefits based on a recipient's individual needs, as specified. 8)Establishes in the State Treasury the Electronic Benefits Transfer System Consumer Protection, Financial Empowerment, and Cash Access Fund (Fund) for the purpose of ensuring CalWORKs recipients are educated about their consumer rights and financial management tools and services available to them, as specified. 9)Requires that, upon approval by the Department of Social Services (DSS), as specified, activities paid for by the Fund that meet the goals of the CalWORKs program are applied to the federal work participation hours required by Welfare and Institutions Code (WIC) Section 11322.8. EXISTING LAW : 1)Establishes under federal law the Temporary Assistance for Needy Families (TANF) program to provide aid and welfare-to-work services to eligible families and, in California, provides that TANF funds for welfare-to-work services are administered through the CalWORKs program. (42 United States Code (U.S.C.) 601 et seq., WIC Section 11200 et AB 1614 Page 3 seq.) 2)Establishes income, asset, and real property limits used to determine eligibility for the program, including net income below the Maximum Aid Payment, based on family size and county of residence, which is approximately 40% of the Federal Poverty Level (FPL). (WIC Section 11250 et seq.) 3)Authorizes the establishment of an EBT system for the distribution and use of public assistance benefits and requires EBT access to be provided through automated teller machines (ATMs), point-of-sale (POS) devices, and other devices that accept electronic benefits transfer transactions. (WIC Sections 10065 et seq., and 123302) 4)Requires the state's EBT system to provide reasonable access to benefits for recipients who are unable to use an EBT card or other aspect of the system due to disability, language, lack of access, or other barrier, and requires alternative methods to be in compliance with the Americans with Disabilities Act and include reasonable accommodations for people with physical and mental disabilities. (WIC Section 10072 (d)) 5)Requires the state's EBT system to have a 24-hour per day toll-free telephone hotline for the purpose of reporting a lost or stolen card and receiving information on how to have the card and PIN replaced. (WIC Section 10072 (f)) 6)Provides that a recipient shall not incur any loss of electronic benefits or cash benefits after reporting a lost or stolen EBT card, and requires prompt replacement of any electronic benefits withdrawn without the use of an authorized PIN or cash benefits taken through an unauthorized withdrawal or unauthorized use of an EBT card after a card is reported lost or stolen, as specified. (WIC Section 10072 (g)) 7)Allows cash aid recipients to be charged a fee for withdrawal transactions that exceed four per month. (WIC Section 10072 (k)) 8)Requires CalWORKs benefits provided through EBT transactions to be staggered over a three-day period unless the county has exempted an individual from the three-day staggering AB 1614 Page 4 requirement due to hardship, as specified. (WIC Sections 10072 (c) and 10072 (l)) 9)Requires each county to make an agreement with one or more financial institutions participating in the Automated Clearing House, and requires counties to provide direct deposit by electronic fund transfer of payments to any person entitled to the receipt of public assistance benefits who authorizes the direct deposit of benefits into the person's qualifying account at a financial institution of his or her choice. (WIC Section 11006.2) 10)Requires all individuals over 16 years of age, unless they are otherwise exempt, to participate in welfare-to-work activities as a condition of eligibility for CalWORKs. (WIC Sections 11320.3 and 11322.6) FISCAL EFFECT : According to the Assembly Appropriations Committee, many of the proposals in the bill are already implemented and part of the current EBT system. All other costs to DSS are minor and absorbable. COMMENTS : 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 well-being of their families. Federal Electronic Fund Transfer Act: The Electronic Fund Transfer Act (EFTA) (15 U.S.C. 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. Within what is commonly referred to as "Regulation E" of the Board of Governors of the Federal Reserve System, the EFTA establishes the rights, liabilities, and responsibilities of consumers who use electronic fund transfer services and of financial institutions that offer such services. Electronic Benefits Transfers (EBT) Act: AB 1542 (Ducheny), Chapter 270, Statutes of 1997, which implemented federal welfare reform and established the CalWORKs program, also conformed to federal law in establishing the EBT Act, which makes the AB 1614 Page 5 following declarations: 1)The development of incompatible systems for EBT will create significant hardships on recipients of public social services and businesses that accept electronic transactions as payment for goods and services; and 2)The goals of EBT are to reduce the cost of delivering benefits to recipients, to ensure that all systems within California are compatible, and to afford public social services recipients the opportunity to better and more securely manage their financial affairs. 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 automated teller systems. 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 TANF block grant. The average monthly cash grant for a family of three on CalWORKs (one parent and two children) is $463. According to recent data from DSS, 554,292 families rely on CalWORKs, including over one million children. Nearly 80% of the children are under age 12. CalFresh: Nutrition benefits provided through the CalFresh program are funded entirely by the federal government through the Supplemental Nutrition Assistance Program (SNAP). The United States Department of Agriculture sets specific eligibility requirements for SNAP programs across the United States, including a gross and net income test, work requirements, and other documentation requirements. The maximum allowable gross income is 130% of the FPL, and households with elderly or disabled members are not subject to gross income criteria but must have a net monthly income at or below 100% of the FPL. Other households must meet both gross and net monthly income tests. CalFresh is administered locally by county human services agencies, and the federal, state, and county governments share in the cost of administration of the program. The average monthly benefit for a CalFresh recipient is $153.13 AB 1614 Page 6 per month, or $5.10 per person per day, whereas the maximum monthly CalFresh benefit for a household of four is $632, or $5.27 per person per day. EBT usage restrictions: 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. Because EBT cards do not have any credit insignia, use beyond ATM or POS machines is limited, resulting in the need for CalWORKs recipients to often withdraw cash to pay utility bills, for example, which are payments that could otherwise be made electronically with a standard commercial debit card. Unlike CalWORKs benefits, CalFresh benefits are only accessible through use of an EBT card and cannot be used for cash withdrawals or for the purchase of basic necessities that don't qualify as food. CalFresh benefits can only be used to purchase food items to be prepared and consumed at home, as well as seeds and plants that can be grown at home and produce food. While EBT cards provide much of the same access to purchases and withdrawals as commercial debit cards, there are federal and state restrictions on EBT transactions in certain locations. The federal Middle Class Tax Relief and Job Creation Act of 2012, signed into law on February 22, 2012, required all states receiving a TANF block grant to prevent EBT transactions in liquor stores that do not also sell food; casinos, gambling and gaming establishments; and any retail establishment that provides adult-oriented entertainment. Prior to this federal policy change, DSS had already responded to Executive Order S-09-10, issued by Governor Schwarzenegger, and by September 2011, had blocked EBT usage at more than 6,000 ATM machines that were determined to be in violation of the Executive Order. It is important to note that DSS moved to remove EBT access for ATM machines at these establishments although there was no record of EBT withdrawals at all of these locations. Additionally, EBT cards are very different from commercial credit cards in that they do not carry a credit line, and the withdrawals or purchases a recipient makes cannot exceed the amount that is available on the card. Lack of overdraft potential is an important feature that helps poor families have access to their minimal benefits as they become available each AB 1614 Page 7 month without the threat of a future month's aid payment having to be used to pay back debts or overdraft fees. State benefits going to banks: Although funds distributed through EBT cards are protected from some of the fees imposed on commercial credit cards, there are still four types of surcharges that impact EBT card usage for CalWORKs recipients. These include ATM surcharge fees that are applied at some ATMs and POS machines when cash is withdrawn, ATM balance inquiry fees, POS machine surcharge fees for getting "cash back" on a purchase, and an $0.85 transaction fee paid to the state's EBT vendor that is in addition to any surcharge and is applied when cash is withdrawn from ATM or POS machines more than four times within a single month. Need for this bill: On October 12, 2013, Xerox, the state's EBT system vendor, reported that all EBT systems in states with Xerox contracts were down. While many stores acted quickly to 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 even their most 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. Additionally, the issue of bank surcharges and fees being applied to EBT cash withdrawals was highlighted in a recent Los Angeles Times article, which stated that $18.9 million in EBT dollars had gone to banks through ATM fees in 2013, and $19.4 million had been taken from EBT transactions at ATMs in 2012. Recipients' grant amounts are not padded to account for potential fees or surcharges, meaning that every dollar that goes to a bank is a dollar that was intended for a needy family, but can't be used by that family to pay for their basic needs. In the absence of policies to eliminate fees and surcharges altogether, this bill seeks to provide EBT consumers with information about how to improve the efficiency and effectiveness of their EBT usage. According to the author, "This bill requires that a few simple steps be taken to increase access to information for EBT AB 1614 Page 8 customers to facilitate their economic empowerment. While current state policies are predominantly focused on the provision of assistance and the myriad requirements recipients must comply with in order to remain eligible for benefits, this bill seeks to help recipients know their consumer rights and facilitates access to the tools they need to be able to manage their benefits. Recently shortened time limits and other restrictions on the provision of state assistance-not to mention the bank fees and surcharges that sweep away state dollars-make it even more important to equip our needy families with the tools they will need to maintain and surpass whatever level of financial stability the state helps them achieve." Analysis Prepared by : Myesha Jackson / HUM. S. / (916) 319-2089 FN: 0003343