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Consumer Banking and Payments Law: 8.1.2 The Definition of “Electronic Benefit Transfer”

The term “electronic benefit transfer” (EBT) is confusing because it can have several different meanings, some legal, some technological, and some inconsistent with one another. This chapter generally uses the term EBT to refer to the intersection of the legal and technological definitions: EBT cards used to distribute needs-tested benefits, whether federal, state, or local. However, the precise meaning may vary and be important, depending on the laws at issue.

Consumer Banking and Payments Law: 8.1.3 Congress’s EBT Mandates

The 1996 Welfare Reform Act provided that, by October 1, 2002, recipients must receive food stamp benefits by means of EBT,8 unless a waiver was granted for delayed implementation.9 States were encouraged to implement EBT to deliver other types of benefits,10 including programs that are fully funded and administered by the states, such as Temporary Assistance to Needy Families (TANF), state child care subsidies, general assistance (GA), the Special Supplemen

Consumer Banking and Payments Law: 8.2.2.1 Standards Imposed by State on Private Vendor

States solicit bids from companies to manage a state’s EBT program.33 Several states have formed alliances34 to work together to solicit bids and select an EBT contractor, but each state signs its own contract with the selected contractor(s), and specific contract terms may vary slightly from state to state. By joining these coalitions, states gain greater bargaining power and are generally able to solicit lower contract bids.

Consumer Banking and Payments Law: 8.2.2.2 Advocacy Before State Agencies Concerning Terms of Vendor Contract

As states procure and renegotiate EBT contracts, local advocates are in a position to provide the state with valuable information regarding proposed EBT practices and to suggest improvements to a new or existing EBT design plan.

The Department of Agriculture provides an online schedule that advocates can check to determine when their state’s contract is coming up for re-bid.38 States that draw upon the resources of local advocates when negotiating these contracts will ensure the greatest degree of recipient rights and protections.

Consumer Banking and Payments Law: 8.2.4 Supplemental Nutrition Assistance Program (SNAP) Regulations

The Welfare Reform Act required the Secretary of Agriculture to issue regulations establishing standards for use of EBT to deliver SNAP benefits, including a definition of “the required level of recipient protection regarding privacy, ease of use, and access to and service in retail food stores.”47 Department of Agriculture regulations regarding the replacement of benefits and liability for replacement of benefits under EBT must be “similar” to regulations in effect for a paper-based food stamp system.48

Consumer Banking and Payments Law: 8.3.1 Card Issuance

In an EBT system, recipients are issued their benefits cards either in person or by mail. States issue initial EBT cards only after eligibility has been established, often at the time of training. This practice causes a delay in the recipient’s access to the benefits. If a state chooses this method of initial card issuance, the state should make every effort to limit this delay time. To expedite card issuance, states that require the consumer to obtain the card in person should provide a number of convenient locations at which recipients can pick up EBT cards.

Consumer Banking and Payments Law: 8.3.2.1 Reasons for Issuance

There are a variety of reasons why states may issue more than one EBT card per household. Older or disabled EBT recipients may require assistance from a relative, friend or some other third party in order to access their benefits and fulfill their basic shopping needs. Also, many public-assistance-recipient households are comprised of more than one adult member or more than one benefit recipient, and it is possible that more than one person will need to be able to access the household benefits.

Consumer Banking and Payments Law: 8.3.2.2 Advantage of Distinguishing Between Primary and Alternative Cards

If a state issues more than one card per user, the additional cards may be identical to the initial EBT card (identical PIN and identical access to benefits) or the cards may be issued as a set of one primary card and one or more alternate cards.73 The latter system is preferable for recipients because it may provide the recipient a greater measure of control over the spending on the additional cards.

Consumer Banking and Payments Law: 8.3.3 Personal Identification Numbers (PINs)

In order to access benefits with an EBT card, recipients must enter a PIN on a keypad to verify authorization for use of that card. The PINs used by EBT recipients are similar to the ones used for debit cards linked to a checking or savings account. EBT training programs are required to address the appropriate utilization and security of the PIN.74

Consumer Banking and Payments Law: 8.3.4.1 General

If an EBT card is damaged, lost, or stolen, a recipient will have to request a new card. A replacement PIN may also be needed if the original PIN has been compromised. A state’s EBT system must be able to process a recipient’s request for a replacement card or PIN expeditiously in order to allow the recipient access to SNAP and other benefits as soon as possible.

Consumer Banking and Payments Law: 8.4 Recipient EBT Training

SNAP regulations require that recipients be provided with training both prior to implementation of EBT and as needed during the operation of EBT.86 The training must address a wide variety of issues, including replacement cards, how to redeem benefits, manual transactions, re-presentment, using and protecting PINs, how to report a lost or damaged EBT card, the agency’s anti-discrimination policy, how to identify checkout lanes that are equipped to accept EBT cards, the right to notice, fair hearings, and provisional credits, how agencies issue

Consumer Banking and Payments Law: 8.5.1.1 General

SNAP benefits can be redeemed only to pay for food items from USDA-authorized access points such as grocery stores, convenience stores, farmers’ markets, route vendors, and some group living facilities.91 In 2000, Congress enacted a statute requiring a national standard by October 2002 to enable recipients to access SNAP benefits through the EBT system anywhere in the nation.92

Consumer Banking and Payments Law: 8.5.1.2 Farmers’ Markets

The USDA has worked with local communities, farmers, and others to develop viable local programs to allow SNAP recipients to purchase food at farmers’ markets using their EBT benefits.99 Food sold at farmers’ markets may be less expensive and fresher than that sold in grocery stores.

The methodologies used range from installing wireless equipment on which farmers use their EBT devices, establishing a voucher system, or allowing recipients to purchase paper scrip in $1 increments that are redeemable at the farmers’ markets.

Consumer Banking and Payments Law: 8.5.1.3 Photo EBT Cards

Under the Food and Nutrition Act of 2008, Congress provided states with the authority to issue EBT cards with a photographic image of the recipient imprinted on the face of the card.100 Since then, several states have issued photo EBT cards in an effort to reduce trafficking of SNAP benefits.101 Unfortunately, the use of photo EBT cards can create problems for SNAP recipients—especially those not pictured on the EBT card—and can frustrate their attempts to access their benefits.

Consumer Banking and Payments Law: 8.5.2.1 General

Cash assistance recipients typically have several options for accessing EBT cash benefits. Recipients can withdraw cash assistance funds from a commercial ATM, just as a bank customer withdraws money from a checking or savings account at an ATM. Cash assistance recipients can also access funds at a POS device in a variety of ways: by (1) using benefits to pay directly for purchases, (2) receiving cash back with a purchase, or (3) simply withdrawing cash without a purchase, similar to an ATM withdrawal.

Consumer Banking and Payments Law: 8.5.2.2 Dedicated POS Devices

Various states have permitted recipients to use EBT cards at dedicated POS devices located in housing authorities and/or utility companies. By allowing recipients to pay large bills directly from EBT accounts, this practice provides a convenient alternative to traditional cash and money order methods of payment and reduces the number of times a recipient has to make large ATM withdrawals. Recipients are also able to avoid the charges often associated with cash withdrawal at ATMs or POS devices.

Consumer Banking and Payments Law: 8.5.2.3 Electronic Fund Transfers

Another way to enable recipients to use their cash benefits is to allow them to direct monthly electronic transfers from the EBT funds to approved vendors or companies to pay recurring bills. To make the program most suitable for recipients, the electronic fund transfers should be fee-free and surcharge-free and should not count against the number of monthly fee-free ATM withdrawals permitted. These transfers give recipients a safe and reliable alternative to withdrawing and transporting large sums of cash to pay bills.