Lagana, Burzichelli & Garcia Legislation to Encourage Use of Pre-Paid Debit Cards for Government Disbursements Goes to Governor

(TRENTON) — Legislation Assembly Democrats Joseph Lagana, John Burzichelli and Carmelo Garcia sponsored to expand the state’s method of government disbursement such as gross income tax refunds or any applicable state and local payments to individuals or business entities was approved 73-0 Monday by the Assembly, giving it final legislative approval.

The sponsors noted that the intent of the measure (A-2925) is to modernize the payment system to increase efficiency and provide a more accessible form of payment receipt for recipients lacking readily available access to banking institutions.

“It’s time to bring the state’s payment disbursement methods into the twenty-first century,” Lagana (D-Bergen/Passaic). “Pre-paid cards would provide easier and faster access to refunds and payments.”

“Debit and credit cards are the preferred method of payment nearly everywhere,” said Burzichelli (D-Gloucester/Salem/Cumberland). “It’s a simple option that would provide more versatility for the residents and more efficiency in government payment processing.”

“Improving the way payments are disbursed would be beneficial to both residents and to local and state government,” said Garcia (D-Hudson). “Encouraging a move to electronic forms of payment is a sensible step toward reducing expenses in a tough economy.”

The bill allows modernization for the form of disbursement for state government and local unit payments by providing for certain State government payments to individuals and business entities to be made in the form of prepaid debit cards and by authorizing local units to adopt policies providing for standard electronic funds transfer (EFT) technologies to be used for the payment of certain claims.

Under the bill, state payments to individuals and business entities, other than gross income tax refunds, service compensation payments to state employees, and certain other payments currently made in connection with programs or services administered by a state entity, are required to be made in the form of prepaid debit cards. The bill provides that implementation of this requirement is subject to an ongoing determination of financial feasibility by the state Treasurer, and is further conditioned on the following requirements:

  • The State Treasurer must make an annual disclosure, on the State Treasurer’s website, concerning the status, scope, and future plans for implementation, including an explanation as to any determinations of financial infeasibility;
  • The State Treasurer must adopt rules and regulations to identify and provide a uniform strategy to address the needs of payment recipients that are unbanked or underbanked and do not have or have limited access to an automated teller machine or a manual teller terminal that is operated by the entity responsible for the issuance of prepaid debit cards to complete a domestic withdrawal of cash against the balance assigned to the card;
  • The State Treasurer must carry out the standardization of prepaid debit cards by providing recipients the opportunity to opt for a number of alternatives to the prepaid debit card format, including receiving payment through a check or direct deposit;
  • Though scheduled to apply to payments authorized on or after July 1, 2016, the scope and timing of implementation is conditioned on an ongoing determination of financial feasibility by the State Treasurer; and
  • The requirements for State payments to individuals and business entities are not to be construed to authorize or preclude the provision of prepaid debit cards to officers, employees, and agents as compensation for services.

The ability of the State Treasurer to shape implementation of the bill’s requirements for State payments to individuals and business entities does not apply to the annual public disclosure or regulatory requirements or the bill’s minimum requirements for prepaid debit cards.

The bill requires prepaid debit cards, issued for purposes of State payments to individuals and business entities, to meet certain minimum characteristics. The cards must be open loop cards that enable recipients to transfer funds assigned to the card to a merchant through a point-of-sale terminal, and to withdraw cash against the balance assigned to the card via a qualified financial institution’s automated teller machine or manual teller terminal. The cards also must allow recipients to complete, for each payment, at least two domestic cash withdrawals against the balance assigned to the card via an automated teller machine or a manual teller terminal that is operated by the issuer of the card prior to incurring a charge for completion of the transaction.

In addition, the bill authorizes governing bodies of local units (including local governments, boards of education, and county colleges) to adopt policies that permit the use of standard electronic funds transfer (EFT) technologies for payments to individuals or business entities. Under the bill, the types of standard EFT technologies that are permitted to be used include but are not limited to wire transfers, automated clearing house transactions, and debit cards.

The bill requires any policies adopted for the use of standard EFT technologies by governing bodies of local units to: list the types of technologies that may be used; adhere to the uniform strategy provided, by regulations, adopted by the Local Finance Board, to address the needs of recipients of claims paid through the use of standard EFT technologies that are unbanked or underbanked; and require recipients of claims be provided the opportunity to receive payment through a conventional check as an alternative to any standard EFT technologies. Additionally, the bill requires policies adopted for the use of standard EFT technologies by governing bodies of local units to designate the chief financial officer of the local unit as being responsible for oversight and administration of the policy.

The bill requires the Local Finance Board, in consultation with the Commissioner of Education, to adopt regulations to identify and provide a uniform strategy to address the needs of recipients of claims paid through the use of standard EFT technologies that are unbanked or underbanked. The bill also permits the board, in consultation with the commissioner, to adopt regulations for purposes of clarifying implementation and use of standard EFT technologies.

The bill now goes to the governor.