The Federal Reserve Board on Wednesday exempted state and local governments from Regulation E when delivering food stamps and other benefits electronically.

In 1994 the Fed said government electronic benefits transfer programs had to meet most of the requirements of Regulation E, which mandates periodic account statements and limits consumer liability for unauthorized transactions.

But a 1996 federal welfare reform law directed the Fed to exclude EBT programs established under state or local law. States had complained that meeting the liability requirements of Regulation E would be costly. The Fed said federally administered benefits in EBT accounts that pool federal and state cash benefits would remain subject to Regulation E.

Financial institutions will not be significantly affected by the Fed action, which takes effect Sept. 15, said William H. Phillips, director of policy development at the American Bankers Association.

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