BILL ANALYSIS �
SENATE HUMAN
SERVICES COMMITTEE
Senator Jim Beall, Chair
BILL NO: AB 1614
A
AUTHOR: Stone
B
VERSION: April 22, 2014
HEARING DATE: June 10, 2014
1
FISCAL: Yes
6
1
CONSULTANT: Mareva Brown
4
SUBJECT
Electronic benefits transfer cards
SUMMARY
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. It requires the system to be designed
so that users are informed when the EBT system is down and
funds are not accessible, as specified. It requires users
of the EBT card be informed of where they can use their
cards to withdraw funds without fees, and other information
regarding fees. This bill also creates the Electronic
Benefits Transfer System Consumer Protection, Financial
Empowerment, and Cash Access Fund and allocates public and
private funds from this account for specified purposes,
upon appropriation by the Legislature.
ABSTRACT
Existing law:
Continued---
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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. (45 CFR 260.2)
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. (WIC 11200, et
seq.)
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 (7 CFR 271.1)
4) Establishes in California statute the CalFresh
program to administer the provision of federal SNAP
benefits to eligible families and individuals. (WIC
18900 et seq.)
5) Establishes in the Electronic Benefits Transfer 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 (POS) devices and other devices that
accept electronic benefits transfer transactions.
(WIC 10065 et seq., 123302)
6) States that 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
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securely manage their financial affairs. (WIC 10065)
7) 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))
8) 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. (WIC 10072
(g))
9) Allows cash aid recipients to be charged a fee for
withdrawal transactions that exceed four per month.
(WIC 10072 (k))
10)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))
11)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. (WIC
11006.2)
12)Requires all individuals over 16 years of age, unless
they are otherwise exempt, to participate in
welfare-to-work activities as a condition of
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eligibility for CalWORKs. (WIC 11320.3, 11322.6)
This bill:
1) Requires an EBT card recipient to be provided
access, over the existing 24-hour hotline, to a
history of the last 10 card transactions and to have a
two-month history of transactions mailed at no charge
to the beneficiary.
2) Requires the EBT system to have an Internet Web
site that will provide recipients, at no additional
cost to the recipient, with information on how to have
the card and personal identification number replaced,
and that will allow an authorized representative or
head of household to view the transaction history
detail 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.
3) Additionally, requires a county human services
agency to make available at no additional cost to an
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.
4) Adds to required information to be provided to EBT
holders, the information on where consumers can use
their cards to withdraw benefits without incurring a
fee, charge, or surcharge.
5) Requires that the EBT system be designed to inform
recipients when the electronic benefits transfer
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. This
information shall be made available in the recipient's
preferred language if the electronic benefits transfer
system vendor contract provides for services in that
language.
6) Requires the EBT system be designed to ensure that
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beneficiaries of cash aid have access to using or
withdrawing their benefits with minimal fees or
charges, including an opportunity to access benefits
with no fee or charges.
7) Requires a county to inform a CalWORKs applicant of
all of the following:
a. Available methods of electronic benefit
delivery, including through the EBT system or
direct deposit, as specified, the applicable
fees, charges, or surcharges associated with each
method of electronic delivery, consumer and
privacy protections, protections from
garnishment, and liability for theft.
b. That a recipient may authorize any
available method of electronic delivery of
benefits, instructions on how to select or change
his or her preferred method of electronic
delivery of benefits, and that the recipient
shall be given the opportunity to select the
method prior to the first payment.
c. That a recipient may be entitled to an
alternative method of delivery if the recipient
demonstrates an inability to use an EBT card or
other aspect of the system because of disability,
language, lack of access, or other barrier
pursuant to subdivision (d) and instructions
regarding how to determine whether the recipient
qualifies for an alternative method of delivery.
d. That a recipient may be entitled to an
exemption from the three-day staggering
requirement on a case-by-case basis for hardship,
as specified, and instructions regarding how to
determine whether the recipient qualifies for the
exemption.
8) Creates in the state Treasury the Electronic
Benefits Transfer System Consumer Protection,
Financial Empowerment, and Cash Access Fund. The fund
may consist of federal, state, and private funds.
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9) Requires that money in the fund be used to ensure
that recipients of CalWORKs benefits are educated
about their consumer rights and financial management
tools and services, and how to access their benefits
with minimal fees or charges, including an opportunity
to access benefits with no fee or charges, as
specified.
10) Permits moneys in the fund to be used by CDSS or
allocated to county human services agencies or other
public entities, as determined by CDSS, in
consultation with county human services agencies and
advocates for low-income consumers.
11) Requires that activities funded by the fund that
meet the goals of the CalWORKs program, particularly
by helping parents successfully prepare for
employment, shall be applied to required federal work
participation hours, as defined, providing that the
department receives a waiver of compliance, as
defined, or otherwise determines that activities meet
the requirements set forth under federal law.
12) Requires reimbursement to local agencies and school
districts if the Commission on State Mandates
determines that this act contains costs mandated by
the state.
FISCAL IMPACT
According to an Assembly Appropriations committee analysis
of this bill, many of the proposals already are implemented
and part of the current EBT system. All other costs to DSS
are minor and absorbable, the committee noted.
BACKGROUND AND DISCUSSION
Purpose of the bill:
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
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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.
CalWORKs
The California Work Opportunity and Responsibility to Kids
(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
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 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 CDSS,
554,292 families rely on CalWORKs, including more than 1
million children. Nearly 80% of the children are under age
12.
While federal law limits cash assistance to a family with
an adult to 60 months, California law limits eligibility
for the CalWORKs program to 24 months, although benefits to
families may be extended to 48 months if families meet
federal work participation requirements, and benefits
solely for children may be extended beyond that date if the
family continues to meet income eligibility.
Electronic Fund Transfers
The federal Electronic Fund Transfer Act (EFTA) was
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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.
(15 USC 1693 et seq.) 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.
California's EBT statute was enacted in this state's
welfare reform act (AB 1542 (Ducheney), Chapter 271,
Statutes of 1997), which required the state to develop a
system that, among other things, enabled recipients to have
access to their benefits through ATM machines and
point-of-sale devices.
In enacting the Electronic Benefits Transfer Act, the
legislature declared that the goal of the state's EBT
system was 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. (WIC 10065)
Electronic Benefits Transfer cards
Food benefits for CalFresh recipients are distributed
through an EBT system, which allows recipients to access
funds at point-of-sale terminals, automated teller machines
(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 CDSS, 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
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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 percent of the 10.4 million
transactions that were cash withdrawals (7.4 million
transactions) incurred fees. According to the CDSS website,
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.
"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 cards 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
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transactions."<1>
Among other suggestions, the organization recommended
educating EBT card users about how to avoid excessive fees.
System malfunction
The EBT system in California and other states has been
plagued by shut downs in recent years, resulting in news
stories of card holders who discovered at the check-out
counter that there were no funds accessible in their
accounts.
On October 12, 2013, Xerox, the state's EBT system vendor,
reported that all EBT systems in 17 states with Xerox
contracts were down, including California. The shutdown was
prompted by a routine testing of a backup system. In
California, the system also was temporarily unavailable in
April 2013 and twice in October 2012 California recipients
were unable to access benefits for some period of time.
Related legislation
AB 1280 (Perez) Chapter 557, Statutes of 2013, authorized
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 756 (Mitchell), 2011, would have prohibited fees or
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<1> "THE $19 MILLION ATM FEE: How Better Banking Services
Would Protect Our Public Investment in Families,"
California Reinvestment Coalition, March 2014.
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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.
COMMENTS
The author may wish to consider whether there is needed
clarification around what information must be provided by
counties to users of EBT cards.
PRIOR VOTES
Assembly Floor 77 - 0
Assembly Appropriations 17 - 0
Assembly Human Services 5 - 0
POSITIONS
Support: California Reinvestment Coalition (sponsor)
Alameda County Community Food Bank
California Catholic Conference, Inc.
California Coalition of Welfare Rights
Organizations
Western Center on Law and Poverty
Oppose: None received
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