Consumer Banking and Payments Law: 8.6.2.1 Federal and State Standards
An EBT system is often used to administer state cash benefits in addition to SNAP.
An EBT system is often used to administer state cash benefits in addition to SNAP.
There are several distinct charges that recipients may incur when accessing cash benefits with an EBT card. First, cash assistance recipients may be charged a fee per transaction by the company with whom the state contracts to administer the EBT program (for example Citibank). In addition to these fees paid to the state’s EBT contractor, there may be a separate surcharge imposed per transaction by the owner/operator of the ATM or POS device for the use of the equipment.136
Beneficiaries may pay fees even for “free” withdrawals. “Free” refers only to the contractor fee (a charge that may be imposed by the company hired by the state to manage the EBT system). The ATM owner may still collect a surcharge for each transaction.
POS terminals can be used to make purchases and in many cases, they can be used so that the EBT recipient obtains cash back from the merchant. There are no POS charges when the recipient uses the terminal to make SNAP purchases, and usually, there are no merchant charges when an EBT card is used to make a purchase of goods or services (although there may be an EBT contractor charge).
One option that can give recipients access to cash benefits without paying ATM fees is for the state to provide state-owned terminals that do not charge fees. The terminal may be available just for SNAP purchases or for both SNAP purchases and cash withdrawals. While the state’s contractor may limit the number of POS transactions or charge for them, the recipient is not subject to the double fee, once by the contractor and then again by the private machine owner.
State EBT programs typically allow cash access at privately owned POS machines, usually in combination with ATMs. Merchants are often permitted to set their own limitations regarding the amount of cash a recipient may receive, for example, $25 per transaction. But generally there is no assurance that recipients will be provided access to POS devices from which they can readily make cash withdrawals up to the full amount of their cash assistance benefit.
The SNAP regulations require that recipients be able to access an EBT account balance “without making a purchase or standing in a checkout line.”140 The SNAP regulations do not mandate any particular method for providing balance information, but one option for states is to provide it by phone from a customer service help desk. Another option is to allow balance inquiries through ATMs. Ideally, states should negotiate with their EBT vendors to make balance information available free of charge.
The SNAP regulations mandate that SNAP recipients may not incur fees for access to SNAP benefits.141 However, the regulations also state that merchants must not incur fees for participating in the SNAP program.142 In response to retailer lobbying, at least two states adopted legislation that provides a per-transaction fee to retailers for EBT implementation costs.
Federal regulations limit the fees that can be charged for replacing a lost or stolen EBT card that is used for SNAP benefits.144 For EBT cards with cash benefits, however, there is no limit on what a replacement card can cost and so the fees tend to be higher.
Both the EBT account itself and information about the account must be secure in order to limit the possibility of fraud or theft of benefits.
Security measures should also be taken to provide personal safety when recipients access cash benefits. The nature of ATMs, usually located outside a building, directly on the street, makes recipients using these machines a highly visible target for muggers.
EBT cards can be lost or stolen, and EBT PINs can be forgotten or otherwise compromised. To minimize the loss to recipients in these situations, a state must have clear procedures for reporting that the card or PIN is lost, stolen or compromised. Recipients should be informed of these procedures, and the procedures should be restated clearly in the written EBT materials presented to recipients.152
The SNAP regulations require that the state place an immediate hold on an account when a recipient reports the need for a card or PIN replacement.153 The regulations also require that state agencies assume liability for any SNAP benefits drawn from an account after the recipient has reported the loss of the card.154 These regulations, however, apply only to SNAP benefits.
Rules regarding the loss of cash assistance benefits are established by state law or the state’s EBT contract. When an EBT card (or PIN) is lost or stolen, the possibility of loss of benefits is the same for both SNAP and cash benefits. Ideally, states should provide the same recipient protections regarding lost or stolen cards and PINs to both SNAP and cash assistance benefits. The immediate hold placed on a lost or stolen card should apply to both types of benefits.
States should have procedures in place to mitigate the loss of benefits when a card or PIN is lost or stolen. Some states have enacted statutes addressing this need. A California law enacted in 2012 provides that the recipient will not incur any loss of electronic benefits after reporting that the EBT card or the personal identification number has been lost or stolen, or bear any loss that occurs through an electronic transfer that does not involve the card itself.155
States may enhance card security by placing an automatic lock on an account after consecutive incorrect PIN entries. This practice is based on the assumption that consecutive incorrect PIN entries indicate that a person other than the recipient is attempting to access benefits with an EBT card. These locks remain in effect for the remainder of the day on which the incorrect PINs were entered. The lock is then removed the next day and the account is reactivated.
The ability of EBT systems to record data about purchases and cash withdrawals creates privacy implications for recipients. Conceivably, EBT transactions could be tracked to show when they are made, where they are made, the amount involved, and what purchases are made. The information gathered could cause actual harm to the recipient if it was used to create a presumption of fraud that the recipient had to rebut to maintain the benefits.
The extent to which there are applicable rules about error resolution depends on the type of benefit. The SNAP rules include fairly detailed procedures for resolving errors in the crediting or debiting of an EBT account.163 They also give recipients the right to notice and a hearing regarding any adjustment of the account.
If the state agency erroneously credits an amount greater than the recipient’s due allotment, food stamp regulations specify that the state agency has until the “availability date” to adjust the benefit balance.168 The availability date is when the benefits in an account become available to the recipient each month.169 State agencies are prohibited from lowering a recipient’s benefit account balance after the benefits availability date.170
After the availability date, the food stamp regulations permit the state to adjust a recipient’s account “to correct an auditable, out-of-balance settlement condition that occurs during the redemption process as a result of a system error.”171 A system error is defined in the regulations as “an error resulting from a malfunction at any point in the redemption process.”172 When a system error occurs, the merchant can request an adjustment from the state agency, which then can place a hold on the
When the EBT system is inaccessible, a merchant may provide eligible food items based on a manual purchase system without the ability to verify the amount of food stamp benefits remaining and at the merchant’s risk.180 If it later turns out that there were insufficient funds for the purchase in the recipient’s account, the food stamp regulations provide precise requirements governing a retailer’s right to “re-present” the transaction for payment during subsequent months.181 Retailers must, at th
A state agency may assert a claim against the recipient for trafficking187 or overpayments caused by system errors or incorrect determination of a benefit amount.188 The food stamp regulations contain specific rules for calculating and collecting the claim, depending upon whether it is an intentional violation by the household, is unintended or due to a household’s misunderstanding, or is an erroneous overpayment by the agency.
Department of Agriculture regulations require a state to give timely and adequate notice before debiting a recipient’s EBT account to correct an alleged error.199 The notice must be sent to the recipient at least ten days before the adverse action is taken, and the notice must clearly explain the adverse action and the recipient’s rights.200 Recipients have ninety days from the date of the notice of the adjustment to request a fair hearing.201 If t
The error resolution procedures provided in the food stamp regulations do not apply to cash benefit transactions. The QUEST operating rules, which are used by most jurisdictions,204 include procedures for cash benefit error resolution. These rules are very technical and apply mostly to disputes between the EBT contractor and the ATM and POS equipment owners and do not provide step-by-step procedures for recipients. Except for the QUEST rules, error resolution procedures for cash benefits vary from state to state.
Food stamp regulations require that, upon a recipient’s request, the state must provide a written transaction history covering all food stamp activity on the account for the past sixty days. A written transaction history enables recipients to maintain records of spending on an EBT account and provides a means to verify proper credits and debits from the account. This verification process is essential for accurate account transactions and to aid recipients in error resolution proceedings.