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Regulation E and the EBT Debate

The Electronic Funds Transfer Act ("EFTA") and Regulation E apply to any consumer electronic fund transfer initiated through ATMs, POS terminals, telephone bill payment systems, automated clearing house, and the like. To many government agencies' dismay, this includes government benefits when those programs make use of these vehicles to deliver benefit programs.

The FRB has held the line on the basis that the consumer protection is critical and should not be available only for transactions conducted in the private sector. In essence, that would mean the protections would not be available to those who most need them.

In 1996, Congress amended the EFTA to exempt government benefits based on need. The FRB has proposed a revision to Regulation E that would implement this new statutory exemption. The proposal would redefine "account" to exempt "needs-tested" benefits in a program established by state or local law or administered by a state or local agency.

The proposal draws a distinction between need-tested programs, such as welfare and food stamps, and other benefit programs such as social security and unemployment.

Copyright © 1997 Compliance Action. Originally appeared in Compliance Action, Vol. 2, No. 2, 2/97

First published on 02/01/1997

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