BILL ANALYSIS Ó
AB 2252
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Date of Hearing: April 8, 2014
ASSEMBLY COMMITTEE ON HUMAN SERVICES
Mark Stone, Chair
AB 2252 (John A. Pérez) - As Introduced: February 21, 2014
SUBJECT : Child support payments: electronic fund transfer:
qualifying accounts.
SUMMARY : Extends federal consumer protection standards to child
support payments deposited into prepaid card accounts.
Specifically, this bill :
1)Requires that child support payments only be deposited into an
account that meets the requirements of a qualifying account,
as specified, when direct deposit is requested by a recipient
of child support payments.
2)Defines qualifying account as one of the following:
a) A demand deposit or savings account at an insured
financial institution in the name of the person entitled to
receipt of the child support payments; or
b) A prepaid card account that meets all of the following:
i. The account is held at an insured financial
institution;
ii. The account is set up to meet the requirements
for passthrough deposit or share insurance so that the
funds accessible through the account are eligible for
insurance for the benefit of the person entitled to the
receipt of child support payments by the Federal
Deposit Insurance Corporation, as specified;
iii. The account is not attached to any credit or
overdraft feature that is automatically repaid from the
account after delivery of the payment; and
iv. The issuer of the card complies with all of the
requirements, and provides the holder of the card with
all of the consumer protections, that apply to a
payroll card account, as specified.
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1)Prohibits a person or entity that issues a prepaid card or
maintains or manages a prepaid card account from accepting or
facilitating direct deposit of child support payments to a
prepaid card account that does not meet the definition of
qualifying account, as specified.
2)Provides that the Department of Child Support Services shall
not be held liable for authorizing direct deposit of child
support payments into a prepaid card account that does not
meet the definition of a qualifying account when that card has
been designated for direct deposit by the recipient.
3)Defines financial institution as a state or national bank, a
state or federal savings and loan association, a mutual
savings bank, or a state or federal credit union.
4)Defines issuer as a person or entity that issues a prepaid
card.
5)Defines a payroll card account as an account that is
established through an employer and to which electronic funds
transfers of the recipient's wages, salary or other employee
compensation are made on a recurring basis, as provided in
regulations implementing the federal Electronic Funds Transfer
Act (EFTA).
6)Provides that prepaid card or prepaid card account shall have
the same definition as provided in EFTA regulations regarding
general use reloadable cards, or shall be defined as a card,
code or other means of access to a recipient's funds that is
usable at automated teller machines, or for goods or services
from multiple, unaffiliated merchants.
EXISTING LAW :
1)Establishes the Department of Child Support Services (DCSS)
within the California Health and Human Services Agency for the
purpose of administering all services and performing all
functions necessary to establish, collect, and distribute
child support. (FC 17200)
2)Requires each county to maintain a local child support agency,
which is responsible for promptly and effectively
establishing, modifying and enforcing child support
obligations, including establishing paternity for children
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born out of wedlock. (FC 17400)
3)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 aid and funds for
welfare-to-work services are administered through the CalWORKs
program. (42 U.S.C. 601 et seq., WIC 11200 et seq.)
4)Requires the local child support agency to pass through the
first $50 of any amount of child support collected on behalf
of a child included in a CalWORKs assistance unit to the
recipient family and disregards that amount when calculating
income or resources for purposes of determining eligibility
and establishing the family's grant amount. (FC 17504, WIC
11457.3)
5)Imposes an administrative service fee of twenty-five dollars
($25) on a custodial party that is receiving services from the
California child support program, but has never received
CalWORKs aid, to pay for support order establishment,
enforcement, and collection services provided if the annual
amount of child support payments collected on behalf of the
custodial party is five hundred dollars ($500) or more. (FC
17208 (c))
6)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)
7)Provides that unemployment compensation benefits directly
deposited by electronic funds transfer into an account of the
recipient's choice shall only be deposited into a qualifying
account, as defined. (UIC 1339.1)
FISCAL EFFECT : This bill has been keyed non-fiscal by the
Office of Legislative Counsel.
COMMENTS : This bill seeks to align state law governing the
transfer or deposit of child support payments into prepaid card
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accounts with federal protections for such accounts. By
aligning with federal requirements and establishing criteria for
prepaid card accounts used for this purpose, this bill protects
custodial parents receiving child support payments, and helps
them avoid being subject to the inappropriate practices of
certain financial institutions.
Child support : The national child support program was
originally established by Congress in 1975 as part D of Title IV
of the Social Security Act to establish paternity and collect
support obligations as a means of reimbursing the state and
federal governments for benefits paid out through public
assistance programs. In California, the child support program
is administered by the Department of Child Support Services
(DCSS), and local child support agencies carry out child support
enforcement duties at the county level.
Although a recipient of child support payments can still elect
to receive the payment via check, for ease of distribution, the
Department of Child Support Services encourages recipients to
receive their monthly payments either through direct deposit to
a bank account or on the state's Electronic Pay Card. Much like
a standard debit card (or EBT card used to receive CalWORKs
benefits), the Electronic Pay Card is a prepaid debit card that
only holds the amount of child support paid to a custodial
parent and has no credit capacity beyond the available funds.
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'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
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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. This bill applies these and other
criteria included in the ruling for purposes of transferring or
depositing child support payments into prepaid card accounts.
Prepaid cards : Under the federal Electronic Funds Transfer Act,
a prepaid card is generally defined as a card or other payment
code or device that is purchased or loaded, on a prepaid basis,
and is redeemable for the purchase of goods or services, or cash
withdrawal at an ATM. In some cases, prepaid cards can be
reloaded for purchases or withdrawals. Many people who have
exhausted credit cards or the ability to obtain new credit
cards, or even those who don't feel comfortable using
traditional bank accounts, have turned to using prepaid cards as
a means of keeping their spending within feasible limits while
having the purchase and withdrawal freedom of a commercial debit
or credit card.
Need for this bill : While federal standards of protection exist
for recipients who choose to receive child support payments on
the state Electronic Payment Card, similar protections do not
yet exist for child support payments received on other prepaid
cards of the recipient's choosing. This can leave recipients
and their much-needed support payments in the hands of
ill-willed financial institutions.
Supporting passage of the bill and expressing the importance of
integrity within the child support distribution system, the
author states:
"Child support is critical to the financial security of millions
of children throughout California as well as across the nation.
Most of the children who live in poverty live with one parent,
with the other parent living elsewhere. Child support accounts
for 40% of income for low-income families who receive child
support payments. In addition, child support is a substantial
source of income for families leaving public support systems.
Over 40% of children in post-welfare families receive child
support. And for those who do, child support accounts for 30%
of their income. The child support program also provides other
beneficial impacts. Effective child support programs with
secure distribution of payments help to promote marriage and
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reduce births to unwed parents. In addition, parents who pay
child support are more likely to be involved in the lives of
their children. Finally, successful child support programs
reduce the need for public assistance.
"The lack of consumer protections for families receiving child
support not only endangers the subsistence of California
families experiencing hardship, it undermines the security of
the noncustodial parent's contribution to support of the
children. By applying federal standards, [this bill] will
ensure federal protections exist for child support and
low-income families."
PRIOR LEGISLATION
AB 1280 (John A. Pérez), Chapter 557, Statutes of 2013, provided
in state law the federal protections sought in this bill for
direct deposit 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)
National Consumer Law Center
Opposition
None on file.
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Analysis Prepared by : Myesha Jackson / HUM. S. / (916)
319-2089