BILL ANALYSIS Ó
AB 2252
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 2252 (John A. Pérez)
As Amended June 16, 2014
Majority vote
-----------------------------------------------------------------
|ASSEMBLY: |75-0 |(April 24, |SENATE: |33-0 |(June 30, |
| | |2014) | | |2014) |
-----------------------------------------------------------------
Original Committee Reference: HUM. S.
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
AB 2252
Page 2
all of the consumer protections, that apply to a payroll
card account, as specified.
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)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.
3)Defines issuer as a person or entity that issues a prepaid
card.
4)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).
5)Provides that a 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 (ATMs), or for
goods or services from multiple, unaffiliated merchants.
The Senate amendments strike provisions that would prohibit the
Department of Child Support Services (DCSS) from being held
liable for authorizing a direct deposit of child support
payments into a prepaid card designated by the recipient that
does not meet the definition of a qualifying account.
EXISTING LAW :
1)Establishes 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. (Family Code (FC) Code Section
17200)
2)Requires each county to maintain a local child support agency,
AB 2252
Page 3
which is responsible for promptly and effectively
establishing, modifying and enforcing child support
obligations, including establishing paternity for children
born out of wedlock. (FC Section 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
California Work Opportunity and Responsibility to Kids
(CalWORKs program. (42 United State Code (U.S.C.) Section 601
et seq., Welfare and Institutions Code (WIC) Section 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 Section 17504
and WIC Section 11457.3)
5)Imposes an administrative service fee of $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 $500 or
more. (FC Section 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
Section 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. (Underemployment Insurance Code (UIC)
Section 1339.1)
AB 2252
Page 4
FISCAL EFFECT : None. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS : This bill seeks to align state law governing the
transfer or deposit of child support payments into prepaid card
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 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
DCSS 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 electronic benefit transfer 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 EFTA (15 U.S.C.
Section 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.
AB 2252
Page 5
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. 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 EFTA, 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
AB 2252
Page 6
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 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.
Analysis Prepared by : Myesha Jackson / HUM. S. / (916)
319-2089
FN: 0004019