Electronic Payments

EFTA expresses concern over proposed rules on EBT cards

DHHSThe Electronic Funds Transfer Association expressed concern on Monday regarding rules proposed by the Department of Health and Human Services aimed at preventing misuse of government benefits via EBT cards.

Under the Middle Class Tax Relief and Job Creation Act, states that receive grants through the Temporary Assistance to Needy Families program—administered by DHHS’ Administration for Children & Families—are required to maintain practices and policies that prevent program assistance from being used in EBT transactions at casinos, strip clubs and liquor stores.

In DHHS’ proposed rulemaking issued in February, the department listed BIN blocking—a process in which the payment system recognizes an EBT card’s bank identification number and approves or rejects the location based on whether the transaction is conducted at a permitted location—as a potential compliance solution.

The EFTA expressed concern that some states would endorse the suggestion that it maintains is an “impractical approach for solving the problem” because payment processors do not have the ability to systematically block BINs at the point of sale for EBT transactions.

“We fear that some states may include BIN blocking as part of their compliance plan without realizing the impracticality of their commitment,” the EFTA said, adding that DHHS should remove BIN blocking from its recommendations in the proposed rules. “We also suggest that the regulation be amended to note the difficulty and probable lack of success by states in using this systemic approach to meet their statutory obligations under the law.”

The EFTA said, alternatively, the rules could be changed to allow a state’s TANF agency to instruct payment processors to remove the TANF EBT payment option for merchant customers in restricted locations.

Additionally, the EFTA raised concerns regarding the issue of cross-border sales and whether other states must enforce the rules of the state in which an EBT card is issued.

“We believe that mandating cross-border enforcement of [the Middle Class Tax Relief and Job Creation Act] creates a Hobbesian dilemma for states,” the letter said. “The cost and federalist principles involved in resolving these dilemmas are such that we would recommend that the prudent course would be for the rule to be silent with respect to cross-border commerce.”

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