Kentucky Upsets Citi Benefits Transfer Effort
Bloom, Jennifer Kingson, American Banker
Citibank's electronic benefits transfer juggernaut has hit a snag in Kentucky.
Though Citibank won the umbrella EBT endorsement of the Southern Alliance of States, a coalition that includes Kentucky, that state's attorney general's office has found grounds to disqualify the New York bank.
Assistant Deputy Attorney General Scott White concluded that delivering food stamps and cash benefits electronically amounts to providing banking services.
Because Citibank, the nation's leading EBT contractor, is not a licensed depository in Kentucky, Mr. White advised the state treasurer, John Kennedy Hamilton, that he can reject Citibank's proposal and start the procurement process over again.
That could create an opening for Transactive Corp., Citibank's chief rival in EBT processing, which has mounted legal challenges to many of the Citicorp subsidiary's contracts.
Citibank said it believes the Kentucky concerns can be addressed and its status confirmed.
"The attorney general just needs additional information so that he can look at it in another context," said Marc MacKenzie, the bank's executive vice president of electronic benefits transfer services. "That's what our next step and goal would be."
Mr. MacKenzie said Citibank plans to explain to Kentucky officials "exactly how the program would operate." After that, Mr. MacKenzie said, "I think the interpretation may be a bit different."
In his opinion dated June 27, Mr. White said Kentucky should select a state-licensed bank to administer electronic benefits. It also said the process by which Citibank was selected was improper.
Mr. Hamilton was upset to learn "that we were in the process of contracting with an out-of-state corporation, not involving Kentucky banks, not involving an RFP (request for proposal), and not involving the Treasury Department," said Assistant Treasurer Paula Payne.
Citibank's argument is that Mr. White was wrong to decide that providing benefits electronically amounts to a banking service and that the benefits provider thus has to be a Kentucky depository, Mr. MacKenzie said. Citibank also said that the procurement process, which followed a procedure reserved for agents of the U.S. Treasury, was proper.
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: Kentucky Upsets Citi Benefits Transfer Effort. Contributors: Bloom, Jennifer Kingson - Author. Magazine title: American Banker. Volume: 162. Issue: 134 Publication date: July 15, 1997. Page number: 12. © 2009 SourceMedia, Inc. COPYRIGHT 1997 Gale Group.
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