BILL ANALYSIS �
AB 1614
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Date of Hearing: April 8, 2014
ASSEMBLY COMMITTEE ON HUMAN SERVICES
Mark Stone, Chair
AB 1614 (Stone) - As Amended: April 3, 2014
SUBJECT : Electronic benefits transfer cards.
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 a recipient
information, at no additional cost to the recipient, 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 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 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.
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6)Requires the EBT system design to ensure that 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 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, 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 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 California Work
Opportunity and Responsibility to Kids (CalWORKs) program.
(42 U.S.C. 601 et seq., WIC 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 (MAP), based on family size and
county of residence, which is approximately 40% of the Federal
Poverty Level. (WIC 11250 et seq.)
3)Authorizes the establishment of an electronic benefits
transfer (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)
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devices and other devices that accept electronic benefits
transfer transactions. (WIC 10065 et seq., 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 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 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 10072 (g))
7)Allows cash aid recipients to be charged a fee for withdrawal
transactions that exceed four per month. (WIC 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 10072(c),
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
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
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11320.3, 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
wellbeing of their families.
Federal Electronic Fund Transfer Act : The Electronic Fund
Transfer Act (EFTA) (15 USC 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's
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.
In 2010, the federal Department of the Treasury ruled to allow
the receipt of federal payments through an electronic method.
In response to concerns about which electronic means, and
essentially which types of card accounts, would be eligible for
the receipt of federal funds, the new rule contained a number of
criteria that prepaid cards would have to meet to be qualified
to receive the delivery of federal funds. Those criteria
include not having an attached line of credit or loan feature
that would cause automatic repayment from the card account and
providing for liability protections for loss, theft, or
unauthorized charges.
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 Electronic Benefits Transfer
(EBT) Act, which makes the following declarations:
1)The development of incompatible systems for electronic
benefits transfer will create significant hardships on
recipients of public social services and businesses that
accept electronic transactions as payment for goods and
services; and
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2)The goals of electronic benefits transfer 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 point-of-sale 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 Temporary Assistance
for Needy Families (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 the California
Department of Social Services, 554,292 families rely on
CalWORKs, including over one million children. Nearly 80% of
the children are under age twelve.
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 (USDA) 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 Federal Poverty Level
(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 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
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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
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
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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.
In expressing the impetus for this bill, the author states:
"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
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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."
PROPOSED AMENDMENT : The author of this bill intends for EBT
heads of household and authorized representatives to have access
to certain information pertaining to their EBT cards via both
the existing 24-hour telephone hotline and the Internet Web site
required to be developed in this bill. In order to correct a
drafting error in the current amended language, committee staff
recommends the following technical amendment, which will allow
an EBT head of household or authorized representative to view
information on the Internet Web site:
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22 (g) The system shall have an Internet Web site for the
reporting
23 of lost or stolen cards that will provide recipients, at no
additional
24 cost to the recipient, with information on how to have the
card and
25 personal identification number replaced, and with access to a
26 complete transaction history detail for use by the recipient
for
27 financial management and dispute resolution. that will allow
an
28 authorized representative or head of household to access view
the
29 transaction history detail for at least the last 10
transactions over
30 the telephone and to request that the transaction history
detail for
31 at least the past two months be sent by mail.
PRIOR LEGISLATION :
AB 1280 (John A. P�rez), Chapter 557, Statutes of 2013, made
state law consistent with federal protections for direct deposit
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of public assistance benefits and unemployment compensation
benefits.
AB 2035 (Bradford), Chapter 319, Statutes of 2012, protects
against electronic theft of benefits delivered electronically.
AB 756 (Mitchell), 2011, would have prohibited fees or
surcharges for EBT cash withdrawal at ATMs, POS machines or
similar cash withdrawal devices.
AB 1542 (Ducheny), Chapter 270, Statutes of 1997, implemented
federal welfare reform and conformed to federal law in
establishing the electronic benefits transfer system to deliver
CalWORKs and CalFresh (then Food Stamps) benefits.
REGISTERED SUPPORT / OPPOSITION :
Support
Western Center on Law and Poverty - sponsor
American Federation of State, County and Municipal Employees
(AFSCME)
CA WIC Association (CWA)
California Catholic Conference of Bishops
California Food Policy Advocates (CFPA)
California Partnership
California Reinvestment Coalition
California WIC Association (CWA)
Coalition of California Welfare Rights Organization, Inc.
East Bay Community Law Center
Hunger Action Los Angeles
National Association of Social Workers, CA Chapter (NASW-CA)
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Opposition
None on file.
Analysis Prepared by : Myesha Jackson / HUM. S. / (916)
319-2089