PLEASE NOTE: This 1998 publication is not current, and should be used only as historical information.

Table of Contents

• The role of the EBT/EFT Education Consortium
• Federal EFT 99 - 'Key provisions' of final direct deposit rules
• Federal guidelines for 'Electronic Transfer Accounts' due in late summer
• Warning about deceptive ads for direct deposit
• About the State EBT chart
• Chart of electronic benefit transfer (EBT) programs in the states
• State profile - Utah's emphasis on client training pays off in efficient EBT program
• The Update talks with . . . EBT consultant Barbara Leyser
• A range of technology for EBT programs
• Banks share lessons learned from EBT program rollouts
• Protect yourself at the ATM
• Credit problems & bank accounts
• What can you do when you have federal and state benefits?
• Finding low-cost or no-cost checking and savings accounts
• A Glossary of Benefits

Consortium Partners: Consumer Action; National Consumer Law Center; NationsBank (Member FDIC); and the National Urban League

Editorial Committee: Ken McEldowney and Linda Sherry, Consumer Action; Barbara Leyser and Margot Saunders, National Consumer Law Center; John Cleghorn, NationsBank; Peter Williams, National Urban League.Copyright 1998 EBT/EFT Education Consortium

The role of the EBT/EFT Education Consortium

By Ken Lewis
President, NationsBank

Electronic transfer of government benefits and funds isn't just coming. For many consumers, it's already here. As state and federal government agencies lower their costs by shifting from paper checks to electronic delivery, tens of millions of Americans face at least some change in how they receive government funds. In many regions of the country, electronic benefit transfer (EBT) programs are underway.

Consumers, consumer advocates, banks and community organizations that work with benefit recipients all are working to ensure that electronic transfer systems reach their full potential for recipients and taxpayers. However, many questions about how these changes will impact consumers have yet to be answered.

To help you and others stay updated on these important developments, NationsBank and three leading consumer advocacy and education organizations have formed the EBT/EFT Education Consortium. (EFT, or electronic fund transfer, is a government program to issue most federal payments by electronic transfer.)

NationsBank launched this initiative out of its commitment to building strong neighborhoods throughout all of its communities. This commitment extends to providing affordable, safe and convenient access to financial services to consumers, including government benefits recipients.

In this publication, our first effort, you will find the latest news from the U.S. Department of Treasury's EFT rule-making process, reports about current state EBT programs, information about direct deposit and low-cost bank account options and other news.

The organizations that make up the EBT/EFT Education Consortium are:

• The National Urban League, one of the nation's leading social service and civil rights organizations, which helps African Americans attain social and economic equality by promoting economic self-reliance and equality under the law.
• The National Consumer Law Center, a 29-year-old non-profit agency providing services and information about consumer issues to legal services, private attorneys, state and federal consumer protection agencies, public policy makers and others.
• Consumer Action, a non-profit advocacy and education organization that has served consumers nationwide since 1971. Consumer Action has a national reputation for producing, translating and distributing consumer education materials.
• NationsBank, a national leader in community development financing and outreach.

NationsBank firmly believes that for electronic benefits and funds transfer programs to work effectively, all parties involved must understand the implications of how these programs are implemented. With this understanding, we all will be better prepared for a smooth transition to these new means of payments.

It is in that spirit of collaboration that NationsBank is funding this effort and that the consortium partners will continue to inform and educate consumers as we move forward.

Federal EFT 99 - 'Key provisions' of final direct deposit rules

By Linda Sherry
Consumer Action

A new law requires that most recipients of federal payments such as Social Security, veterans or disabled benefits or retired federal or railroad workers' pensions receive their benefits through electronic direct deposit instead of paper checks as of Jan. 2, 1999. However, recent U.S. Treasury Department statements indicate that recipients who do nothing about direct deposit will continue to receive paper checks.

"If a recipient chooses not to respond to any formal outreach effort, we are going to keep sending checks," said Paul Elliott, a public affairs specialist at the U.S. Treasury Department.

EBT: Electronic benefit transfer-a program to distribute public benefits electronically, instead of sending checks.

EFT: Electronic fund transfer-the electronic distribution of money, and specifically, federal payments by direct deposit into federally insured bank or credit union accounts.

The Treasury Department is the federal agency charged with issuing guidelines for the "electronic fund transfer" (EFT) program. The agency on June 25 released some "key provisions" of its final regulations-including the announcement about the automatic default to paper checks.

The department also announced that by late summer it will issue final rules on special "electronic transfer accounts" (ETAs) for people who have problems affording or using a bank account. The ETA notice will be published in the Federal Register and the public will have at least 30 days from publication to comment on the rules. (For more on ETAs)

"We want to strike a balance between realizing the tremendous taxpayer cost savings from direct deposit while still protecting the payment recipients from possible disruption or hardship," said Treasury Under Secretary John D. Hawke Jr. "The final rule will emphasize recipient choice and the importance of insuring that recipients are not forced into choices that are not right for them."

The Treasury Department's recent announcement that it will continue to send paper checks to all beneficiaries who do not specifically request direct deposit is a change from the department's original position.

Originally, the government said it would allow only those recipients who could show that they have a "physical disability, geographic barrier or financial hardship" to have a waiver allowing them to continue to receive paper checks.

Waivers-albeit voluntary-will still be part of the EFT process. Waivers will be allowed for financial hardship, physical or mental disability, language or fluency difficulty or geographic hardship.

However, the Treasury Department has made clear that all waiver request forms must be "self-certifying." According to Elliott, "If an individual chooses to notify the agency that they cannot use direct deposit, the agency will supply a simple orm that the recipient can drop in the mail. They will be granted a waiver based on their request-we are not going to go out and verify it. We are going to take their word for it."

Grassroots education campaign

The Treasury Department has begun an informational campaign called Electronic Funds Transfer 99 (EFT 99) that will educate the public about the new direct deposit program. This outreach will include what the agency calls a "grassroots" educational campaign working with community-based agencies throughout the country to educate their clients and constituents about the advantages of direct deposit, how the ETAs will work, the waivers and default to paper checks, and other topics. A number of educational publications have been developed for the effort and will be distributed free and in bulk to community-based agencies.

The Treasury Department is mounting a media and advertising campaign to publicize EFT 99. Consumer Action, a partner in the Educational Consortium that produced this publication, has been awarded a grant in partnership with the California/Nevada Community Action Association (Cal/Neva) to lead the EFT 99 educational effort in 14 western states.

Federal guidelines for 'Electronic Transfer Accounts' due in late summer

As part of the EFT initiative, the Treasury Department has been working to develop a low-cost account that will allow recipients to use direct deposit of benefits even if they don't have-or can't get-a traditional bank account. The "electronic transfer accounts" (ETAs) would be offered through federally insured financial institutions. (Editor's note: The Treasury Department released its Proposed Electronic Transfer Accounts (ETA) on Nov. 23, 1998.)

ETAs are envisioned by the federal government as a "lifeline" account for those who receive federal benefits but who may have problems opening or managing a checking or savings account.

"The reasons for not having a bank account are many," said Peter Williams of the National Urban League. "It could be a physical disability or limited language skills that keep people from visiting a bank or using an ATM. They might live in an area where a banking office is not in close proximity. Or they might have past banking or credit problems that keep them from opening another bank account." (See "Credit problems and banks accounts")

The government has been working for more than a year to design an ETA account that would serve a diverse group federal beneficiaries. In designing the account, the Treasury Department turned to community and consumer groups and financial institutions for input. The specifics of ETAs have yet to be defined, although community and consumer groups have recommended that these accounts should be low-cost (with maximum fees of $3-$5 per month) and must not be subject to credit screening. Other issues being considered by the government include:

• How many "free" transactions should be allowed per month.
• Whether the account will come with an automated teller machine (ATM) card that can be used not only at ATMs, but also at point-of-sale (POS) terminals at supermarkets and other stores.
• If ETAs should be created under a government contract or fran-chise system or left up to the competitive marketplace to offer them.

Many states have already implemented electronic benefits transfer (EBT) programs which allow recipients to withdraw benefits from an ATM or POS terminal. In some states, plans include the option of receiving state and federal benefits on the same card. (See "Electronic benefit transfer programs in the states".)

The ETAs would be available to all beneficiaries of federal payments who agree to direct deposit, regardless of negative credit or banking histories. When the Treasury Department publishes the final ETA rule in the Federal Register late this summer, it will allow a public comment period of at least 30 days. The department will notify interested persons by e-mail when the ETA rules are published. To sign up for e-mail notification and news, visit the EFT 99 home page (www.fms.treas.gov/eft/index.html).

Warning about deceptive ads for direct deposit

By Linda Sherry
Consumer Action

The Department of the Treasury has issued a warning about misleading ad campaigns targeting beneficiaries of Social Security, Veterans Affairs, Office of Personnel Management and Railroad Retirement payments. The department cautioned recipients not to be pressured into signing up for any payment access services, and not to worry that they face loss of government benefits.

The ads warn people that they will lose their government benefits unless they sign up for direct deposit-which is false-and are aimed at people who use check cashing services instead of banks. The ads are selling direct deposit services that have high fees.

The Debt Collection Improvement Act of 1996 requires that most Federal payments-except tax refunds-be made electronically by Jan. 2, 1999, as part of a program called Electronic Fund Transfer 99 (EFT 99). But in June, a dramatic change in the program was announced: Beneficiaries who do nothing to switch to "direct payments" automatically will continue to receive a paper check. (See Federal EFT '99 story.)

In its "EFT '99 Alert" in early June, the department stated that "no payments will be delayed or withheld because of EFT 99. All payment recipients will continue to receive payment checks unless and until they give instructions to have payments made by direct deposit into an account of their choice."

The federal electronic fund transfer law required that beneficiaries choose a financial institution to receive the payments, unless a waiver applies.

All financial institutions that accept direct federal payments on behalf of recipients must be insured by the Federal Deposit Insurance Corporation (FDIC). But many recipients of federal payments don't have bank accounts, and instead use what the government calls "non-depository providers of payments services," like check cashers, money wiring firms, small mom and pop shops and even liquor stores to cash their checks.

The end of paper checks could mean a potentially huge loss of revenue for these uninsured financial services providers. The new law prompted the uninsured providers to form partnerships with federally insured depository institutions. And some well-known non-depository companies have purchased banks in order to take part in the new era of direct federal payments.

The Treasury Department said that it is "concerned about recent reports indicating that some banks are offering or are planning to offer direct deposit services that involve prearranged linkages with [nonbank] retail outlets." On June 25 it announced that it is considering whether to propose regulations to protect consumers and promised that any regulations would be published for public comment.

Billboards and radio ads touting third-party direct deposit services are specifically targeting people who now use check cashing services. But they typically don't mention the high fees-up to $7.50 per transaction. They urge recipients to sign up for direct deposit programs now or "lose their federal checks." One billboard that was still up in San Francisco at press time alluded to EFT 99 with these words: "Soon Social Security, SSI and VA checks won't be mailed..."

Treasury Under Secretary for Domestic Finance John D. Hawke noted, "We are concerned that government payment recipients may be misled into signing up for such payment access services prematurely and on the basis of misinformation or misapprehension about their rights."

Hawke went on to note that the department was asking bank regulators to make sure that all costs and fees were disclosed to customers. In one case widely reported in the media, a national money wiring company was persuaded to distribute a "corrective notice" offering to return all fees to customers who felt they had been misled when they signed up for a benefits deposit program for federal payment recipients.

Linda Sherry is Editorial Director of Consumer Action.

About State EBT Programs Chart

Editor's note: This chart, compiled by Margot Saunders and Barbara Leyser of the National Consumer Law Center (NCLC), is the only recent effort the consortium is aware of that brings together information about electronic benefit transfer (EBT) programs in all the states. However, there are some gaps in the consortium's information, as noted in the chart. If you have information to share about your state's EBT program, please write to Barbara Leyser, 416 Deerfield Ave., Silver Springs, MD 20910.

Key to chart

An asterisk (*) denotes states that have decided to join the Quest system, allowing recipients to use their electronic benefit transfer (EBT) cards in any other participating Quest state.

ATM: Automated teller machine. Using ATM, debit or EBT cards and personal identification numbers (PINs), bank account holders can make withdrawals and deposits or check the balance on their checking or savings account.

Bids: Typically, states issue a "request for proposals" (RFP) to draw bids from contractors who are interested in running the state's EBT program.

Cash back: Many retailers who have point-of-sale (POS) terminals will give customers a limited amount of cash back when they make a purchase using an EBT, ATM or debit card.

Child support: Some states use EBT to distribute court-ordered child support payments that have been collected by the state on behalf of the recipient.

Child support pass-through: Families applying for TANF (Temporary Assistance to Needy Families) must assign any child support paid by a non-custodial parent to the state. In some states, a portion of this money is "passed through" to the family as a monthly stipend.

EBT status: The state's timetable for implementing electronic benefit transfer.

Fees: A charge, usually paid by the recipient, to withdraw cash from an ATM or POS terminal. In some states, fees are charged for all ATM transactions-even balance inquiries as well as for some POS withdrawals. Fees-unlike surcharges (see below)-are paid to the state's EBT contractor.

Voluntary federal benefits: In the eight states of the Southern Alliance of States, recipients may choose to have their federal benefits (Social Security, SSI, VA benefits, etc.) added to the state EBT program. They must pay a monthly account maintenance fee of $1.92, which entitles them to one fee-free cash withdrawal of their federal benefits from either an ATM or POS terminal and unlimited fee-free cash purchases from their account. They must pay 85¢ per month for each additional cash withdrawal, plus another $1 per month if they want to receive a monthly account statement. Unlike the state benefits in the EBT account, federal benefits are subject to all consumer protections contained in the federal electronic fund rule, Regulation E.

FS: Food Stamps

GA: General Assistance

TANF: Temporary Assistance to Needy Families-formerly Aid to Families with Dependent Children (AFDC).

Litigation: In many states, the implementation of EBT has been delayed by law suits brought by contractors who were not chosen to run the state's EBT program and/or by check cashers.

No information: This indicates that final status of these items has not been determined, or that the consortium's information is incomplete.

Not applicable: If a state is using EBT only for Food Stamps, there is no cash component and therefore ATM and POS fees or surcharges are not pertinent.

Pilot: A preliminary test program. The pilot can begin in one county, or just a few, before a full-scale EBT program is started.

POS: Point-of-sale, a system which allows a retailer to accept electronic payment. Point-of-sale terminals usually require the shopper to enter a personal identification number (PIN).

Surcharges: A charge for using an ATM or POS that is levied by the machine's owner. A surcharge is paid in addition to any EBT fees. Some states have prohibited surcharges on EBT transactions.

WIC: Special Supplemental Nutrition Program for Women, Infants and Children.

Electronic benefit transfer (EBT) programs in the states

State	EBT status	Benefit programs	ATM fees	POS fees
Alabama*	Statewide 1/97	FS, TANF, Voluntary federal benefits	2 free; others 85¢ each (includes POS transactions)	Included in ATM allowance Surcharges : Yes. ATM & POS
Alaska*	Began 2/98; statewide by 9/98	FS, other information not available	No information	No information
Arizona*	Begins 7/98; statewide by 8/99	FS, TANF, other information not available	No information	No information
Arkansas*	Went statewide in 4/98	FS, TANF, voluntary federal benefits	No information	No information Surcharges : Yes. ATM & POS
California	FS-only pilot programs in 2 counties; GA-only pilot (with recipient opt-out provisions) began in Sacramento 6/98; will seek bids in 9/98 for statewide EBT program.	FS; for statewide EBT program, TANF and other benefits will be at county option	1 free in GA pilot (others $1 each). 4 free withdrawals under full scale EBT with fees for additional withdrawals limited by any applicable state law.	3 free POS withdrawals in GA pilot (others 75¢ each); fees for additional withdrawals beyond 4 per month to be limited by any applicable state law. Surcharges : Permitted at ATMs in GA pilot. (No information on surcharges under statewide EBT)
Colorado*	Went statewide in 2/98	FS, TANF, all cash assistance benefits, including energy assistance, state SSI supplement	All transactions are 85¢ each	2 free POS withdrawals; others 85¢ each
Connecticut*	Went statewide in 10/97	FS, TANF, state assistance, refugee assistance, child support pass-through, voluntary state SSI supplement	4 free ATM transactions, including balance inquiries; others 85¢ each	Unlimited free POS withdrawals Surcharges : Prohibited-ATMs by state law, POS under EBT rules
Delaware	Still in planning stages	FS, WIC	Not applicable	Not applicable
District of Columbia*	Began 6/98, districtwide by 10/98	FS, TANF, GA, refugee assistance; may add others later	2 ATM withdrawals and unlimited ATM balance inquiries; other withdrawals 85¢ each	Unlimited free POS withdrawals Surcharges : Permitted for ATMs, but seeking exemptions from banks. Prohibited for POS
Florida*	Began 10/97, statewide by 10/98	FS, TANF, WIC pilot, refugee assistance, voluntary federal benefits	2 fee-free cash withdrawals per month; others 85¢ each	Included in ATM allowance Surcharges : Permitted but discouraged
Georgia*	Began 7/97, statewide by 11/98	FS, TANF, voluntary federal benefits	2 fee-free cash withdrawals per month; others 85¢ each	Included in ATM allowance Surcharges : Permitted. Retail surcharges for EBT cash transactions discouraged
Hawaii*	Statewide in 7/98	FS, TANF, other information not available	No information	No information
Idaho*	Went statewide in 2/98	FS, TANF, state SSI supplement, refugee assistance	No information	No information
Illinois	Statewide 11/97	FS, TANF, child support pass-through, state SSI supplement, GA, refugee assistance	4 free withdrawals (others $1 each) and plus 4 balance inquiries (others 50¢ each; monthly maximum $5)	Unlimited free POS withdrawals Surcharges : Permitted at ATMs and check cashing outlets; prohibited at retailers
Indiana	No information available	FS, other information not available	No information	No information
Iowa	Pilot began in 7/89, goes statewide by 5/99	FS voluntary until 5/00, TANF voluntary, refugee assistance;may add WIC, child support, federal benefits	4 free withdrawals (others 75¢ each) and a limited number of free balance inquiries	No information Surcharges : ATM surcharges prohibited by state law. (No POS information)
Kansas	Went statewide in 3/97	FS, TANF, GA, refugee assistance	None	2 free POS cash withdrawals and unlimited free cash back with purchase; other POS cash withdrawals are 40¢ each Surcharges : Yes
Kentucky*	Delayed by pending litigation	FS, TANF, Voluntary federal benefits	No information	No information
Louisiana	Went statewide in 12/97	FS, TANF	All transactions 45¢ each	Unlimited free POS withdrawals Surcharges : $1-$1.50 surcharge for each POS cash back transaction; ATM surcharging permitted
Maine*	Pilot to begin 8/98; statewide by 1/99	FS, TANF, WIC, Medicaid, Headstart, and other social services	No information	No information
Maryland	Went statewide in 4/93	FS, TANF, GA, child support	Unlimited free transactions (likely to change under new contract 8/98)	Unlimited (likely to change under new contract 8/98) Surcharges : Prohibited for POS; most banks agreed to waive EBT surcharges
Massachusetts*	Went statewide 10/97	FS, TANF, GA, refugee assistance	4 free ATM transactions per month; others 85¢ each. (TANF paid twice monthly)	Free POS cash withdrawals Surcharges : Prohibited for POS; major banks agreed to waive EBT surcharges
Michigan	In planning stage; no start date	FS, TANF, Medicaid, state disability assistance, state family assistance, refugee assistance, day care payments, WIC pilot in one county	No information	No information
Minnesota*	Began in 1987; goes statewide in 10/98	FS; voluntary for TANF, GA, refugee assistance, and state SSI supplement	4 free withdrawals; others $1 each up to $10 per month	POS cash-only withdrawals are included in ATM allowance; no fee allowed on POS purchases Surcharges : Yes. ATMs & cash-only POS
Mississippi	No information available	FS	Not applicable	Not applicable
Missouri*	Went statewide 5/98	FS, TANF, Medicaid, voluntary federal benefits	All transactions are 85¢ each	Only the 2nd monthly POS cash withdrawal and cash back with purchase transactions are free. All others are 85¢ each Surcharges : Yes. ATM & POS
Montana	No information available	FS, WIC	Not applicable	Not applicable
Nebraska	In pre-planning stage	No information available	No information	No information
Nevada	In pre-planning stage	No information available	No informatione	No information
New Hampshire*	Pilot to begin 8/98	FS, TANF, Medicaid, WIC, Headstart, and other social services	No information	No information
New Jersey	Three counties since 3/95, now expanding statewide	FS, TANF; adding GA, refugee assistance, and all other state cash assistance programs; considering WIC	3 free monthly ATM withdrawals; others 40¢ each	Unlimited free POS withdrawals Surcharges : Prohibited for EBT transactions under state welfare law
New Mexico	Statewide 8/95	FS, TANF, GA, support service benefits (other than child care) added in '97	Unlimited free transactions (likely to change under new contract 9/98)	Unlimited free POS withdrawals (likely to change under new contract 9/98) Surcharges : ATM surcharges prohibited (No POS information)
New York*	Pilot to start 9/98, statewide by end of '99	FS, TANF, GA; may add separate WIC EBT program	4 free ATM transactions per month; others 85¢ each (TANF paid twice monthly)	Unlimited free POS withdrawals Surcharges : Prohibited at POS. Major ATM network agreed to waive EBT surcharges
North Carolina*	Began pilot 4/98, statewide by 10/99	FS, voluntary federal benefits	Not applicable	Not applicable
North Dakota	Statewide 3/97	FS, option to add TANF	Not applicable	Not applicable
Ohio	Began expanding pilot in '97, statewide by 1999	FS, option to add TANF and WIC	Not applicable	Not applicable
Oklahoma	Statewide 10/97	FS, other information not available	No information	No information
Oregon	Statewide 5/98	FS, TANF; other information not available	No information	No information
Pennsylvania*	Statewide by 9/98	FS, TANF, GA, Medicaid, others	4 fee-free ATM transactions per month (including balance inquiries); others 50¢ each	Unlimited free POS withdrawals Surcharges : 22 largest banks voluntarily agreed to waive EBT surcharges
Puerto Rico	No information available	FS, TANF; other information not available	No information	No information
Rhode Island*	Pilot started 6/98	FS, TANF; other information not available	No information	No information
South Carolina	Statewide since 12/95	FS	Not applicable	Not applicable
South Dakota	Statewide since 3/97	FS, option to add TANF	Not applicable	Not applicable
Tennessee*	Pilot begins in fall '98	FS, TANF, WIC, Medicaid, unemployment insurance, child support, voluntary federal benefits	No information	No information Surcharges : Yes. ATM (No POS information)
Texas	Went statewide 11/95	FS, TANF; might add WIC and Medicaid	No ATM access	Unlimited free POS withdrawals Surcharges : Retailer surcharging permitted, but rarely practiced
Utah	Went statewide 3/96	FS, TANF, refugee assistance, GA, child care; might add federal benefits as a recipient option	3 free ATM transactions per month; others 50¢ each	Unlimited free POS withdrawals
Vermont*	No information available	FS, TANF, WIC, Headstart, Medicaid, and other state social services	No information	No information
Virginia	Bids requested in 1999	FS, TANF; other information not available	No information	No information
Washington*	Pilot begins 2/99; statewide by 12/99	FS, TANF; other information not available	No information	No information
West Virginia	In pre-planning stage	FS; other information not available	No information	No information
Wisconsin	Pilot begins 4/99; statewide by 11/99	FS	Not applicable	Not applicable
Wyoming	Pilot program in progress; bids being sought for statewide program	FS in one county; seeking bids for EBT for WIC, Food Stamps, and cash benefits	Not applicable	Not applicable

State profile - Utah's emphasis on client training pays off in efficient EBT program

By Linda Sherry
Consumer Action

Utah's electronic benefits transfer (EBT) program has a two-year track record. The state rolled out its "Horizon EBT" with a pilot program in October 1995, and expanded it statewide in April 1996. Benefits paid through the Horizon program are Food Stamps, Temporary Aid to Needy Families (TANF), Refugee Cash Assistance, General Assistance, and child care subsidies.

The state awarded its EBT contract to Zions First National Bank. Benefits can be withdrawn at ATMs that use the Star ATM network statewide and at stores and other places that display the Horizon EBT logo. (Recipients cannot yet use their cards out of state.)

Recipients get three free withdrawals per month from Zions Bank's own ATM terminals (and pay 50¢ for each additional withdrawal). If they use other banks' ATMs, they are subject to whatever transaction fee is charged by the ATM's owner. Disclosure requirements on ATMs ensure that any fee charged by the machine's owner is disclosed before the transaction takes place.

It's important to involve all stakeholders up front. That's a good way to iron out problems before they begin.
- Scott Anderson

Benefits can also be used in grocery stores with point-of-sale (POS) machines, which allow clients to pay for groceries directly with their food stamps benefit, as well as to receive cash. In Utah, all POS transactions are free for Horizon EBT customers.

No going back

Scott Anderson, EBT program specialist for the Utah Department of Workforce Services, said that the program is working well. "I don't think any client would want to go back to the paper system."

He said that the program, while an overall success, "is not convenient in every single community. We have tried to make sure there is at least one food merchant in every community that accepts Horizon, but that is not always possible." Most food merchants give shoppers cash back at no additional cost, he said.

The state program serves some 38,000 food stamp clients, about 18,000 cash assistance clients and about 5,000 child care clients (some of whom receive more than one kind of benefit).

In-person trainings

Utah's client training programs were well planned in advance, said Anderson. The state made sure that all clients attended in-person training about the EBT program. Training videos and a 20-page instructional booklet were developed for use in teaching clients about EBT and were published in English and Spanish. Versions were designed for use by visually and hearing impaired recipients as well.

Clients choose a PIN

Utah did not send its benefits cards in the mail, but distributed them at the training sessions. Clients also had the opportunity to choose their own personal identification number (PIN) instead of receiving a pre-assigned number. According to the program's designers, this is done to make sure that the intended client receives the card and PIN, not someone else who may have access to the client's mail. Utah even extended its training program to make house calls to homebound clients.

Utah's program allows each recipient to designate up to two "alternate payees" who can have separate cards. Alternate payees may be given separate PINs so that withdrawals can be tracked in the event of fraud.

Anderson recommended that any states still in the EBT design stage consider having an online "interface" system. This means that case managers, eligibility personnel and those with fiscal responsibility are all "in direct communication with the EBT system" not just the EBT contractor. The same system can be used "to order benefits, issue cards and PINs or assign or change alternate payees," Anderson said.

Anderson also emphasized how important it is to "involve all stakeholders up front. It's a good way to iron out problems before they begin."

Averting fraud

The program has helped rein in the misuse of benefits, said Anderson. He said that in April arrests were made after an investigation of Food Stamp fraud in Utah. The case, now in court, charged a store owner and three other individuals, and "is based in large part on EBT system documentation," said Anderson.

Clients who lose their cards or have them stolen can call a 24-hour hotline to report the loss, and the card is immediately canceled. This protects recipients from the fraudulent use of the card as well as fraudulent "voucher claims." (When he EBT online system goes down, the voucher system allows recipients to access their benefits off line.) Recipients can then go to the nearest state benefits office on the next working day and get a new card and PIN for immediate use.

The Update talks with . . .EBT consultant Barbara Leyser

Editor's note: In this issue, EBT/EFT Update interviews Sarbara Leyser, a social policy consultant based in Maryland. Leyser is one of the nation's leading specialists on EBT and public benefits. Following 23 years as a social policy analyst at the Welfare Law Center in New York City and Washington, DC, Leyser is now an EBT consultant to the National Consumer Law Center based in Boston, MA, and to the Washington (DC) Council of Agencies. In future issues, the Update will feature interviews with government and financial industry representatives in order to bring you a diversity of opinion on electronic benefit transfer. The opinions expressed here are Leyser's own and do not necessarily reflect the views of all EBT/EFT Education Consortium members.

Q. What are the key points that benefits recipients need to know?

First, that there is no federal mandate with regard to EBT for state-administered public benefits except for the Food Stamp program and that requirement gives states until Oct. 1, 2002 to have an EBT system for Food Stamps fully operational statewide. Second, recipients should know that they have some federal protections with respect to EBT for Food Stamps. Efforts are needed at the state level to ensure compliance. I would like to see training materials that adequately disclose these federal protections to recipients.

For instance, there is a requirement in the Food Stamp regulations that gives EBT recipients the right to receive a free, written, 60-day record of their EBT transactions upon request.

The Food Stamp rules give states two business days to replace a lost or stolen EBT card or provide for a PIN [personal identification number] change when a recipient reports a problem. USDA has granted a number of states a waiver to extend this time limit.

The exact rules about EBT theft or fraud state that if your card is lost or stolen and you call the appropriate toll-free number to report it, you are only out for what was taken before you made the call. When you call, they're supposed to freeze your account. Food Stamp rules are clear-you are supposed to be made whole for losses that come after you notify the proper authorities. Most states follow these rules for cash benefits, too. Many recipients don't know their rights and so they suffer a loss when they don't have to.

If you are moving out of the area or state-even temporarily-you may be able to convert your EBT benefits to a form you can use in the new location.

Under the Food Stamp regulations, the client training materials are required to be written at a certain literacy level, and they must be translated to appropriate languages or alternative forms under certain circumstances. The rules also require that large-type materials for the visually impaired be made available.

With respect to EBT for the delivery of federal benefits such as SSI and Social Security, there is a whole different set of rules. First, federal benefits recipient participation must be totally voluntary, even if EBT is mandatory in the state. Second, federal beneficiaries have Regulation E [federal electronic funds transfer] protections on the federal portion of their benefits, even if they are being delivered through a state EBT program.

Q. Has there been any progress in making sure that EBT cards issued by one state will work when used in another state, the so-called "interoperability" issue?

Yes, there has been considerable progress in the past year but the overriding question still remains unanswered, and that is who will bear the costs for interoperability processing costs-the federal agencies, the states, the EBT contractors, the retailers and financial institutions, the recipients, or some combination of these stakeholders.

There is a nationwide model for interoperability called Quest. But it is up to each state to decide whether or not to adopt the Quest operating rules. If a state decides to comply with the Quest guidelines and use the Quest logo on its EBT cards, then recipients can use their cards in any participating Quest state. As we go to press 24 states have agreed to join the Quest system, although EBT is not yet operable in all of these states. [See State EBT chart] The Quest logo is displayed at ATMs [automated teller machines] and businesses offering POS [point-of-sale] terminals where Quest EBT transactions are accepted.

In addition, while not specifically buying into Quest, several other states have some provision requiring a degree of either national or cross-border EBT interoperability.

Q. What effect is welfare reform having on state EBT programs?

Welfare reform is creating some challenges for recipients. Now there are wide variations among states in limits on EBT cash access fees and making people whole in cases of theft. Despite the differences in state EBT programs, recipients nationwide who opt for direct deposit of benefits at banks and credit unions still have Regulation E [federal electronic funds transfer] protections against loss and theft.

Welfare reform required that minor parents can get cash assistance only if they live with a parent or legal guardian, unless there's proof it's an abusive situation. It won't be uncommon to have three age groups in one household receiving three different types of benefits. If a state requires that there be only one EBT card and one PIN per household, it would give one family member de facto control over everyone's benefits.

Welfare reform legislation mandates EBT for all Food Stamp recipients by Oct. 1, 2002, without any provisions for waivers or hardship exemptions. Federal law allows such waivers. [See EFT 99 article.] There are certain recipients for whom electronic benefits will not work, such as some handicapped recipients. They can designate a representative payee to access their funds-but for many of them that's taking away whatever level of self-sufficiency they had under a paper-based system. And if you voluntarily give someone your card and your PIN and they rip you off, you have to eat the loss.

Q. Are any particular problems with EBT arising at the state level?

Yes. First, we are hearing from advocates all over the country that there is a segment of the elderly and handicapped populations who simply appear to be falling through the cracks and dropping off the food stamp rolls when the states convert to EBT.

Second, there appear to be problems getting stores to use the manual back-up systems for food stamp purchases when the EBT systems are down-and there aren't any back-up systems on the cash side at all.

Third, we hear that many farmers markets and other food markets that used to accept Food Stamp coupons dropped out when the state went to EBT because the manual systems are too time-consuming or they have no way to verify that the recipient has enough Food Stamp credit to cover the purchases.

Finally, we hear that recipients have problems when they try to get through to EBT customer service. Some contractors refuse to accept calls placed at a pay phone because of a new federal rule that permits pay phone owners to charge a fee to the owners of toll-free numbers. Original cost estimates don't cover this fee. But many recipients don't have their own phones-they need to use a pay phone to report a lost or stolen EBT card or a compromised PIN.

Q. The Treasury Department cites cost savings as a major reason for going to an electronic fund transfer system. Has EBT really shown substantial cost savings at the state level?

I'm not aware of any recent studies on cost savings. When Congress mandated Food Stamp EBT it was mostly an issue of fraud control. Early studies anticipated a substantial savings to the federal government on the food stamp side-no coupons to print, distribute, batch, count and destroy each month-as well as a smaller savings to the states in administrative costs. On the cash benefits side, early studies showed it would probably be 'cost neutral' or even that EBT would cost more than sending a check every month.

It's important to realize that those early cost/benefit predictions centered on having EBT contractors provide unlimited free access to cash benefits. Now in many states, clients pay fees when they withdraw their benefits. Obviously, if a state puts out a bid request saying that it wants to offer six free transactions per month, the bid is going to be higher than if the state did not include any free transactions. So this may translate to a cost savings for state taxpayers. Hopefully, it won't be at recipients' expense.

A range of technology for EBT programs

State EBT programs are being rolled out using different models as well as different timetables. While most states are using cards with information carried on a magnetic stripe-like most credit and debit cards-others are using "smart card" technology.

The magnetic stripe cards typically work on an "online" system where information on the recipient's account is stored in a central computer database.

So-called smart cards store information right on the card in an embedded computer microchip. Each month, the value of the new benefits must be added to the card. As the recipient withdraws cash or makes purchases, value is deducted from the card. (Currently, there are no consumer protection regulations covering smart card use.)

To date, two states are using smart card technology-Wyoming and Ohio-only for Food Stamps or WIC benefits, not for cash benefits. However, both states plan to add cash benefits to their systems.

A few states have proposed the use of cards incorporating both types of payment systems. They reason that the smart card industry might evolve rapidly enough to eclipse magnetic stripe cards. Maine, New Hampshire and Vermont created a "Partners Project" to develop a "hybrid" card that would include benefits such as TANF and Food Stamps on the magnetic stripe and have WIC, Medicaid and social services data embedded on a computer chip. Delaware and New Mexico are also exploring a hybrid option.

Banks share lessons learned from EBT program rollouts

By Faith Tucker
NationsBank

The advent of EBT and EFT opens new possibilities for the delivery of government benefits and payments.

Electronic transactions streamline the process, allowing government agencies to lower their costs of printing and mailing paper checks, enabling recipients to save time and often money when cashing their checks and helping banks lessen the expense and time required to process Food Stamps.

Along with these benefits, however, EBT and EFT present recipients, government agencies and participating financial institutions with new issues and challenges to ensuring a smooth transition for all involved. By August, NationsBank will participate in 10 state EBT programs, including the District of Columbia. This experience has provided a number of important lessons about the implementation of EBT programs.

First and foremost are the challenges that result from higher ATM traffic. These include working with those who have little or no experience using an ATM, addressing recipients' confusion about the role of participating banks and managing the congestion that occurs as a result. Generally, the first two to three months of any EBT program rollout are the most challenging and require the most patience from recipients.

Higher ATM traffic

Normal ATM traffic is higher at the beginning of each month as customers access their first-of-the-month direct-deposited funds such as paychecks and Social Security benefits. Because EBT benefits are distributed at the same time, lines at ATMs grow longer. This also results in longer lines for tellers when customers enter the branch rather than wait for the ATM.

In addition, many recipients may take longer to conduct their transaction or may make mistakes that cause their transaction to be declined and, in turn, try their transaction repeatedly. They often will then turn to a bank representative for help. These bank employees assist EBT recipients as much as possible, but have no access to a recipient's EBT account information.

Frequently, recipients incorrectly believe participating banks are responsible for the program and should be able to help them more completely.

Some ideas...

Given these experiences, benefit recipients who want to avoid ATM congestion may want to consider these ideas:

• If possible, access benefits after the first day of their distribution because of the frequency of long lines at ATMs. If waiting until the second day is not possible, try to wait until later in the day.
• Consider ATMs other than those located in grocery stores. These machines regularly have the longest lines because recipients are already at the store redeeming Food Stamp benefits and grocery store personnel often ask benefit recipients to access their funds through an ATM rather than help them at the store's service desk.
• Remember that many merchants provide cash back on point-of-sale (POS) transactions as an alternative to the ATM.

Lessons learned

Other lessons that banks participating in EBT programs have learned include:

• EBT recipient training programs are critical. The quality of government-sponsored training heavily influences the quality of the rollout experience. To ensure the best possible experience, it is incumbent on all involved to strongly encourage all recipients to take complete advantage of all program training and materials.
• Programs that spread their distribution of cash benefits over three or four days, rather than distributing all benefits on one day, produce shorter lines and less ATM congestion. This is referred to as "staggered benefit issuance."
• Programs that join a regional ATM network for transaction processing present less ATM congestion because transactions can be spread more broadly across the network.
• Programs that require recipients to call in to activate their card experience more recipient confusion at the ATM because many cardholders have not activated their card. Recipients often don't realize this until after they have stood in line for some time.
• During program rollouts, it helps to have organized and knowledgeable EBT program volunteers stationed at the ATMs. They can make a big difference in speeding up ATM transactions and answering recipients' questions.
• For participating banks, employee training is very important. Knowing the facts about a program, what to expect and what role to play allows bank employees to do a better job.

Our experience has taught us that many of these program issues usually subside within three to six months, allowing all involved-recipients, governments, retailers, banks and taxpayers-to reap the benefits of electronic transfer.

Faith Tucker is a NationsBank vice president responsible for coordinating the company's involvement in EBT programs. In addition, she sits on the Representative Board of the EBT Council, which administers the national Quest EBT operating rules.

Protect yourself at the ATM

By Peter Williams
National Urban League

With the increase in electronic fund transfer for benefits and federal payments, we're all using ATMs more. The convenience of "24-hour banking" is clear, but using ATMs at odd hours when there aren't many people around requires common sense. These tips can help you bank more safely.

• Stay alert. Be aware of your surroundings when you use an ATM, especially at night. It's best to park in a well-lighted area and have someone go with you.
• Be prepared. To complete your transaction safely, fill out deposit forms and have your card ready before arriving at the ATM. When you've completed your transaction, pocket your card and cash right away.
• Drive-up ATMs. When using a drive-up ATM, keep your doors locked, passenger side and rear windows up and the engine running.
• Treat your ATM card like cash. Guard your ATM card as carefully as cash, checks and credit cards. Never give your account number or card information over the phone.
• Keep your PIN secret. Do not write your personal identification number on your card or keep it in your wallet. Memorize your number and do not tell anyone what it is-even family members and bank employees.
• Protect your privacy. Be mindful of others waiting behind you. Position yourself in front of the ATM and shield the keyboard with your hand to prevent anyone from observing your PIN.
• Be courteous. Don't crowd the person who is using the ATM before you.
• Save your receipts. Do not leave your receipt at the ATM, since it may contain confidential account information and is your only record of the transaction until your monthly statement arrives.
• Report a lost or stolen card immediately. Call your financial institution as soon as you realize your card has been lost or stolen.

Peter Williams is the National Urban League's Director of Housing and Community Economic Development.

Credit problems & bank accounts

By John Cleghorn
NationsBank

As state governments launch EBT programs across the country, many unbanked consumers are taking the extra step of opening checking accounts to receive benefits and other funds directly.

Bank accounts provide a number of important consumer protections and the banking industry offers a growing variety of account options to fit various customers' needs, including many low- or no-cost accounts.

The vast majority of consumers encounter no problems opening accounts. However, in some cases an applicant may be turned down for a new account because of a current or past problem with their finances. The reasons for such instances are limited, however, and consumers have a number of ways to address financial blemishes or to avoid them in the first place.

When a consumer applies to open an account, bank officers check the information provided on the application through specialized companies that help banks identify those who have not paid their financial obligations in a timely manner in the past or who have a history of overdrawing their accounts.

Another reason banks use such information systems companies is to identify anyone who may be opening an account in order to commit a fraud or crime. Bank fraud ends up costing all account holders money. By helping banks hold down check fraud losses, which total more than $13 billion a year, these systems help banks keep costs to the consumer down.

The items related to past merchant or banks losses that information systems most often identify include:

• Any instance in which a consumer has not made good on a check to a merchant.
• Any loss a bank incurred that was not repaid.
• Two or more instances in which a bill has not been paid for 60 to 90 days.
• Any instance in which an individual attempts to open bank accounts at multiple banks in a period of a few days-this may be a signal that someone is trying to commit fraud.

Consumers who are turned down when they apply for a bank account have the right to obtain the name, address and phone number of the company that provided the information used to make the decision. There are several steps a consumer can take:

• Contact the company. (Some of the larger database companies providing this service include CheckRite, ChexSystems, CrossCheck and TeleCheck.) Ask for information about the original debt.
• If you do not think the debt is yours, and that there is a mistake in your record, you have the right to dispute the information. The database companies' consumer affairs offices will provide you with information about how to file a dispute.
• If you acknowledge the debt, contact the original merchant or bank that reported the debt and offer to make restitution. Only the original company to which you owe money can amend your record. Ask that company to inform the information systems company that you have paid your debt. Make sure you get a receipt showing that you paid your debt.
• If the merchant or bank you owe money to cannot or will not help you, you will have to wait several years for the information to be deleted from your record. The larger information systems companies keep records for five years.

Consumers have a number of ways to avoid any problems in the first place. They include:

• Avoiding overdrafts in checking accounts. Bank overdrafts heighten a consumer's "risk profile" and increase the possibility that the bank will place a temporary hold on any checks deposited by that consumer.
• Paying bills on time.
• Working with creditors to meet a payment schedule. Many creditors will adjust payment schedules to find terms that the consumer can meet.
• Periodically obtaining your "credit report" to confirm its accuracy and, if there are inaccuracies, working with any of the "credit bureaus" to straighten them out. (A credit report is information about loans, payments and credit limits you have and is supplied by companies that have given you credit or loaned you money. There are three large credit bureaus that supply credit reports: Equifax, Experian and Trans Union.)

John Cleghorn is Manager of Consumer Affairs at NationsBank.

What can you do when you have federal and state benefits?

When states first began considering electronic benefit transfer (EBT), many discussed expanding the program to include not only state benefits, but also federal benefits such as Social Security, SSI and veterans pensions. Even before the federal government formally announced plans to require that all federal payments be made electronically by direct deposit as of 1999, the U.S. Treasury Department had shown an interest in EBT as a cheaper alternative to paper checks.

But the idea posed problems when the states decided to exempt EBT funds from most consumer protections offered by the federal Regulation E, the rule governing the electronic transfer of money. Under Reg E, users of ATMs and debit cards who follow the rules have limited liability for losses from fraudulent use ($50 or, in certain cases, $500). Reg E, however, does not apply to state-administered benefits such as Food Stamps, cash assistance and the Women, Infants and Children (WIC) nutrition and health program.

States lobbied against affording recipients consumer protections under Reg E-and won. As a result, in most states recipients of state benefits are responsible for any and all losses of EBT funds, unless the card is reported lost or stolen before the funds are fraudulently withdrawn. And if the thief had access to the recipient's card and personal identification number (PIN), the loss is considered to be the recipient's own fault.

Barbara Leyser, an EBT consultant to the National Consumer Law Center-a partner in the EBT/EFT Consortium, said that while some states have offered recipients of both state and federal benefits the option of receiving both kinds of benefits through EBT, little promotion has been given to another, much more preferable option: to get a bank account and have cash benefits deposited directly. "With a bank account, you have all the Reg E protections," she said.

For instance, the Southern Alliance of States (SAS), formed to coordinate EBT programs in Alabama, Arkansas, Florida, Georgia, Kentucky, Missouri, North Carolina and Tennessee, allows recipients of federal and state benefits to roll both kinds together. The funds can be accessed using the recipient's EBT card. But Leyser said that few SAS recipients have expressed interest in the arrangement, perhaps because recipients must pay a monthly fee of $1.92 to get their federal benefits via EBT and $1 each for all but the first monthly ATM or point-of-sale cash withdrawal.

Recipients of federal and state benefits have some or all of these choices:

• All benefits-state and federal-on the same EBT card.
• Two cards-one for state EBT and another to access federal funds in a separate EBT account or "electronic transfer account" (ETA).
• An EBT card for all state benefits and a direct deposit bank account for federal benefits.
• An EBT card for state benefits and a federal paper check. (Paper checks will continue to be sent to recipients of federal payments if they wish.)
• A bank account and direct deposit for both state and federal cash benefits and an EBT card for food stamps and other voucher-type payments for which access is restricted to specific goods or services.

Because many banks and credit unions across the country offer low-cost or no-cost accounts for people who have direct deposit of a payroll or benefits check, the last option may be the most cost-effective, because many states charge fees for EBT cash transactions. Recipients with bank accounts would have access to their own bank's ATMs for free cash withdrawals, personal checks to pay bills and the option to use point-of-sale (POS) for paying for purchases-all at little or no additional cost.

Finding low-cost or no-cost checking and savings accounts

By Linda Sherry
Consumer Action

There are many low-cost-or even no-cost-checking and savings accounts available. Many of these accounts do not require maintaining a minimum balance, although even free accounts may have "unusual activity" fees charged by banks to recoup costs for additional services, such as stop payment orders and printing checks.

Credit unions provide an alternative to banks, and can help some consumers save money. Although very much like banks, credit unions are owned by their members and run solely for their benefit. In order to join a credit union, you must meet its membership requirements. In general, credit unions have less account variety and fewer branches and ATM locations than most banks.

There are good reasons to have a bank or credit union account:

• Accounts in banks and credit unions are insured by the Federal Deposit Insurance Corporation (FDIC), a U.S. government agency.
• You can use checks to pay bills, and avoid the hassle and expense of buying money orders, or the danger of losing cash.
• Bank accounts can serve as references for landlords, phone companies and electric and gas utilities.
• You earn interest on the money in your checking or savings account.
• Cashing or depositing checks at your bank is in most cases free.
• Federal regulations protect you against unlimited financial loss in the event your automated teller machine (ATM) or debit card is lost or stolen. (These are cards that allow you to withdraw cash and make purchases by accessing funds in your checking or savings account.)

While many banks and credit unions offer low-cost or free accounts, these accounts often have one or more special conditions that you may have to agree to, such as:

• Having your paycheck, benefits check or federal payment deposited electronically into your account. This is called "direct deposit."
• Always using the bank's ATM-instead of seeing a teller-or a limit on the number of times you can use a teller each month.
• Not receiving your canceled checks. The bank will send you a list of your canceled checks or small reproductions of your checks ("check imaging"). This is called check "safekeeping" or "truncation." If you need a copy of a check, the bank will send you one. (There is usually a fee for this.)
• Limiting the number of checks you write. If you want to write more checks, you will be charged a small fee for each additional check.
• Meeting an age requirement. Many banks have free or low-cost accounts for seniors.

These tips can help you keep banking costs in check:

• Shop around and ask each bank about different kinds of checking accounts to find the one that best fits your banking needs, habits and budget.
• If the account requires that you conduct certain transactions at ATMs, make sure you understand in which situations you are allowed to visit a teller without paying a fee.
• Banks usually charge more for checks than do other companies. Mail order check printing firms offer lower cost checks-and a wider selection of designs and varieties.
• Look into overdraft protection as a way to avoid the expense-and embarrassment-of bounced checks. While overdraft protection is not free, it costs substantially less than bounced check fees.
• When you use ATMs that are not owned by your bank, you could be charged by your own bank and by the bank that owns the ATM you are using.
• Most banks do not charge their customers for using their ATMs. If you use an ATM frequently, consider a bank with a large ATM network in your area.

A Glossary of Benefits

Child care assistance programs are provided by many states, using both state and federal funding. These programs are designed to enable parents to participate in employment and approved education and training activities.

Food Stamps are coupons that can be spent like money to buy food. The program is administered by the U.S. Department of Agriculture through state grants.

General Assistance (GA) is an optional state- and/or county-administered and funded cash assistance program. Because there are no governing federal rules or funding, eligibility varies widely from state to state.

Refugee Assistance is funded by Congress each year to assist refugees overseas and in the U.S. Refugees in the U.S. are eligible for public benefits during their first five years, unlike other non-citizens who entered the U.S. after Aug. 21, 1996.

Social Security, or Old Age Survivors and Disability Insurance, is a federal retirement and disability insurance program. Beneficiaries pay taxes into the program during their working years and they receive monthly benefits when they retire or become disabled.

Supplemental Security Income (SSI) provides monthly checks to people who are blind, elderly or disabled (mental or physical) and who have a limited income and resources. It is administered by the Social Security Administration.

Temporary Assistance to Needy Families (TANF) provides cash benefits to needy dependent children under the age of 18 and their caretaker parents or relative. It is a temporary program.

WIC (Special Supplemental Nutrition Program for Women, Infants and Children) is a program designed to build healthy families through improved access to nutrition. WIC also provides vouchers which can be used to buy foods, and refers recipients to other services, like immunizations and medical and social services.