BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1614| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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 CONTINUED AB 1614 Page 2 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 CONTINUED AB 1614 Page 3 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. CONTINUED AB 1614 Page 4 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 CONTINUED AB 1614 Page 5 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. CONTINUED AB 1614 Page 6 "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: CONTINUED AB 1614 Page 7 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 CONTINUED AB 1614 Page 8 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 **** END **** CONTINUED