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CU urges California to make new computer system for distributing public assistance benefits user-friendly

August 29, 2000

State Officials Are Currently Negotiating Contract With Citicorp, Which Has Been Criticized in Other States For Providing Inadequate Service to Recipients

SAN FRANCISCO – Consumers Union called on California officials today to make sure that the state’s new computer system for distributing food stamps and cash assistance benefits will be user-friendly so that recipients can avoid the hassles that have been encountered in other states. The group issued a report outlining a set of recommendations for creating a model electronic benefit transfer (EBT) program based on practices in ten states.
Under EBT, the state chooses a private vendor to distribute public assistance payments using an electronic card similar to a debit card. Consumers Union’s recommended best practices are designed to offer public assistance recipients independence, low cost, convenience, and familiarity with the banking system.
“Moving to electronic payment of benefits has the potential to reduce the stigma of paper food coupons, and to help recipients become more familiar with the technology used in the traditional banking system,” said Debra Garcia, Policy Analyst with the West Coast Regional Office of Consumers Union. “California has the opportunity to learn from the experience of other states, so that low income recipients won’t have to face new costs or barriers to accessing their benefits.”
Last week, state officials began negotiations with Citicorp Services, Inc. to hammer out the details of a contract for running California’s new EBT program. EBT will eliminate paper food stamps in California. Federal law requires EBT to be used for food stamp benefits in every state by October 2002. California counties may also choose to use the EBT card to replace CalWORKS and other public assistance checks. California’s EBT program will distribute approximately $1.6 billion annually in food stamps and, depending on the choices of the counties, up to $3.3 billion in cash benefits annually.
Consumers Union’s report, entitled “Electronic Benefit Transfer (EBT) Program: Best Practices to Serve Recipients,” offers best practices used in EBT programs in nine states and in pilot programs in San Bernardino and San Diego counties in California. In some states, recipients have faced problems such as inadequate customer service phone lines, restricted language access, high fees for cash withdrawals, insufficient access to places where cash can be withdrawn without a fee, inadequate training of store clerks and recipients, and interrupted access to benefits when computer systems are down. The report also notes that in every state, recipients risk financial losses for benefits on lost or stolen cards before a theft is reported, and that most states have no effective rules for correcting errors such as a store clerk accidentally overcharging recipients.
“For families who depend on these benefits to make ends meet, these delays and problems can make it difficult to put food on the table,” said Garcia.
Consumers Union recommends a number of policies that California should adopt in its new EBT system and that other states should add to their EBT programs as they renew or reassign their EBT contracts. These recommendations include:
Run the EBT program as a social welfare program designed to build familiarity with the banking system, rather than solely as a benefit transfer program.
Monitor card non-use, especially during implementation of the program, and follow-up with recipients who are not using their cards.
Set up phone helplines that allow recipients to speak to a customer service representative without punching in the 16-digit card number in the event that their card is lost or stolen. Establish and enforce busy signal and wait time policies with the phone helpline vendor.
Work with banks and retailers to offer minimal or no fees to access cash benefits and provide easy and free opportunities for recipients to check their balances.
Establish guidelines for the number and location of ATMs and point-of-sale machines so that they are conveniently located for recipients.
Offer community-sensitive training in multiple languages and identify those who need additional or customized instruction. Provide training opportunities on weekends, evenings, and on a walk-in basis.
Offer a separate card for “Authorized Representatives” designated by recipients who need to rely on others to access their benefits.
Establish guidelines governing access to a recipient’s electronic information to ensure that privacy is protected.
Citicorp is the largest U.S. operator of EBT programs, with contracts in more than 29 states. In June, the Food Marketing Institute (FMI) filed a grievance against Citicorp with the EBT Council of the National Automated Clearing House Association. FMI’s grievance charges that there have been serious problems with some of the EBT programs operated by Citicorp, including customer overcharges and the inability of some food stamp recipients to acquire food.
California’s bid request, prepared by the State, includes many of the best practices outlined in the report, but the power of Citicorp in the EBT market may create pressure to weaken those requirements. Other best practices covered in the report concern decisions that will be made by the state through regulations and by the counties through implementation of EBT.
“We are concerned about reports that Citicorp has failed to provide adequate service to food stamp recipients in other states,” said Garcia. “State officials need to negotiate a detailed contract that holds Citicorp responsible for meeting high performance standards so that California’s poorest families won’t be inconvenienced or burdened with new costs.”

Gail Hillebrand
West Coast Office