Magazine article Independent Banker

IBAA Troubled by EBT Arrangements

Magazine article Independent Banker

IBAA Troubled by EBT Arrangements

Article excerpt

IBAA generally supports efforts to deliver government benefits electronically, but our association remains deeply concerned about anti-competitive aspects of some federal and state models designed to do it.

That's the message Thomas J. Sheehan, president of Grafton State Bank, an $84 million-asset community bank in Grafton, Wis., carried to the House Banking and Financial Services Committee on behalf of IBAA.

Most electronic benefit transfer, or EBT, programs that have started or are being built allow people without bank accounts to receive cash payments from the government through ATMs and point-of-sale terminals. A consortium of southeastern states are pushing to provide electronic benefits through several big banks contractors, such as Citicorp, First Union Corp. and Bank of Boston Corp.

While testifying before the committee, Sheehan, chairman of IBAA's Bank Operations Committee, made four points about the current way EBT models are being developed by the federal and state governments.

1) They unfairly give a competitive edge to EBT contractors in forming close financial ties with people who receive government payments, Sheehan said. "The EBT model can disadvantage community banks and other financial institutions by attempting to lure satisfied bank customers with bank accounts to the EBT contractor. This occurred with the Direct Payment Card, the Texas EBT program," he said.

2) They will allow EBT contractors to control electronic funds transfer networks, Sheehan said. …

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