[Congressional Record Volume 141, Number 142 (Wednesday, September 13, 1995)]
[Senate]
[Pages S13551-S13552]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


   APPLICABILITY OF REGULATION E FOR ALL ELECTRONIC BENEFIT TRANSFERS

 Mr. LIEBERMAN. Mr. President, earlier this year I introduced 
S. 131, a bill that would remove the applicability of regulation E of 
the Electronic Funds Transfer Act for all electronic benefits transfer 
[EBT] programs established under Federal, State, or local law, with the 
exception of when payments are made directly into a consumer's account. 
I introduced this legislation for the purposes of removing the barriers 
for States so that they could implement EBT. Although regulation E 
provides many protections for the consumer, the States see it as 
barrier to implementing EBT because it requires States to be liable for 
lost and stolen benefits over $50. This added liability could result in 
added administrative costs.
  At the time I introduced this bill, I expected cash-assistance 
welfare programs to continue to be federally regulated. But now, it 
appears that our largest cash-assistance program for low-income people, 
Aid to Families With Dependent Children [AFDC], will be block granted 
and there will no longer be Federal oversight in many areas. Because of 
this, we must be somewhat more careful in exempting cash assistance and 
other welfare programs that use electronic benefit transfers from all 
of the provisions of regulation E. I want to explain why there may be 
problems in adopting the current language in the House welfare bill 
that exempts electronic benefit transfers [EBT] from regulation E.
  Electronic benefit transfers are the transfers and distributions of 
Federal and State benefit programs through electronic banking 
techniques. The Electronic Fund Transfer Act governs all ATM 
transactions and point-of-service sales such as the use of your credit 
card or ATM card at the grocery store. The act assures individuals that 
their complaints about unauthorized uses and systems problems will be 
attended to in a timely manner. Other protections provided by 
regulation E include the disclosure of information to the consumer 
about their rights. I'm sure that most Members would agree that these 
provisions are fair and should be applied to welfare recipients as well 
as the general banking population. Indeed, States that currently have 
EBT already provide most of these services.
  Under the Electronic Funds Transfer Act [EFTA] the cardholder is only 
responsible for up to $50 if the card is lost or stolen and benefits 
are withdrawn. EFTA requires cardholders to have a personal 
identification number [PIN] which should prevent unauthorized 
withdrawal of benefits even if the card is stolen. This number should 
only be known by the recipient so if the card is stolen, the thief 
would not be able to gain access to the benefits. In an EBT system, if 
money is stolen from the account the State would be liable for all 
benefits beyond the $50 limit.
 This single provision opens EBT to fraud and abuse which could result 
in very high costs to the States. The States have said that this 
potential liability would prevent them from going forward with the 
implementation of EBT programs.

  EBT holds many benefits for the administering agency and the 
recipient. EBT delivers benefits more cost-effectively and eliminates 
the need to print and process food stamps. It also eliminates postal 
fees for sending out checks and authorizing documents. It can provide 
substantial protections against fraud and theft. There is a successful 
EBT demonstration project in Ramsey 

[[Page S 13552]]
County, MN. Ninety-five percent of recipients in Ramsey County prefer 
EBT over checks and food stamps. It allows recipients to have their 
monthly benefits on the date that they are available, instead of when 
the Postal Service finally delivers them. It also allows the recipient 
to bypass check cashing fees and to withdraw small amounts at a time, 
making them less of a target for mugging.
  Senator Dole's welfare reform proposal S. 1120, as well as Senator 
Daschle's proposed substitute, the Work First proposal, would exempt 
only food stamp benefits distributed by EBT from regulation E. I 
support these provisions, for now, because the Secretary of the U.S. 
Department of Agriculture would continue to have authority to ensure 
there are adequate protections. For example, it is my understanding 
that the Secretary could require the application of regulation E to 
food stamps if the States or banks abuse the system. But the same would 
not be true for AFDC if the Congress were to convert the program to a 
block grant for cash assistance. Under a block grant beneficiaries 
would have no recourse if banks or the State agencies did not act 
responsibly.
  In contrast, the House has taken a different approach and has 
exempted all needs-tested Government programs that make use of EBT from 
regulation E. For reasons I have described, I do not think this is 
appropriate. I believe legislation that effects regulation E's 
application to EBT needs more thought. We need to consider how to 
minimize State liability while still maintaining protections for 
recipients using EBT. Congress should take the short-term step of 
eliminating the $50 liability limit. Other requirements of regulation 
E, such as the requirement to address complaints in a timely manner, 
may continue to be necessary to ensure that recipients in Federal cash-
assistance welfare programs are treated fairly. The Federal Reserve 
Board has already determined that regulation E shall apply to all EBT 
programs as of February 1997. We need to act on this issue soon so that 
States will not see the impending implementation of regulation E as a 
barrier to starting EBT programs. I would like to work with my 
colleagues to eliminate barriers to the States' use of EBT so that 
States will not be dissuaded from implementing EBT programs.


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