BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                    THIRD READING


          Bill No:  AB 1614
          Author:   Stone (D)
          Amended:  8/22/14 in Senate
          Vote:     21


           SENATE HUMAN SERVICES COMMITTEE  :  4-0, 6/10/14
          AYES:  Beall, DeSaulnier, Liu, Wyland
          NO VOTE RECORDED:  Berryhill

           SENATE APPROPRIATIONS COMMITTEE  :  5-0, 8/14/14
          AYES:  De León, Hill, Lara, Padilla, Steinberg
          NO VOTE RECORDED:  Walters, Gaines

           ASSEMBLY FLOOR  :  77-0, 5/15/14 - See last page for vote


           SUBJECT  :    Electronic transfers:  payments and benefits

           SOURCE  :     California Reinvestment Coalition
                      Western Center on Law and Poverty


           DIGEST  :    This bill requires users of Electronic Benefits  
          Transfer (EBT) cards to be provided access to transaction  
          history via toll-free telephone hotline and Internet Web site,  
          among other methods.  This bill requires the system to be  
          designed so that users are informed when the EBT system is down  
          and funds are not accessible, as specified.  This bill requires  
          users of the EBT card to be informed of where they can use their  
          cards to withdraw funds without fees, and other information  
          regarding fees.  This bill specifies that the Department of  
          Child Support Services (DCSS) is prohibited from being held  
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          liable for authorizing a direct deposit of child support  
          payments into an account that is not a qualifying account. 

           Senate Floor Amendments  of 8/22/14 clarify required procedures  
          in the bill; add a new Family Code section addressing prepaid  
          card liability in child support cases; and change the subject of  
          the bill.

           ANALYSIS  :    

          Existing law:

           1. Establishes in federal law the Temporary Assistance for  
             Needy Families (TANF) program to provide assistance to needy  
             families so that children may be cared for in their own homes  
             or in the homes of relatives, and to end the dependence on  
             government benefits by promoting job preparation, work and  
             marriage.

           2. Establishes in California the California Work Opportunity  
             and Responsibility to Kids (CalWORKs) Act, to provide cash  
             benefits, employment training and other supports to  
             low-income families through a combination of state and county  
             funds and federal funds through the TANF block grant.

           3. Establishes under federal law the Supplemental Nutrition  
             Assistance Program (SNAP) to promote the general welfare and  
             to safeguard the health and well-being of the nation's  
             population by raising the levels of nutrition among  
             low-income households.

           4. Establishes in California statute the CalFresh program to  
             administer the provision of federal SNAP benefits to eligible  
             families and individuals.

           5. Establishes in the EBT Act a 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 devices and other devices that accept EBT  
             transactions.

           6. 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  

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             the card and personal identification number (PIN) replaced.

           7. Protects a recipient from incurring 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.

           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  
             requirement due to hardship, as specified.

           9. Requires each county to make an agreement with one or more  
             financial institutions, as specified, and requires counties  
             to provide direct deposit by electronic fund transfer of  
             payments to any beneficiary who authorizes the direct deposit  
             of benefits into a qualifying account, as defined.

           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.

          This bill:

           1. Requires the CalWORKs/CalFresh 24-hour toll-free telephone  
             hotline to provide recipients, at no additional cost, the  
             ability to view transaction history detail (at least 10  
             transactions over the telephone), and to request at least two  
             months of transactions be sent by mail.

           2. Requires the EBT system to be designed to ensure that  
             CalWORKs recipients have access to using or withdrawing  
             benefits with minimal fees or charges, including an  
             opportunity to access benefits with no fees or charges.

           3. Requires the EBT system to have an Internet Web site to  
             provide recipients, at no additional cost, information on how  
             to replace a lost or stolen EBT card and PIN, the ability to  
             view transaction history detail (at least 10 transactions  
             over the telephone), and to request at least two months of  
             transactions be sent by mail.  

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           4. Requires a county human services agency make available to an  
             authorized representative or head of household, at no  
             additional cost to the authorized representative or head of  
             household, all electronic benefit transaction history details  
             that are available to the county human services agency within  
             10 business days after a request has been received by the  
             agency.

           5. 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 not to  
             function for more than a one-hour period between 6 a.m. and  
             midnight during any 24-hour period.

           6. Requires counties to inform recipients of CalWORKs of  
             various information provided by the Department of Social  
             Services (DSS), including the methods of electronic delivery  
             of benefits available, including the EBT system or direct  
             deposit, and the applicable charges, fees, or surcharges  
             associated with each method, how to avoid fees/charges,  
             consumer and privacy protections, liability for theft, as  
             well as where to withdraw benefits without a surcharge when  
             using the EBT system.

           7. Specifies a county is in compliance with provisions related  
             to informing recipients of benefits with specified  
             information if it provides the recipient a copy of the  
             information developed by DSS. Permits a county to provide a  
             recipient the required information, in addition to the copy  
             of the information developed by DSS, either verbally or in  
             writing, if the county determines the additional information  
             will benefit the recipient's understanding of the information  
             provided.

           8. Prohibits DCSS from being held liable for authorizing a  
             direct deposit of child support payments into a prepaid card  
             account that is not a qualifying account.

           Background
           
           CalWORKs  .  The average monthly CalWORKs cash grant for a family  
          of three is $463, or $15.43 per day to meet basic needs such as  
          rent, clothing, utilities and other necessities.  A family of  

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          three receiving the average grant amount would have an annual  
          household income at $5,556 per year - about one quarter of the  
          Federal Poverty Guidelines level for the same size family of  
          $19,790.  According to recent data from DSS, 554,292 families  
          rely on CalWORKs, including more than one million children.   
          Nearly 80% of the children are under age 12.

           Electronic Fund Transfers  .  The federal Electronic Fund Transfer  
          Act was established in 1978 to protect individual consumers  
          engaging in fund transfers.  It establishes the rights,  
          liabilities, and responsibilities of financial institutions that  
          offer such services and of the customers who use them.  In 2010,  
          the federal Department of the Treasury mandated that federal  
          benefit payments such as social security, veterans' benefits and  
          others be delivered through an electronic transfer.

           EBT cards  .  Food benefits for CalFresh recipients are  
          distributed through an EBT system, which allows recipients to  
          access funds at point-of-sale terminals, ATMs and other  
          electronic fund transfer devices.  EBT cards look similar to ATM  
          debit cards, and are swiped through the same machines using  
          magnetic strips to transfer information.

          While the EBT system was designed in California to deliver  
          CalFresh benefits, all of California's 58 counties also deliver  
          either CalWORKs or General Assistance benefits, or both, through  
          the EBT cards.  According to DSS, in 2013 there were 35.5  
          million EBT transactions, with about one-fifth of them charged  
          fees or surcharges.  Of that, 17 million transactions were used  
          for direct purchases, 2.5 million were for cash back only from a  
          purchase of service location and nearly 5.5 million transactions  
          were purchases with cashback.  These transactions incurred  
          relatively minimal fees.  However, 71% of the 10.4 million  
          transactions that were cash withdrawals (7.4 million  
          transactions) incurred fees.  According to the DSS Internet Web  
          site, EBT food and cash aid benefits can be redeemed at more  
          than 80,000 locations in California.

           Fees and Charges  .  A 16-page report issued in March 2014 by the  
          California Reinvestment Coalition calculated $19 million per  
          year in public benefits is going to pay for bank fees and  
          another $6.7 million is spent annually on fees to pay bills and  
          make purchases using prepaid cards, money orders, independent  
          check cashers and in-person pay locations.

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               "The current EBT program provides recipients limited access  
               to ATMs before charging fees to withdraw cash while most  
               banks and other ATM owners charge a fee of up to $4 every  
               time someone uses an EBT card in their machines.  As a  
               result, families that receive an average CalWORKs benefit  
               of only $510 a month use a significant portion of that  
               money just to pay ATM fees.

               "Unfortunately, the $19 million captures only the cost of  
               using EBT cards.  CalWORKs recipients who don't have access  
               to affordable, full service bank or credit union accounts  
               are paying additional fees to pay bills and make purchases  
               using prepaid cards, money orders, check cashers and  
               in-person pay locations.  We estimate that an additional  
               $6.7 million of the state's CalWORKs funds is going to pay  
               for these services.  In total, $25.7 million of the state's  
               aid meant to support the wellbeing of families is instead  
               going to fees charged to conduct the most basic financial  
               transactions."

          Among other suggestions, the organization recommended educating  
          EBT card users about how to avoid excessive fees.

           Prior Legislation

           AB 1280 (Perez, Chapter 557, Statutes of 2013) authorizes public  
          assistance payments to be directly deposited by electronic fund  
          transfer to a qualifying account and required those accounts to  
          meet specified consumer protection regulations.

          AB 2035 (Bradford, Chapter 319, Statutes of 2012) protects  
          recipients against the loss of EBT benefits that are stolen  
          electronically.

          AB 1542 (Ducheny, Chapter 270, Statutes of 1997) implemented  
          federal welfare reform and conformed to federal law in  
          establishing the EBT system to deliver CalWORKs and CalFresh  
          (then Food Stamps) benefits.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  Yes

          According to the Senate Appropriations Committee:

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           Ongoing state-reimbursable administrative costs to counties to  
            inform all CalWORKs recipients of specified information  
            provided by DSS regarding the electronic delivery of benefits.  
             Based on CalWORKs recipient cases of about 550,000, to the  
            extent the information is provided verbally in person or over  
            the phone, an additional five minutes of eligibility worker  
            time for each recipient will result in costs of $2.6 million  
            (General Fund).

           Minor, absorbable costs to DSS, as most of the requirements of  
            the EBT system are already implemented and part of the  
            existing system.

           SUPPORT  :   (Verified  8/25/14)

          California Reinvestment Coalition (co-source) 
          Western Center on Law and Poverty (co-source) 
          AFSCME 
          Alameda County Board of Supervisors President, Keith Carson
          Alameda County Community Food Bank
          Alameda County Social Services Network 
          California Asset Building Coalition
          California Catholic Conference, Inc.
          California Food Policy Advocates
          California Partnership
          California WIC Association
          Center for Asset Building Opportunities
          Center for Responsible Lending
          Coalition of California Welfare Rights Organizations, Inc.
          Community HousingWorks
          Consumer Action
          County Welfare Directors Association
          East Bay Community Law Center
          Home Preservation & Prevention, Inc.
          Hunger Action Los Angeles
          Los Angeles County
          Mission Economic Development Agency
          National Association of Social Workers, California Chapter
          Opportunity Fund
          Pacific Asian Consortium of Employment
          Rio Hondo College



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           ARGUMENTS IN SUPPORT  :    The author states that this bill seeks  
          to improve consumers' access to information about their EBT  
          transactions and 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, according to the author.

          Recently shortened time limits and other restrictions on the  
          provision of state assistance 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, the author states.

           ASSEMBLY FLOOR  :  77-0, 5/15/14
          AYES:  Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,  
            Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian  
            Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,  
            Dababneh, Dahle, Daly, Dickinson, Donnelly, Fong, Fox,  
            Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,  
            Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hernández,  
            Holden, Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,  
            Maienschein, Medina, Melendez, Mullin, Muratsuchi, Nazarian,  
            Nestande, Olsen, Pan, Patterson, Perea, John A. Pérez, V.  
            Manuel Pérez, Quirk, Quirk-Silva, Rendon, Ridley-Thomas,  
            Rodriguez, Salas, Skinner, Stone, Ting, Wagner, Waldron,  
            Weber, Wieckowski, Wilk, Williams, Yamada, Atkins
          NO VOTE RECORDED:  Eggman, Mansoor, Vacancy


          JL:ek  8/25/14   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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