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OK Plan for TANF Restrictions

Oklahoma’s Experiences

Since March 2007, Oklahoma’s DHS has issued cash assistance benefits through an Electronic Payment Card (EPC), namely debit MasterCard, or by direct deposit into clients’ bank accounts. Switching from mailing paper checks to putting cash benefits on a MasterCard debit card has saved the state of Oklahoma millions in administrative costs as well as lost benefits and fraud.  The cash benefits on the debit card includes: TANF, foster care payments, adoption subsidy payments, State Supplemental Payments, and child support.  Due to banking regulations (Regulation E) and state privacy laws, DHS has been unable to track transactional usage of this card at targeted business locations except on a very limited basis. (See Differences between EPC and EBT systems).

When the federal and state laws were passed to restrict use of TANF and other funds at prohibited locations, DHS was tasked with enforcing those restrictions.  One of the issues the agency immediately encountered, as had other states, was that non-restricted funds, namely child support payments, were on the same debit MasterCard.  Child Support is collected by DHS on behalf of custodial parents but is not considered state assistance and not subject to the state or federal restrictions on TANF.

Another problem was the cost of enacting immediate change.  The state and federal laws became effective in the middle of an existing contract with the state’s electronic payment processor, Xerox. DHS would have had to pay XEROX to issue a separate card for the restricted funds, institute extensive systems changes, and perform manual and electronic monitoring to block the use of those cards. Since none of these actions were included in the existing contract with Xerox, the cost to DHS and taxpayers would have exceeded a million dollars. 

Instead, DHS chose a more fiscally responsible approach beginning with voluntary cooperation of the businesses, education of TANF clients, and manual monitoring of the restricted locations. Several other states had already proven successful with voluntary compliance of prohibited vendors.

DHS Adult and Family Services (AFS) and Financial Services Electronic Payment Systems (EPS) Unit staff moved forward with a plan to restrict access to the Oklahoma debit MasterCard for TANF funds.  The plan included a two-prong, phased-in approach in dealing with prohibited businesses, client notifications and expectations, as well as electronic blocking of the cards at targeted locations.

In October, 2013, DHS EPS staff requested a list of all identifiable prohibited businesses from the Oklahoma Tax Commission (OTC).  In December 2013, OTC provided a list to DHS containing over 4,000 business entities.  The list of names included many non-restricted businesses. In less than one month, DHS EPS staff performed exhaustive manual reviews of the 4,000 businesses to remove those that were not restricted by the law. 

This manual effort proved challenging as many business names did not indicate the true nature of their services.  The keyword search was imperfect at best.  For example, some of the convenience store names did not indicate the store was connected to or operated by a casino. Or a business with the word “smoke shop” turned out to be a barbeque restaurant.  EPS staff eventually narrowed the list down to 2,151 Oklahoma businesses that were prohibited by law.

In January, 2014, DHS sent letters to the prohibited businesses (2,151 letters) advising them of federal law and state statutes restricting where TANF cash assistance cards may be used and informing them the products or services offered by their businesses must be restricted.  The letter recommended the businesses contact their debit card processor to request the Oklahoma MasterCard bank identification number (BIN) be blocked in all credit card and automated teller machines (ATMs) at their business location.  With the letter, businesses were also sent a sign to post for education of their cashiers and customers that the business does not accept this particular Oklahoma MasterCard.  The sign shows a picture of the Oklahoma debit MasterCard and states: "We do not accept this card.  State and federal laws prohibit use of this card at this location." Reminder letters were sent every other month to businesses that continued to accept the cards.

However, since there were no regulatory requirements for or penalties against the prohibited businesses for accepting the state MasterCard debit card, DHS could only request their voluntary compliance.

DHS requested Xerox provide a list of businesses each month where the Oklahoma debit MasterCard was used.  EPS staff members have been manually monitoring that list and comparing it to the OTC list to look for prohibited businesses that continue to accept the Oklahoma debit MasterCard.  DHS has continued to send reminders to businesses requesting their compliance. 

Many of the businesses voluntarily stopped accepting the debit MasterCard.  Some of the businesses even contacted their debit card processor which handles transactions for Point of Sale (POS) machines, and requested the debit MasterCard be automatically blocked.  Unfortunately, the card processors reported to the businesses that their POS machines did not have these programming capabilities and could not block specific cards. 

The table below shows the results of the voluntary compliance effort.  In the “New” column are the numbers of letters sent to vendors suspected of being in a prohibited category.  If a future transaction was recorded for that vendor, another letter warning of the law was sent. While no transactions were blocked electronically at that time, by the declining numbers of state debit card usage at the prohibited locations, the education of TANF recipients as well as the voluntary compliance of the businesses seems to have been effective, with just a few problem vendors.





































Last Modified on May 11, 2021