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Recipients of electronic food stamps should have same protections as bank customers

December 22, 1998

Families Must Not Risk Losing Food if Debit Card is Lost or Stolen

SAN FRANCISCO, CA — Consumer and community groups say that California families who receive food stamps may be at risk of losing food under current plans for a new electronic program in the state. Groups are urging a state agency to take action to prevent such a problem prior to the launching of the program next year.
Within the next year, the state will choose a private company to provide a statewide system to replace paper food stamps with an Electronic Benefit Transfer (EBT) program, similar to bank debit cards. Federal welfare reform and state statutes do not require that the companies protect benefits in the event of lost or stolen debit cards until after it has been reported missing. Without such protection, families that lose a food stamp debit card or have a card stolen and do not realize it immediately will simply lose the balance of food money available on that card if it is misused before they report it. Traditional bank customers, on the other hand, are protected if their debit cards are lost or stolen from the moment that the card is lost.
In a letter today, more than 20 groups, including Consumers Union, California Food Policy Advocates, Catholic Charities of California, and the Western Center on Law and Poverty, urged the California Department of Social Services to require that the bidding companies provide the same protections to EBT program participants as protections provided by the private banking system in the event of a lost or stolen debit card. Federal law places a $50 maximum liability for debit card holders if the theft or loss is reported within two days of discovering the loss. Meanwhile, major banks and card issuers have gone further for their customers, voluntarily agreeing to cover all losses.
Based on data in a report from the U.S. Department of Agriculture, Consumers Union estimates that providing this protection will cost California about one cent per month per food stamp participant in the event of a lost or stolen card.
“One goal of this new electronic program is to encourage low-income individuals to participate more fully in the mainstream banking system,” said Shelley Curran, policy analyst with Consumers Union. “If you lose your debit card, you won’t lose the funds stolen before you realize it’s gone. A family relying on food stamps should receive the same protection. Their food money hangs in the balance.”
The groups also urged the Department of Social Services to schedule a public hearing to discuss the new EBT program. The state has had meetings with some groups, including Consumers Union, but has required that all discussions remain confidential. The letter explains that such a requirement “deprives the state the broad input it needs to design the best possible EBT system.”

(415) 431-6747
Gail Hillebrand
Consumers Union