The House today is expected to approve a measure that would bring nonbank electronic benefit transfer companies under the same anti-tying restrictions banks face.
In the Senate, the measure is folded into a welfare reform package expected to be approved Thursday. Lawmakers promised to send the bill to the White House by the end of the week, and President Clinton is expected to sign it.
Community banks claim that without the anti-tying measure they would be squeezed out of the business of providing point of sale terminals to small grocery stores.
As government benefits such as food stamps are increasingly delivered electronically, more mom and pop grocery stores are expected to buy point of sale terminals. Nonbank benefit transfer companies compete with banks for these contracts.
However, unlike banks, these companies are allowed to offer the stores related services, such as debit and credit card transactions, at a discount. Provisions in the Bank Holding Company Act generally bar banks from offering discounts to customers who buy more than one service.
The provision, originally introduced by Rep. Ray LaHood, R-Ill., would extend these restrictions to nonbank benefit transfer companies.
"This legislation will preserve the ability of financial institutions to fairly compete in the point of sale marketplace," said Viveca Ware, director of payment systems for the Independent Bankers Association of America. "It prevents an EBT provider from using its contractor's status as a way of creating a market monopoly."
An aide said Rep. LaHood wants to create a level playing field between community banks and nonbank competitors as states gear up to provide benefits electronically.
"Small banks have been asking for years for a seat at the EBT table," the aide said. "Now, with EBT ready to be implemented, community banks shouldn't be shut out."
As many as 30 states are expected to be providing benefits electronically by the end of 1997, according to William Phillips, director of policy development at the American Bankers Association. Currently, only Maryland operates a full-fledged EBT system; a number of states are operating pilot programs.
