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OK Plan for TANF Restrictions

Enforcement Challenges Nationally


In many other states where human services agencies are responsible for enforcing restricted access to TANF benefits, the directors report challenges identifying the prohibited businesses for monitoring compliance with the law. For example, liquor stores on a state level are typically licensed or monitored by some sort of alcoholic beverage commission, not by a department of human services. In many states, a state official’s only way of locating these businesses is the Yellow Pages.

In addition, the ATMs in these locations may or may not be owned by the liquor store or casino owner. It is common practice for owners of small ATMs, the kind used primarily to dispense cash, to move the machines around from location to location for various business reasons.

The blending of merchant categories, the reuse of terminal IDs on ATMs and the movement of terminals from one location to another all make enforcement of restriction laws a highly subjective, manual process for the state officials called on to enforce the law.

The following flow chart details the level of complexity involved in attempting to block EBT (Electronic Benefit Transfer) or state-issued debit cards from specific merchant classifications or locations.



Another issue state directors raised is the categories of prohibited businesses all offer low-wage employment, such as clerks, janitors and servers. It is not beyond possibility that these workers might receive various forms of public assistance. However, federal and state laws restrict their access to those funds though ATMs on the premises where they work.

Perhaps the biggest state challenge to enforcement is the fact that those responsible for enforcement—state departments of social or human services—have no enforcement mechanism over any of the categories of prohibited businesses. Even if they knew exactly where TANF benefits were being spent, department officials would have nothing to compel those businesses to deny access or use of TANF funds.

 

Some have suggested that enforcement of the law at a state level should be the responsibility of whatever state agency is responsible for licensing that category of business. For example, an alcoholic beverage commission should be responsible for overseeing enforcement of the ban at liquor stores that the commission regulates. A gaming commission would be responsible for enforcement at casinos, bingo parlors and similar gaming businesses.

However, this solution would require additional legislation on the state level.  This type of legislation would be subject to attack by lobbying groups representing these industries.

In addition to the fact state human services agencies have no regulatory authority over gaming establishments program managers in other states have reported two other significant problems restricting access at casinos. The first is that casinos located on, and operated by, Independent Tribal Organizations have sovereignty over gaming operations on their land. The second is that in many rural areas, including tribal lands, there are no banks or independent ATMs. The closest ATMs in these cases are those located in casinos operated by tribes.

Xerox assisted the California Department of Social Services (CDSS) and the Office of Systems Integration (OSI) in complying with their 2010 Executive Order and identified challenges with meeting requirements of the Federal Act.  After this experience, Xerox shared some the lessons learned with other states contracting with Xerox for their electronic payment systems. 

Xerox can block access of state-issued cards at inappropriate locations. A point to consider is that once cash is accessed at an allowed ATM or POS location through a cash back with purchase transaction, there is no way to determine how these dollars are spent. Theoretically, a cardholder may withdraw cash at a gas station or bank, for example, and then use these funds at a casino, at a liquor store, or at an adult entertainment venue.

Xerox also learned, for ATMs, no reliable identifier exists to identify the business category of a location where an ATM has been placed. Research revealed that most ATMs are identified with a Merchant Category Code (MCC) of Financial Institutions. For this reason, inappropriate locations are identified by:

  • Location name (part of transaction record) – a manual, time-consuming process. This is mostly an intuitive, thus, not a reliable process.
  • Location address (part of transaction record) – to the extent possible, a list of addresses for the inappropriate locations (primarily adult entertainment venues and casinos) has been obtained from the Internet. This list is manually compared to a given month’s ATM activity report in an effort to identify inappropriate locations. This is also not reliable, as it depends on accuracy of addresses posted on the Internet and, if an address is in a strip mall and a location name is not clear, it is difficult to identify.

The whole process is labor intensive and time consuming, mainly because there is little opportunity for automation as the Regulation E information attached to a transaction (source of location name and address information in the monthly ATM Activity Report) contains spelling errors and/or inconsistent abbreviations of location name, address, and/or city name. Additionally, some records contain ATM owner name in the location name field, making it impossible to identify location type by name. 

It should be noted, however, the Xerox process has been relatively successful. Although Xerox reports it is impossible with the current strategy to restrict access at 100 percent of all inappropriate locations in each category, their process has very few instances where a location not identified by Xerox has been cited by the state as a location that should have been blocked.

Last Modified on May 11, 2021
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