BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1614
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          CONCURRENCE IN SENATE AMENDMENTS
          AB 1614 (Stone)
          As Amended  August 22, 2014
          Majority vote
           
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          |ASSEMBLY:  |77-0 |(May 15, 2014)  |SENATE: |35-0 |(August 26,    |
          |           |     |                |        |     |2014)          |
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           Original Committee Reference:    HUM. S.  

           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.

          4)Requires EBT consumers to be informed on how to protect their  
            cards from misuse and 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  








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            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 use information provided by the  
            Department of Social Services (DSS) to inform CalWORKs  
            recipients of 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)Provides technical clean-up to AB 2252 (John A. Pérez),  
            Chapter 180, Statutes of 2014.
           The Senate amendments  :

          1)Clarify that counties are required to use information  
            developed by DSS to inform CalWORKs recipients of options  
            available with respect to their receipt of benefits and EBT  
            usage, as specified, and provide that counties are in  
            compliance with this requirement upon providing recipients a  
            copy of the information developed by DSS.

          2)Delete the establishment of the Electronic Benefits Transfer  
            System Consumer Protection, Financial Empowerment, and Cash  
            Access Fund in the State Treasury and related provisions.
             
          3)Require DSS to implement the provisions of this bill by  
            all-county letters or similar instructions no later than April  
            1, 2015, and until regulations are adopted on or before  
            October 1, 2016.

          4)Provide technical clean-up to AB 2252, to clarify that the  
            Department of Child Support Services is not liable for  
            authorizing a direct deposit of child support dollars into a  
            prepaid account designated by the recipient that does not meet  
            the criteria set forth in AB 2252.  This clean-up aligns AB  
            2252 with AB 1280 (John A. Pérez), Chapter 557, Statutes of  
            2013, with respect to departmental liability for prepaid card  








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            account transactions.

           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., Welfare and  
            Institutions Code (WIC) Section 11200 et 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  








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            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  
            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  :  Unknown

           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.  








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           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  
          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  








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          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  
          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  








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          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  
          month without the threat of a future month's aid payment having  
          to be used to pay back debts or overdraft fees.

          Benefits for poor families 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 widespread 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.









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          Lastly, with the rapidly evolving landscape of electronic  
          benefits transfer options, and the challenges this evolution  
          presents to benefits recipients, it is of utmost importance to  
          enforce adequate consumer protections and to ensure that  
          electronic benefits card users know their rights.  To this end,  
          AB 1280 ensured federal consumer protections were in place for  
          public assistance and unemployment compensation benefits  
          electronically transferred to prepaid cards.  Similarly, AB  
          2252, instituted the same protections for child support payments  
          electronically transferred to prepaid cards.  AB 1280 included  
          provisions to limit departmental and local agency liability for  
          authorizing payments to prepaid card accounts. This bill  
          contains clean-up provisions to AB 2252 to also ensure that the  
          Department of Child Support Services isn't held liable for  
          electronic deposits of child support payments to a prepaid card  
          account that is designated by a recipient but does not meet the  
          federal standards of a qualifying account.  

          According to the author, "This bill requires that a few simple  
          steps be taken to increase access to information for EBT  
          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 


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