Electronic Benefit Transfer Task Force Policies

Legislation should be proposed to facilitate nationwide implementation
of EBT.

OMB should direct the Electronic Benefit Transfer Task Force to perform
the following policy and legislatively oriented tasks. The team should
draft a report of its activities by July 1994.

---Review existing legislation and regulations for each program that may
affect nationwide implementation of EBT and draft appropriate changes.
For example, one key issue concerns the applicability of Regulation E to
EBT. Examine the comments submitted in response to the Regulation E
proposal making it applicable to EBT, and determine a governmentwide
position on recipient liability in EBT processing.  

---Adopt a uniform EBT services pricing structure and attendant funding
agreements.  Identify standard categories and construct an EBT
processing pricing structure to include capture and financial settlement
of transactions by and among processing centers and networks, including
industry and federal and state operations. Within the pricing structure,
address cross-program cost effectiveness. This should maximize the
benefits of economies of scale, leverage the commercial direct debit
infrastructure, and ensure that cost-effective criteria are used to
facilitate and expedite the migration to EBT.

---Define a settlement process that is the financial reconciliation of
all debit and credit transactions on a daily basis. High-volume/same-day
settlement processing is required to support EBT. This processing
closely aligns with and can leverage the financial services industry's
current settlement exchange system. The Treasury's Financial Management
Service and the Richmond Federal Reserve Bank are in the process of
assessing implementation approaches.

---Develop integrated EBT program and operating rules. For example,
recipient responsibilities presently vary among different benefit
programs. Obtain agreement across programs on how to combine program
requirements into a uniform set of EBT rules and responsibilities.
Review and modify ongoing efforts to adapt industry's electronic
transfer operating procedures and rules. Coordinate with private sector
entities to define the government EBT system: this includes technical
considerations such as standards and type of equipment deployed,
security and privacy protection, and operating rules (e.g., roles and
responsibilities of all parties, liabilities, indemnifications, and
settlement timing).

---Define benefits delivery options. The presumed method of payment for
all new enrollees in direct federal programs would be direct deposit or
EBT service. While total conversion from paper checks to electronic
payments is the goal, it probably is best to start with a highly
publicized voluntary direct deposit program and phase in EBT service
over a 3-year period. However, a voluntary dual paper-based and EBT
system is not the preferred method for the federal-state administered
programs, especially for the Food Stamp Program. An objective shared by
the Food and Nutrition Service, food retailers, and financial
institutions is to eliminate paper coupons, not create a dual-delivery
system. A dual system would be too costly to manage, hinder the
interstate flow of transactions, cripple efforts to obtain economies-of-
scale pricing, and defeat efforts to combat fraud and abuse in the
trafficking of coupons. Consumer and recipient advocacy groups will need
reassurance that strong recipient preference exists for EBT and that
adequate privacy safeguards are in place.