PORTLAND, Ore. (KOIN) — Every state in the union has until Saturday to prove to the federal government it’s cracking down on people using welfare debit cards at ATMs in adult businesses.
With the Oregon Trail card, a family of three can get up to $506 per month for essential items like rent and diapers. But the cash on the card can be spent on anything.
Oregon relies on the honor system among its card users, while Washington state has penalties for clients who make unauthorized withdrawals.
State records from 2012 obtained for this investigation show someone used an Oregon Trail welfare card to twice withdraw a total of $106 from the ATM at Fantasyland Adult Video in Southeast Portland.
Another person used an Oregon Trail card at the Tigard liquor store to withdraw $210.25 from their ATM. At the Mystic Gentleman’s Club in Southeast Portland, there were multiple withdrawals totaling $888.
Other withdrawals were made at the Poker Palace Casino in Las Vegas ($102) and multiple times at liquor stores throughout California.
These 2012 results were found in a search of data from the Oregon Department of Human Services, the first time anyone had an idea of the questionable spots Oregon Trail cards were being used.
Two years later, Oregon still has done little to stop people from getting taxpayer money from ATMs at places that raise eyebrows.
“We’ve been focusing on raising the awareness. We’ve reached out to vendors,” said Xochitl Esparza, who runs the $187 million cash assistance program for the Oregon DHS.
They mailed letters to adult businesses and to people who use the Oregon Trail card, warning them about “new restrictions on where Oregon Trail cards may be used.”
The cards are banned from liquor stores, casinos and places where “performers disrobe.” DHS also sent each business a sticker to put on their ATM as a warning.
Washington state told its vendors to reprogram their ATMs to not take welfare debit cards, but to date, Oregon has not.
“It’s still an option for us,” Esparza said.
Oregon continues to study more restrictive options. Washington state already said adult businesses caught allowing banned ATM transactions can lose their business or liquor license.
Oregon State Rep. Andy Olson, R-Albany, wanted to put card holders names on the front of each card in addition to the card number that is currently there. But he said he was told that was too expensive and the legislature has other priorities.
DHS said it hasn’t put more effort into combating fraud in the cash assistance program because the agency is understaffed and overwhelmed trying to serve a flood of people in need.
One thing Oregon has done with success is letting people know that if they’ve lost their Oregon Trail card six times, they could be investigated. That cut the number of replacement cards by 19%. The federal law now lowers the threshold to four replacement cards.
Olson, who serves on the committee that looks at ways to tackle welfare fraud, is frustrated.
“I’m interested in accountability,” he told KOIN 6 News. “I’m interested in the dollars getting to the people who truly need them. I don’t like to see abuse and I most definitely don’t like to see fraud.”
Some of the places who received the warning sticker for their ATMs from DHS — the Tigard liquor store and the Mystic Gentleman’s Club — put them on the machines.
But no sticker is posted at Fantasyland Adult Video.
The store is not doing anything wrong. Federal law does not cover this kind of business since there are no employees who “perform in an unclothed state.”
The law also does not cover bars and tattoo parlors.
But the Oregon DHS said they are looking at proposing anti-fraud laws to pass in 2015.
“Whether it’s large or small, it’s not the most appropriate way to be using your EBT cards,” Esparza told KOIN 6 News. “We are looking for ways to stop it.”
The state of Oregon doesn’t know exactly how much money is being garnered from questionable debit card transactions. Other states put the rate around 1%.
Out of a $187 million program, that’s $1.87 million.
Washington regulators caution that it’s difficult to enforce the law. While one agency keeps the ATM data, separate agencie enforce the liquor and gambling licenses.
In an email interview with KOIN 6 News, Mindy Chambers with the Washington State Department of Social and Health Services said they’ve monitored for two years how often EBT cards are used at prohibited spots.
“In February 2012, we noted 234 non-allowable transactions, totaling more than $146,000. In January 2014, we noted 39 non-allowable transactions, totaling $2,700,” Chambers wrote.
They’ve chosen the path of education for both the EBT cardholders and businesses.
“As of the end of January 2014, we have not referred any business to a licensor for enforcement action. To date, we, and our partner agencies, have taken the approach of educating businesses,” she wrote.
Cardholders face fines of $25 for the first offense and $50 for subsequent offenses. But the state of Washington has not actually fined anyone, she said.