Management of Federal Agency Disbursements, 80315-80335 [2010-32117]
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Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations
DEPARTMENT OF LABOR
Occupational Safety and Health
Administration
29 CFR Part 1926
Compliance Directive for Fall
Protection in Residential Construction
Occupational Safety and Health
Administration (OSHA), Labor.
ACTION: Notice of Significant
Enforcement Policy Change; Rescission
of Interim Fall Protection Compliance
Directive for Residential Construction.
AGENCY:
The Occupational Safety and
Health Administration (OSHA) is
issuing compliance directive STD 03–
11–002 Fall Protection in Residential
Construction. This directive rescinds
compliance directive STD 03–00–001,
Plain Language Revision of OSHA
Instruction STD 3.1, Interim Fall
Protection Compliance Guidelines for
Residential Construction, effective on
June 18, 1999. There continue to be high
numbers of fall-related fatalities in
residential construction. The Advisory
Committee on Construction Safety and
Health, the National Association of
Home Builders, and the Occupational
Safety and Health State Plan
Association have recommended the
withdrawal of directive STD 03–00–001.
DATES: Effective date: June 16, 2011.
FOR FURTHER INFORMATION CONTACT:
General information and press inquiries:
Ms. Mary Ann Garrahan, Acting
Director of the Office of
Communications, Room N–3647, OSHA,
U.S. Department of Labor, 200
Constitution Avenue, NW., Washington,
DC 20210; telephone (202) 693–1999.
Technical inquiries: Contact Mr.
Garvin Branch, Directorate of
Construction, Room N–3468, OSHA,
U.S. Department of Labor, 200
Constitution Avenue, NW., Washington,
DC 20210; telephone (202) 693–2020 or
fax (202) 693–1689.
Electronic copies of this Federal
Register notice: Go to OSHA’s Web site
(https://www.osha.gov), and select
‘‘Federal Register,’’ ‘‘Date of Publication,’’
and then ‘‘2010.’’
SUPPLEMENTARY INFORMATION:
Background. Under 29 CFR
1926.501(b)(13), workers engaged in
residential construction six (6) feet or
more above lower levels generally must
be protected by conventional fall
protection (i.e., guardrail systems, safety
net systems, or personal fall arrest
systems). However, if an employer can
demonstrate that such fall protection is
infeasible or presents a greater hazard,
it may implement a written fall
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protection plan meeting the
requirements of § 1926.502(k).
After OSHA promulgated
§ 1926.501(b)(13) in 1994,
representatives of the residential
construction industry argued that they
needed more compliance flexibility than
the standard allowed. As a result, OSHA
issued Instruction STD 3.1 on December
8, 1995. STD 3.1 set out an interim
compliance policy that permitted
employers engaged in certain residential
construction activities to use specified
alternative procedures instead of
conventional fall protection. These
alternative procedures could be used
without a prior showing of infeasibility
or greater hazard and without a written,
site-specific fall protection plan.
On June 18, 1999, the Agency issued
STD 3–0.1A (subsequently re-designated
STD 03–00–001), which was a plain
language replacement for STD 3.1. And
shortly after issuing STD 03–00–001,
OSHA published an Advanced Notice of
Proposed Rulemaking (ANPR). (64 FR
38077, July 14, 1999). The Agency noted
that publication of that notice marked
the ‘‘begin[ning] [of its] * * *
evaluation * * * of’’ STD 03–00–001. In
the ANPR, the Agency noted that there
had been ‘‘advances in the types and
capability of commercially available fall
protection equipment’’ since the
promulgation of § 1926.501(b)(13) (64
FR at 38080), and stated that it
‘‘intend[ed] to rescind * * * [STD 03–
00–001] unless persuasive evidence
* * * [was] submitted * * *
demonstrating that for most residential
construction employers complying with
* * * [§ 1926.501(b)(13)] is infeasible or
presents significant safety hazards.’’ (64
FR at 38078).
Summary of Action. In Directive STD
03–11–002 OSHA rescinds STD 03–00–
001. In the new directive, OSHA
describes the comments it received in
response to the ANPR and concludes
that it did not receive ‘‘persuasive
evidence’’ showing a continued need for
STD 03–00–001. OSHA notes that there
continue to be high numbers of fallrelated fatalities in residential
construction. Directive STD 03–11–002,
also describes more recent
developments, including
recommendations from the Advisory
Committee on Construction Safety and
Health, the National Association of
Home Builders, and the Occupational
Safety and Health State Plan
Association, that provide independent
support for the Agency’s decision to
rescind STD 03–00–001.
Directive STD 03–11–002 sets forth
OSHA’s interpretation of ‘‘residential
construction’’ for purposes of 29 CFR
1926.501(b)(13) and explains that
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existing compliance guidance
referencing STD 03–00–001 will be
withdrawn or revised as appropriate.
Authority and Signature
This document was prepared under
the authority of David Michaels, PhD,
MPH, Assistant Secretary of Labor for
Occupational Safety and Health, U.S.
Department of Labor, 200 Constitution
Avenue, NW., Washington, DC 20210,
pursuant to Sections 4, 6, and 8 of the
Occupational Safety and Health Act of
1970 (29 U.S.C. 653, 655, and 657), and
Secretary of Labor’s Order 4–2010 (75
FR 55355).
David Michaels,
Assistant Secretary of Labor for Occupational
Safety and Health.
[FR Doc. 2010–32154 Filed 12–21–10; 8:45 am]
BILLING CODE 4510–26–P
DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 208
RIN 1510–AB26
Management of Federal Agency
Disbursements
Financial Management Service,
Fiscal Service, Treasury.
ACTION: Final rule.
AGENCY:
The Department of the
Treasury (Treasury), Financial
Management Service (FMS), is
amending its regulation to require
recipients of Federal nontax payments
to receive payment by electronic funds
transfer (EFT), effective May 1, 2011.
The effective date is delayed until
March 1, 2013, for individuals receiving
Federal payments by check on May 1,
2011; and for individuals who file
claims for Federal benefits before May 1,
2011, and request check payments when
they file. Individuals who do not choose
direct deposit of their payments to an
account at a financial institution would
be enrolled in the Direct Express® Debit
MasterCard® card program, a prepaid
card program established pursuant to
terms and conditions approved by FMS.
Treasury waives the EFT requirement
for recipients born prior to May 1, 1921,
who are receiving payments by paper
check on March 1, 2013; for payments
not eligible for deposit to a Direct
Express® prepaid card account; and for
recipients whose Direct Express® card
has been suspended or cancelled. In
addition, this rule establishes the
criteria under which a payment
recipient may request a waiver if the
SUMMARY:
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EFT requirement creates a hardship due
to his or her mental impairment or
remote geographic location.
DATES: This rule is effective February
22, 2011.
ADDRESSES: You can download this rule
at the following Web site: https://
www.fms.treas.gov/eft. You may also
inspect and copy this rule at: Treasury
Department Library, Room 1428, Main
Treasury Building, 1500 Pennsylvania
Avenue, NW., Washington, DC 20220.
Before visiting, you must call (202) 622–
0990 for an appointment. In accordance
with the U.S. government’s
eRulemaking Initiative, FMS publishes
rulemaking information on https://
www.regulations.gov. Regulations.gov
offers the public the ability to comment
on, search, and view publicly available
rulemaking materials, including
comments received on rules.
FOR FURTHER INFORMATION CONTACT: Walt
Henderson, Director, EFT Strategy
Division; Natalie H. Diana, Senior
Counsel; or Ronda Kent, Senior
Counsel, at eft.comments@fms.treas.gov
or (202) 874–6619.
SUPPLEMENTARY INFORMATION: On June
17, 2010, the Department of the
Treasury (Treasury), Financial
Management Service (FMS), published a
notice of proposed rulemaking (NPRM)
at 75 FR 34394, requesting comment on
a proposed amendment to 31 CFR part
208 (Part 208), which implements the
requirements of 31 U.S.C. 3332. Section
3332, title 31, United States Code, as
amended by subsection 31001(x)(1) of
the Debt Collection Improvement Act of
1996 (Pub. L. 104–134) (Section 3332),
generally requires that all Federal
nontax payments be made by electronic
funds transfer (EFT), unless waived by
the Secretary. The Secretary must
ensure that individuals required to
receive Federal payments by EFT have
access to an account at a financial
institution ‘‘at a reasonable cost’’ and
with ‘‘the same consumer protections
with respect to the account as other
account holders at the same financial
institution.’’ See 31 U.S.C. 3332(f), (i)(2).
Direct deposit is the primary method
used to make EFT Federal payments.
The NPRM proposed to amend Part
208 to require all recipients of Federal
nontax payments to receive payments
by EFT, effective March 1, 2011, with a
delayed effective date of March 1, 2013
for individuals receiving Federal
payments by check on March 1, 2011,
and for individuals who file claims for
Federal benefits before March 1, 2011
and request check payments when they
file. Recipients receiving payments by
direct deposit prior to March 1, 2011,
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would continue to do so under the
proposed rule.
Treasury’s proposed rule stated that a
Federal payment recipient could choose
to have payments directly deposited to
his or her own account at the recipient’s
financial institution. The NPRM stated
that individuals who did not choose
direct deposit of their payments to an
account at a financial institution would
be enrolled in the Direct Express® 1
Debit MasterCard® card program, a
prepaid card program established
pursuant to terms and conditions
approved by FMS. The proposed rule
contemplated that, beginning on March
1, 2013, all recipients of Federal benefit
and other non-tax payments would
receive their payments by direct
deposit, either to a bank account or to
a Direct Express® card account.
Treasury sought comment on all
aspects of the proposed rule, and
specifically requested comments
regarding (1) exceptional circumstances
where specific types of individual EFT
waivers could be needed, (2) the costs
to recipients for accessing their benefit
payments received by paper check
compared to those received by EFT, and
(3) alternative phase-in approaches.
Treasury is finalizing the proposal in
the NPRM to require, in general, that all
Federal nontax payment recipients
receive payments by EFT. The March 1,
2011 effective date has been changed to
May 1, 2011. There remains a delayed
effective date of March 1, 2013, for: (1)
individuals receiving Federal payments
by check on May 1, 2011; and (2)
individuals who file claims for Federal
benefits before May 1, 2011 and request
check payments when they file. In
addition, after consideration of the
comments received, Treasury is
modifying its proposed elimination of
all individual waivers from the EFT
requirement. Instead, Treasury will
automatically waive the EFT
requirement for: (1) A recipient born
prior to May 1, 1921, who is receiving
Federal payments by check on March 1,
2013; (2) a payment that is not eligible
for deposit to a Direct Express® prepaid
card account; and (3) a recipient whose
Direct Express® card has been
suspended or cancelled. Also, the final
rule establishes the criteria under which
a payment recipient may request a
waiver if the EFT requirement creates a
hardship due to his or her mental
1 Direct Express® is a registered service mark of
the Financial Management Service, U.S.
Department of the Treasury. The Direct Express®
Debit MasterCard® card is issued by Comerica
Bank, pursuant to a license by MasterCard
International Incorporated. MasterCard® and the
MasterCard® Brand Mark are registered trademarks
of MasterCard International Incorporated.
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impairment or remote geographic
location.
I. Background
Part 208 sets forth the general rule
requiring Federal payments to be made
by EFT and the requirements for
accounts to which Federal payments
may be sent by EFT. ‘‘Federal payment’’
means any nontax payment made by an
agency, including, but not limited to,
Federal wage, salary, and retirement
payments; vendor and expense
reimbursement payments; benefit
payments; and miscellaneous payments.
See 31 CFR 208.2(g). Federal payments
include payments made to
representative payees and other
authorized payment agents. See 31 CFR
210.5(b)(1). For Part 208 purposes,
‘‘agency’’ means any department,
agency, or instrumentality of the United
States Government, or a corporation
owned or controlled by the Government
of the United States. See 31 CFR
208.2(a).
As explained in the NPRM, Part 208
provides that any individual who
receives a Federal benefit, wage, salary,
or retirement payment is eligible to
open an Electronic Transfer Account
(ETA) at a financial institution that
offers such accounts, and establishes the
responsibilities of Federal agencies and
recipients under the regulation. Part 208
also sets forth a number of waivers to
the general requirement that Federal
payments be delivered by EFT. See 31
CFR 208.4. Among the waivers
previously included in the regulation
were waivers for situations in which an
individual determined that payment by
EFT would impose a hardship due to a
physical or mental disability or a
geographic, language or literacy barrier,
or would impose a financial hardship.
See 31 CFR 208.4(a).
Treasury has reviewed the comments
received in response to the NPRM, and,
as described in more detail below,
modified its proposal to eliminate all
individual waivers from the EFT
requirements. The Secretary’s waiver
authority remains unchanged, and
Federal agencies continue to have the
ability to waive payment by direct
deposit or other EFT method in the
circumstances described in paragraphs
(b) through (g) of § 208.4, namely, for
situations where the infrastructure in a
foreign country does not support EFT,
for certain disaster or military
situations, for situations in which there
may be a security threat or for valid law
enforcement reasons, for non-recurring
payments, and for unusual and/or
urgent situations where the Government
would be seriously injured unless
payment is made by a method other
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than EFT. The final rule revises the
criteria for the agency waiver related to
non-recurring payments, as described
below.
II. Summary of NPRM Comments
Treasury received 33 comment letters
and 1,087 comments solicited by and
sent to a consumer advocate
organization via its Web site. Of the 33
comment letters, three were from
consumer advocate groups. One of the
groups submitted its comments on
behalf of its low-income clients, another
consumer advocate organization, and 23
national, state, and local advocates for
low and moderate income recipients of
Federal benefits. While the consumer
advocate groups generally
acknowledged the benefits of EFT, all
three groups opposed the complete
elimination of waivers for individuals
for whom EFT might impose a hardship
and suggested improvements to the
Direct Express® card and changes to the
Direct Express® card terms and
conditions. In addition, the three groups
recommended that Treasury issue
consumer protection rules for
individuals whose benefit payments are
delivered electronically to prohibit
predatory loans, the unlawful freezing
or garnishing of benefit payments
legally exempt from garnishment, and
the offsetting of overdraft and other
bank fees against benefit payments.
Three comment letters were from
associations that represent financial
institutions. One commenter supported
Treasury’s proposal, provided that
payments would be delivered, by
default, to a recipient’s existing bank
account and that recipients would be
allowed to elect direct deposit to
reloadable prepaid cards issued by
insured depositary institutions. Another
commenter supported Treasury’s
proposal, including the alternative debit
card option, because of the potential
cost savings to credit unions. The third
association commenter also supported
Treasury’s proposal and urged Treasury
not to include individual waivers in the
final rule.
A national electronic payments
association and one financial institution
submitted comment letters supporting
Treasury’s proposal. The electronic
payments association supported the
Direct Express® card as a safe,
convenient, and reasonably priced
alternative for unbanked Federal benefit
recipients. The financial institution
urged Treasury to consider expanding
its regulations to allow direct deposit of
Federal payments to general purpose
reloadable prepaid debit cards.
Fourteen attorneys and an association
that represents Social Security
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claimants’ representatives
recommended that Treasury waive the
EFT requirements for attorneys and
other representatives who receive fee
payments for representing Social
Security claimants. The association and
the attorneys stated that, when fee
monies are electronically deposited into
an attorney’s account, the attorney does
not receive adequate information to
determine which client the fee payment
is for. In addition, the association and
the attorneys stated that many attorneys
and other representatives, as associates
or employees of a firm, are precluded
from accepting direct deposit of
representative fees into their own
personal bank account. These fee
payments must be deposited directly to
accounts owned by their firms. This is
problematic because the Social Security
Administration will only make
representative fee payments to
individual attorneys or representatives,
most of whom are not the owners of
their firm’s bank account, and therefore
cannot accept or direct payments to
them.
A national trade association
representing neighborhood financial
service providers, such as check
cashers, remittance servicers, short-term
lenders and bill payment providers, did
not support Treasury’s proposal. It
viewed the proposal as depriving
Americans of the right of choice with
respect to the delivery of Federal nontax
payments, disproportionately affecting
low- and moderate-income individuals.
Treasury received six comment letters
from individual or unidentified
commenters with various concerns. One
of these commenters, a coordinator of a
local Volunteer Income Tax Assistance
program, supported the proposed rule,
encouraged Treasury to discontinue the
ETA program, and suggested modifying
the Direct Express® card program to
provide at least one surcharge-free
automated teller machine (ATM)
withdrawal at any ATM. Another
commenter, a certified public
accountant, raised concerns about
whether the proposed rule would create
problems if nursing homes are unable to
clearly identify the resident for whom a
benefit payment has been directly
deposited to the nursing home’s trust
account. Another individual suggested
that Treasury clarify that it continues to
support the ETA as an option for
receiving Federal benefit payments by
direct deposit. Another individual
suggested that Treasury require
financial institutions to allow recipients
of Federal funds to obtain the full
amount of their payment in one
transaction with minimal charge. An
individual attorney raised a concern
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that direct deposit of Social Security
disability or SSI benefits could
inadvertently lead to disqualification
from Medicaid whereas an individual
receiving a paper check payment can
control when the payment is deposited
into his or her account. An unidentified
individual opposed the proposed rule
primarily because the commenter
believed that benefit recipients are
entitled to choose to receive their
payments by paper check, and did not
agree with Treasury’s underlying
rationale for the proposed rule.
In addition to its own comment, one
consumer advocate organization sent
Treasury 1,087 comments it solicited
and received through its Web site. Sixtythree of the Web site commenters
expressed support for Treasury’s
proposed rule, but most of the
commenters opposed the proposal for
one or more of the following reasons:
(1) 845 of the commenters cited a
preference for allowing those who wish
to continue to receive a paper check to
do so (more than 140 of the commenters
already receive their payments
electronically, but were concerned for
others who may choose not to do so);
(2) 615 of the commenters cited an
objection to bank fees, including Direct
Express® card fees, with approximately
482 commenters objecting to requiring a
benefit recipient to pay fees to receive
a monthly paper statement; (3) 558
commenters cited concerns about
requiring benefit recipients to bank
online and/or discomfort with adapting
to new payment technologies, especially
for older benefit recipients; (4) 475
commenters cited concerns about
whether electronic banking would lead
to increased identity theft; (5) 410
commenters cited concerns about
providing bank account information to
the Social Security Administration or
other Federal agencies; and (6) 134
commenters were concerned about the
ability of elderly benefit recipients to
change the way they receive their
benefit payments. Approximately 125 of
the commenters simply expressed
general opposition to Treasury’s
proposal. Other miscellaneous reasons
for opposing Treasury’s proposal
included preference for checks (65
commenters), concerns about EFT
processing (13 commenters) and
improper garnishment (6 commenters),
opposition to prepaid cards (21
commenters), concerns about access to
the banking system (35 commenters),
need for access to a free account (18
commenters), and hardship (10
commenters).
Finally, three Federal government
agencies submitted comments for
Treasury’s consideration. One agency
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expressed uncertainty about whether
recipients of payments from that agency
would qualify for the Direct Express®
card. Two agencies raised concerns
about making payments to recipients
who reside in geographically remote
areas with no access to electronic
financial services.
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III. Treasury’s Responses to NPRM
Comments
In developing the final rule, Treasury
has attempted to implement the
requirements of Section 3332 on balance
with concerns expressed by different
commenters. The final rule essentially
adopts the core provisions of the
proposed rule, and also makes available
several important waivers for
individuals in circumstances in which
Treasury finds that requiring EFT could
create a significant hardship for those
individuals. The final rule reflects the
view of the commenters who generally
agree that receiving payments by EFT is
beneficial to recipients and taxpayers
for the reasons described in the NPRM
and this final rule. Treasury has
addressed the concerns raised by those
opposed to the EFT requirement, and
will continue to monitor carefully
whether recipients are subject to
additional hardships in the future
because of the requirements of this final
rule. Treasury’s responses to the NPRM
comments are as follows.
1. Retain Paper Check as a Payment
Option
Many commenters voiced a
preference for Treasury to allow
recipients the choice of a paper check as
a way to receive their Federal payments.
Treasury recognizes that the paper
check has been an important Federal
payment instrument for at least 150
years. Treasury also recognizes that
choice, as expressed by many of the
commenters, is an important American
value. While Congress mandated that all
non-tax payments be made
electronically, Part 208 continues to
offer payment recipients the choice of
how to receive their payments in an
electronic format. Payment recipients
have many financial account options
available to them, and in fiscal year
2010, more than 80% of all non-tax
payment recipients selected their own
accounts for the purpose of receiving
payments by EFT. Further, Congress
conditioned its mandate on Treasury
making available to payment recipients
an account at a financial institution ‘‘at
a reasonable cost’’ and with ‘‘the same
consumer protections with respect to
the account as other account holders at
the same financial institution.’’ See 31
U.S.C. 3332(f), (i)(2).
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The Direct Express® card, which is
now a nationwide option for most
Federal benefit recipients, meets these
statutory account requirements. There
are no monthly fees and most services
are free, so it is possible for an
individual to use the Direct Express®
card for free. There are no fees for
cardholders to sign up for or activate the
card; receive deposits; make purchases
at retail locations, online or by
telephone; get cash at retail locations
and financial institutions; or check the
card’s balance at an ATM, by telephone
or online. Transaction history and other
account information are available at no
cost online or by telephone, but if
desired, a cardholder may receive a
monthly paper statement for $ .75 per
month. There are no fees for declined
transactions and, in rare instances when
overdrafts occur, there are no overdraft
fees.
Cardholders can choose to receive free
automated text, email or telephone ‘‘low
balance’’ alerts or ‘‘deposit notifications’’
when money is deposited to their card
account. Cardholders may close their
Direct Express® card account at any
time without a fee. There are no
inactivity fees and there is no charge for
bank teller cash withdrawals at
MasterCard® member banks. The free
services and minimal fees are fully
disclosed on the Direct Express® Web
site (www.USDirectExpress.com), in
materials available to interested
applicants, and in materials that are sent
to new cardholders along with the card.
Fee and features information are also
available by calling the Direct Express®
toll-free call center.
Cardholders may make purchases
anywhere Debit MasterCard® is
accepted, including millions of retail
locations worldwide, online, or by
telephone. The Direct Express® card
provider does not impose any limits on
the number of transactions a cardholder
may conduct with a card. Similarly,
cardholders may make cash
withdrawals and check their account
balances at ATMs. A cardholder is
allowed one free ATM cash withdrawal
for every Federal payment the
cardholder receives, valid until the end
of the month following the month of
receipt. For subsequent ATM cash
withdrawals, a cardholder pays a fee to
the card issuer of $.90 per ATM
withdrawal in the United States. ATM
owners often charge ATM users
additional fees, known as ‘‘surcharge
fees;’’ however, a Direct Express®
cardholder may make cash withdrawals
at more than 53,000 Direct Express®
card surcharge-free network ATMs
without paying any surcharge fees. The
Direct Express® card surcharge-free
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ATM network consists of ATMs owned
by a variety of entities who have agreed
to offer surcharge-free ATM access to
Direct Express® cardholders.
Cardholders are provided with
information on how to recognize the
various logos that identify a surchargefree ATM, the Direct Express® card Web
site has an ATM locator feature to assist
cardholders in finding a surcharge-free
ATM, and cardholders may call the
customer service department with any
questions on how to locate a surchargefree ATM. The Direct Express® card
provider does not impose a daily limit
for ATM withdrawals, although many
ATM owners do set limits on the
maximum amount of cash that may be
withdrawn by any debit cardholder.
ATM owners’ daily ATM withdrawal
limits typically range from $200 to
$1,000.
Direct Express® cardholders are
protected by the Federal Reserve
Board’s Regulation E (12 CFR part 205,
which implements the Electronic Funds
Transfer Act (Regulation E)), which
generally provides certain protections to
a cardholder whose card is lost or
stolen, subject to reporting
requirements. In fact, Direct Express®
cardholders have 90 days to report
unauthorized transactions rather than
the typical 60 days offered by most
financial institutions. Card balances are
covered by deposit insurance by the
Federal Deposit Insurance Corporation
(FDIC) to the extent allowed by law and
Direct Express® cardholders are not at
risk for an improper garnishment or the
related freezing of funds in the card
account. More information about the
Direct Express® card, including a list of
all fees and the terms and conditions of
card use, can be found at
www.USDirectExpress.com.
In light of the choices available to
payment recipients, as well as the
benefits of electronic payments to
recipients and the Government,
Treasury believes it is appropriate to
make all Federal nontax payments
electronically.
2. Provide Limited Waivers From EFT
Requirement
a. Limited Waivers for Hardship Based
on Mental Impairment and Geographic
Barriers
In its NPRM, Treasury requested
comments about ‘‘examples of
exceptional circumstances where
specific types of individual EFT waivers
could be needed, even with the
availability of the Direct Express® card
for Federal benefit recipients.’’ See 75
FR 34394, at 34395. After review and
consideration of all of the comments,
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Treasury agrees with those commenters
who urged Treasury to reconsider its
proposed elimination of individual
waivers from the EFT requirement for
claims of hardships due to mental
disability or geographic barriers.
Treasury does not agree, however, that
such reconsideration should be
extended to the elimination of waivers
related to physical disability, language
or literacy barriers, or where payment
by EFT would impose a financial
hardship. None of the commenters
provided specific examples of how
physical disability or language or
literacy barriers would make receiving
payments by EFT more difficult than
receiving payments by paper check and
Treasury does not find any basis for
maintaining a waiver for such
conditions. In addition, although several
commenters urged Treasury to consider
that any fees charged for use of the
Direct Express® card could create a
financial hardship, the Direct Express®
card is structured in such a way that it
may be used at no cost to the payment
recipient, thus minimizing a
beneficiary’s risk of incurring a financial
hardship to receive and use his or her
benefits. Treasury recognizes that more
education regarding how to use the card
for free is needed and is expanding its
program to provide such information to
Direct Express® cardholders in various
ways, including direct mail,
informational pictorial brochures,
online videos, and more.
One consumer advocate organization
urged Treasury to retain a paper check
option for those who articulate a
‘‘legitimate’’ reason for receiving
payments by paper check, including
physical or mental disability that makes
it difficult to use a debit card; difficulty
accessing funds without incurring fees,
costs, or inconvenience; availability of a
less expensive and more beneficial
alternative using a paper check; dispute
with the participating financial provider
of the debit card; concerns over privacy
or financial security; literacy and
technology barriers; and need to
accommodate assistance provided by a
representative payee or family member.
This commenter proposed that Treasury
accept individuals’ statements about the
need for a paper check without inquiry
or review. Another consumer advocate
organization similarly urged Treasury to
reconsider its proposal to eliminate
individual waivers with respect to
people with mental disabilities,
emotional disorders, or other disabilities
making the use of the Direct Express®
card difficult; people who live in rural
areas, or even inner city areas, where
there is not ready access to banks and
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automated teller machines (ATMs); and
other hardships that make both a bank
account and the Direct Express® card
unusable for the payment recipient.
This organization also suggested that
Treasury not review waiver requests
because the costs of policing a waiver
process would far outweigh the costs
associated with letting recipients who
would not qualify for a waiver receive
a paper check. Another consumer
advocate organization also objected to
the elimination of the provision
allowing recipients to determine on
their own whether they qualify for a
waiver to obtain their Federal payments
by paper check. Unlike the other two
consumer advocate organizations, this
organization urged Treasury to offer the
broadest waiver possible to allow any
individual who wants his or her
payments by paper check to receive
them that way.
After reviewing the comments,
Treasury has reconsidered its proposed
elimination of the waivers related to
mental disability and geographic
barriers. A consumer advocate
organization commented on the need to
provide a waiver for individuals who
have mental or emotional disabilities,
for example, someone with an anxiety
disorder that makes it difficult to
receive benefits electronically, but not
by paper check. Another commenter
cited his parents with poor memories
stating that having their payments
deposited electronically would simply
add to their confusion and problems in
taking care of their own finances. In
recognition of individuals within the
payment recipient population who may
have mental impairments that do not
hinder their ability to manage their
financial transactions using checks or
cash, but for whom EFT would present
a significant hardship, Treasury is
retaining a waiver from the EFT
requirement for an individual payment
recipient for whom EFT would impose
a hardship because of his or her
inability to manage a bank account or
prepaid debit card due to a mental
impairment. Treasury notes that, in
those cases where a beneficiary suffers
from a mental disability necessitating
the appointment of a representative
payee, the representative payee is the
‘‘recipient’’ of a Federal payment under
this rule. In those cases, it is the
condition of the representative payee
and not the beneficiary that is the
determining factor as to whether a
waiver is appropriate.
Two Federal agencies cited the need
to consider the inability of payment
recipients who live in remote and less
developed areas of the country to access
their payments electronically. For
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80319
example, according to one agency, many
recipients of Individual Indian Money
payments live in remote and less
developed areas such as Alaska and on
reservations throughout Indian Country
in an environment lacking many
amenities including public
infrastructure such as roads and
convenient access to providers of goods
and services. The other agency noted
that Regional Advisory Council
members appointed under the Alaska
National Interest Lands Conservation
Act (ANILCA) travel to council meetings
held in off-roadway bush villages where
it is highly unusual for most village
merchants to have the infrastructure to
accept charge cards. These villages are
cash economies with check cashing
capabilities, but no ability to process
electronic financial transactions. In its
comment, one consumer advocate
organization cited the lack of access to
banks and ATMs in the majority of
Montana, rural parts of Alaska, and
some rural parts of Missouri. The fact
that an area is rural or remote does not
necessarily preclude the use of
electronic financial services. As these
examples demonstrate, it is the
combination of being in an area that is
rural or remote plus being in an area
lacking the transportation or other
infrastructure (for example, access to the
Internet and online banking) necessary
to access electronic financial services.
Therefore, Treasury is including in the
final rule a waiver from the EFT
requirement for an individual recipient
who lives in a remote area lacking the
infrastructure to support electronic
financial transactions.
Under this final rule, to assert one of
these two waivers based on mental
impairment or geographic barrier, a
Federal payment recipient is required to
provide to Treasury a written
certification supporting his or her
request, in such form as Treasury may
prescribe. The individual is required to
sign the certification before a notary
public, or otherwise file the certification
in such form that Treasury may
prescribe. Treasury will publish
guidance describing the waiver process.
b. Automatic Waivers for Recipients
Born Prior to May 1, 1921 Who Are
Receiving Federal Payments by Check
on March 1, 2013; for Payments Not
Eligible for the Direct Express® Card;
and for Recipients Whose Direct
Express® Card Has Been Suspended or
Cancelled
In addition to the limited waivers
from the EFT requirement for hardship
claims due to mental impairment and
geographic barriers, Treasury has added
automatic waivers for: (1) A recipient
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born prior to May 1, 1921, who is
receiving Federal payments by check on
March 1, 2013; (2) a payment that is not
eligible for deposit to a Direct Express®
prepaid card account; and (3) a recipient
whose Direct Express® card has been
suspended or cancelled.
Many commenters were concerned
about the ability of elderly check
payment recipients to adapt to
electronic money technologies. For
example, one consumer advocate
organization explained that ‘‘[p]eople
who are older are more likely to be
unaccustomed to or uncomfortable
using the technology involved in
electronic disbursements.’’ An
individual commenter noted: ‘‘Many of
us older people do not understand and
get confused by this paperless society
* * * ’’ On the other hand, another
commenter believed that paper checks
cause problems for older people noting
that through her work as a coordinator
of a Volunteer Income Tax Assistance
program in Missouri, she has ‘‘witnessed
firsthand the hardships that * * *
elderly * * * individuals face when a
Treasury Check is lost or misdirected
through the mail.’’ Many senior citizens
receive their benefit payments
electronically, and are very capable of
managing their finances electronically.
In recognition of the concerns raised
by the commenters about the elderly,
Treasury has established an automatic
waiver from the EFT requirement for
recipients born prior to May 1, 1921,
who are receiving Federal payments by
check on March 1, 2013. According to
the Social Security Administration,
almost 80% of Social Security recipients
who will turn 80 years old in 2011
receive their payments electronically.
By comparison, fewer than 72% of
Social Security recipients who will turn
90 years old in 2011 receive their
payments electronically. Further, for
most of the population of elderly benefit
recipients, the EFT requirement is not
effective until March 2013, giving
Treasury, Federal agencies, community
organizations, and others more than two
years to educate individuals so they
may become comfortable with and adapt
to the requirement. Between the
publication of the final rule and the
effective date for current check
recipients, Treasury will work with
Federal agencies and various
organizations to educate all affected
individuals, including the elderly and
long-time check recipients, about how
to use direct deposit or the Direct
Express® debit card.
Treasury has also waived the EFT
requirement for any payment that is not
eligible for a Direct Express® card
account and for those payment
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recipients whose Direct Express® card
has been suspended or cancelled by the
card issuer due to improper, fraudulent,
or unauthorized use. The Direct
Express® card program currently
accepts Social Security, SSI, and
Veterans compensation and pension
benefit payments, as well as Railroad
Retirement benefit, Black Lung benefit,
and civil service retirement benefit
payments. If a recipient receives a
payment for which the Direct Express®
card is unavailable (for example, an
Individual Indian Money payment or a
pension benefit payment), then the
individual is automatically exempt from
the EFT requirement for that payment
type. Once the card becomes available
for the payment type, then the recipient
will be required to switch to an EFT
payment option. If the individual also
receives other types of Federal
payments that are accepted by the Direct
Express® card, those payments remain
subject to the EFT requirement.
Further, under the terms and
conditions of the Direct Express® card
program, the card issuer reserves the
right to suspend or cancel the Direct
Express® card for reasons such as
cardholder breach of the account terms
and conditions, multiple cardholder
claims of unauthorized transactions, a
card being used for an unlawful
purpose, or other similar reasons.
Treasury agrees that the card provider
needs to retain the right to suspend or
cancel an individual’s card account in
these types of cases, and recognizes that
in the few instances where suspension
or cancellation occurs, the payment
recipient may have no other way to
receive his or her payment except by a
paper check.
c. Elimination of Waivers Based on
Hardship Due to Physical Disability,
Language or Literacy Barriers, or Where
Payment by EFT Would Impose a
Financial Hardship
Given the availability of the Direct
Express® card and Treasury’s expansion
of its public education campaign
describing how to use the Direct
Express® card, physical disability,
language or literacy barriers, and fees no
longer present hardships requiring
waivers from the EFT requirement.
i. Physical Disability. As noted above,
Treasury requested specific examples of
the types of hardships that could make
it difficult to use EFT as compared to a
paper check, but none were cited by the
many commenters. While Treasury
recognizes that not all physical
disability barriers have been eliminated,
the Americans With Disabilities Act of
1990, Public Law101–336 (Jul. 26,
1990), and the advent of many services
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that benefit the physically disabled,
such as accessible transportation, public
accommodations, and online banking,
have generally rendered receiving
benefit payments by EFT no more
difficult than receiving payments by
paper check. In some cases, EFT
payments may even be easier for the
recipient. With the elimination of this
waiver, Treasury recognizes that for
those who are physically disabled, the
ability to travel in remote and rural
areas may be limited, but considers this
to be more a hardship due to a
geographic barrier, described above,
than solely because of a physical
disability. In addition, as suggested by
two commenters, Treasury is working
with the Direct Express® card provider
to determine the feasibility of providing
cardholders with an additional
convenience card that could be loaded
via the Internet or by telephone with a
cardholder-determined amount of funds
for use by a caregiver or relative to make
purchases on behalf of the cardholder.
ii. Language Barriers. None of the
commenters urged Treasury to continue
the waiver from the EFT requirements
based on hardship due to language
barriers. All of the Direct Express®
cardholder materials are in English and
Spanish, and the Direct Express® card
provider offers both English and
Spanish support through its automated
telephone service and its customer
service representatives. Callers may
choose to speak with a customer service
representative in either language. In
addition, the Direct Express® card
provider offers real-time free interpreter
services in virtually any language a
caller requires. For example, in
September 2010, the Direct Express®
card provider handled customer service
calls in 19 different languages in
addition to English, including languages
such as Mandarin, Urdu, Tagalog, and
Tigrinya.
iii. Literacy Barriers. None of the
commenters specifically urged Treasury
to continue its waiver based on
hardship due to literacy barriers,
although several commenters alluded to
the difficulties people have due to a lack
of basic literacy skills. For example, one
commenter noted that the constituents
she works with in a poor, rural area of
Georgia are often barely literate and deal
with cash because they understand it.
Treasury recognizes that lack of basic
literacy skills hinders many in
managing their financial affairs, and
understands the challenges associated
with moving some individuals to
payment by EFT from payment by paper
check. The delayed effective date of the
rule for those currently receiving paper
checks to March 2013, gives Treasury
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additional time to expand its public
education efforts related to EFT options.
Among other things, through its Go
Direct ® campaign, Treasury will work
with more than 1,800 partners who
know their communities best to help
educate check recipients about the
benefits of direct deposit, the options for
receiving payments electronically, and
how to safely and cost-effectively use
the Direct Express® card. With the
assistance of its partners, Treasury is
able to tailor its education efforts to
meet the differing needs of local
communities.
Treasury especially recognizes the
need for and importance of expanded
cardholder education for existing and
new Direct Express® cardholders. While
Treasury recognizes that the current
pool of Direct Express® cardholders may
not resemble future Direct Express®
cardholders in either demographic
characteristics or attitudinal variables,
according to research conducted in
March 2009 (Direct Express—
Cardholder Satisfaction and Usage
Survey, OMB Control No. 1510–0074),
95 percent of Direct Express®
cardholders are satisfied with the card.2
Eight in ten satisfied cardholders cite
convenience, safety or immediate access
to money as reasons for their
satisfaction. Eighty-six percent of those
surveyed said they would recommend
the card to a friend or family member
who receives Federal benefits. Despite
this high satisfaction rate, Treasury
believes that many Direct Express®
cardholders may be unaware of
important features that promote proper
card usage and reduce fees, such as the
availability of free text message alerts on
their cell phones when a deposit is
made or when their balance is low, the
surcharge free ATM network, the ability
to get cash back at point-of-sale (POS)
locations for free, or even the ability to
make purchases at retail locations for
free. Using its research, including recent
research conducted with respect to
cardholder education materials sent to
approximately 7,000 newly enrolled
Direct Express® cardholders who
receive Veterans compensation and
pension benefit payments, Treasury will
develop materials, such as informational
pictorial brochures, and methods for
further educating benefit recipients as
necessary, and as suggested by several
commenters.
In addition, Treasury continues to
work with its Go Direct® partners to
promote financial education. For
example, through its partnership with
the Federal Deposit Insurance
Corporation (FDIC), the Go Direct®
campaign is working to raise awareness
of the value of financial education
through the FDIC’s award-winning
Money Smart financial education
program. The Money Smart program is
a comprehensive financial education
curriculum designed to help individuals
outside the financial mainstream
enhance their financial skills and create
positive banking relationships. Many Go
Direct® campaign partners have used
the Money Smart curriculum in their
financial education efforts, including
banks, credit unions, law enforcement
and crime prevention organizations,
aging and senior organizations, library
systems, and community and disability
organizations.
iv. Financial Hardship. Many
commenters suggested that the cost of
receiving payments electronically is
higher than receiving payments by
paper check for many benefit recipients,
and expressed concern that Treasury’s
EFT requirement will create a financial
hardship for many of America’s most
vulnerable population. Treasury’s goal
is to provide Federal beneficiaries and
other payment recipients with a lowcost option for receipt of Federal
payments, which goes beyond the
requirement in Section 3332 that
Treasury make available an account at a
‘‘reasonable cost.’’ See 31 U.S.C.
3332(i)(2)(a). In addition to low-cost
accounts available from financial
institutions and other financial service
providers around the country, Federal
payment recipients have at least one
low-cost option—the Direct Express®
card—and many recipients potentially
have a second option—the Electronic
Transfer Account (ETA), an account
developed by Treasury in 1999.
Although the ETA is not available on a
nationwide basis and does not include
some of the more useful features that
have become available with prepaid
debit cards in recent years (thus making
the Direct Express® card a more costeffective and useful option in most
cases), the ETA continues to meet the
needs of some benefit recipients and
will continue to be available.
The Direct Express® card offers a
user-friendly low-cost option for Federal
benefit payment recipients (see Direct
Express® card fee tables below). The
account fees are structured so that even
those cardholders without access to
surcharge-free ATMs can use their cards
for free because they can access their
funds through free POS purchases either
in-store or online, can get cash back for
free at retail locations, and can get cash
for free at any MasterCard® member
financial institution. The Direct
Express® surcharge-free ATM network
has more than 53,000 surcharge-free
ATMs, and the Direct Express® card
program provider continues to identify
opportunities to expand the network
further.
While many commenters expressed
concern about having to pay fees to the
Direct Express® card provider, or pay
fees to receive a paper statement,
Treasury believes that these fees are
generally lower than costs that could be
imposed for cashing a Treasury check
and managing financial transactions on
a cash basis. The Direct Express® fee
tables are as follows:
STANDARD FREE SERVICES
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Service
Fee
Purchases at U.S. merchant locations .........................................................................................................
Cashback with purchase ..............................................................................................................................
Cash from bank tellers .................................................................................................................................
Customer service calls .................................................................................................................................
Web account access ....................................................................................................................................
Deposit notification .......................................................................................................................................
Low balance notification ...............................................................................................................................
Card replacement-One free per year ...........................................................................................................
ATM balance inquiry .....................................................................................................................................
ATM denial of service ...................................................................................................................................
2 Summaries of all of the surveys conducted by
or on behalf of Treasury that are cited in this
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Jkt 223001
FREE
FREE
FREE
FREE
FREE
FREE
FREE
FREE
FREE
FREE
rulemaking may be found at https://
www.fms.treas.gov/eft.
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Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations
STANDARD FREE SERVICES—Continued
Service
Fee
ATM cash withdrawal in the U.S. including the District of Columbia, Guam, Puerto Rico, and U.S. Virgin
Islands. Surcharge by ATM owner may apply.
One free withdrawal with each deposit
to your Direct Express® Card Account.*
* For each Federal government deposit to your Card Account, Comerica Bank will waive the fee for one ATM cash withdrawal in the U.S. The
fee waiver earned for that deposit expires on the last day of the following month in which the deposit was credited to the Card Account.
THE ONLY FEES YOU CAN BE CHARGED
Fee
ATM cash withdrawals after free transactions are used in U.S. including the District of Columbia, Guam,
Puerto Rico, and U.S. Virgin Islands. Surcharge by ATM owner may apply.
Monthly paper statement mailed to you .......................................................................................................
Funds transfer to a personal U.S. bank account .........................................................................................
Card replacement after one free each year .................................................................................................
Overnight delivery of replacement card .......................................................................................................
ATM cash withdrawal outside of U.S. Surcharge by ATM owner may apply ..............................................
Purchase at Merchant Locations outside of U.S. .........................................................................................
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Optional service
$0.90 each withdrawal (after free
transactions are used).
$0.75 each month.
$1.50 each time.
$4.00 after one (1) free each year.
$13.50 each time.
$3.00 plus 3% of amount withdrawn.
3% of purchase amount.
The low fees and nationwide
availability of the Direct Express® card
more than satisfy the statutory
requirement of 31 U.S.C. 3332 for
Treasury to make available an account
at a financial institution ‘‘at a reasonable
cost’’ and with ‘‘the same consumer
protections with respect to the account
as other account holders at the same
financial institution.’’ See 31 U.S.C.
3332(f), (i)(2).
A recent report comparing fees for
general purpose reloadable prepaid
cards helps illustrate the low cost of
using a Direct Express® card. A
consumer advocate organization
conducted a case study showing the
wide variations in fee structures for four
prepaid card products. See, ‘‘Prepaid
Cards: Second-Tier Bank Account
Substitutes,’’ Consumers Union
(September 2010) (https://
www.defendyourdollars.org/pdf/
2010PrepaidWP.pdf). Using a sample
consumer scenario,3 the report stated
that, for the four prepaid card products
studied, monthly fees ranged from
$15.45 to $43.75 for the first and second
months of card use. In contrast, as
shown in Figure 1, below, a Direct
Express® cardholder under the same
scenario would spend no more than $
.90 per month if using surcharge-free
ATMs (one free ATM withdrawal per
deposit, with a $ .90 per ATM
withdrawal charge after that), and no
more than $7.89 per month if no
surcharge-free ATMs were used,
assuming the average $2.33 surcharge
3 The sample consumer scenario in the cited
report consisted of a cardholder making the
following transactions in a month: Three ATM
withdrawals, three bill payments (rent, utilities,
phone), eight point-of-sale purchases (groceries and
meals once a week), weekly balance inquiry, and
two deposits.
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Jkt 223001
fee per withdrawal cited in the 2010
checking study by bankrate.com (https://
www.bankrate.com/finance/checking/
banks-taking-a-bigger-bite-with-atmfees.aspx).4 There is no online bill
paying service currently offered in the
Direct Express® card program, so a
cardholder would pay his or her own
bills directly to the vendor or retailer,
with no fee being charged by the
provider. The Direct Express® card
provider does not impose charges for
POS purchases, balance inquiries, or for
receiving a deposit.
FIG. 1—DIRECT EXPRESS® CARD
FEES: SAMPLE SCENARIO
Direct Express®
Card transactions
Fees
(with no
ATM
surcharge)
1st ATM withdrawal (free
with 1st deposit) .............
2nd ATM withdrawal (free
with 2nd deposit) .............
3rd ATM withdrawal ............
Three bill payments ............
Eight POS .........
Weekly Balance
Inquiry ...........
Two Deposits ....
FREE
FREE
$ .90
FREE
FREE
Fees
(with ATM
surcharge of
$2.33)
$2.33
activating the card, or fees for customer
service calls, which can drive up costs
of other prepaid card products. By
educating Direct Express® cardholders
to learn how to avoid multiple ATM
withdrawals, cardholders can quickly
learn how to incur no monthly fees
whatsoever.
The regulatory impact assessment,
below, contains additional scenarios
describing the Direct Express® card fees
based on card usage.
Costs incurred to use the Direct
Express® card can compare favorably to
the cost of cashing a check and
conducting necessary cash transactions.
While some individuals may be able to
cash government checks at no cost,
there are often fees of up to $20 or more
for cashing a check, according to
Treasury’s research in 2007 (SSA & SSI
Check Recipient Survey, OMB Control
No. 1510–0074). Check recipients may
also incur money order and postage
costs to pay bills that are not incurred
with the Direct Express® card.
3. Suggested Changes to Direct Express®
Card Program. Various Commenters
2.33 Suggested a Number of Ways That the
Direct Express® Card Should Be
3.23
Changed
FREE
FREE
a. ATM Cash Withdrawal Fees. A few
commenters suggested a range of ways
to maximize a cardholder’s ability to
FREE
FREE
access his or her cash from an ATM for
FREE
FREE
free. Suggestions ranged from providing
Total ...........
.90
7.89 cardholders with at least one surchargefree ATM withdrawal to providing free
unlimited ATM withdrawals and
In addition, the Direct Express® card
does not have any monthly fees, fees for expanding the current surcharge-free
network. Treasury’s current Direct
Express® card offers sufficient
4 The consumer scenarios used in the cited report
assumed that the cardholder did not incur any ATM opportunities for a cardholder to access
surcharge fees.
his or her cash without incurring a fee.
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The Direct Express® card program offers
one free ATM withdrawal for each
deposit received. The free withdrawal is
valid until the last day of the month
following the month of receipt of the
deposit. Thus, if a cardholder receives
two deposits in January 2011, the
cardholder is entitled to two free ATM
cash withdrawals that are good until
February 28, 2011. In addition,
cardholders may obtain cash at retail
locations and bank tellers without
incurring a fee. The Direct Express®
card provider does not impose limits on
the number of cash back or teller
transactions a cardholder may conduct,
although merchants may impose a limit
on the amount of cash back a cardholder
may receive.
After using available free
withdrawals, Direct Express®
cardholders who choose to withdraw
additional cash from an ATM are
charged a fee by the Direct Express®
card provider of $ .90 per withdrawal.
The card provider does not impose any
limits on ATM withdrawals. If the
cardholder withdraws cash from an
ATM that is not in the Direct Express®
network, the ATM owner may charge
the cardholder an additional fee, known
as a ‘‘surcharge,’’ which can range from
$1.00 to $3.50 or more. If the cardholder
uses one of the more than 53,000 Direct
Express® surcharge-free ATMs, the
cardholder can avoid a surcharge fee.
The Direct Express® card provider
continues to look for ways to expand the
network, and Treasury will continue to
educate current and new cardholders
about alternative ways to get cash
without paying a fee and how to use
their card to pay for goods and services.
b. Free Monthly Paper Statements.
Several commenters stated a preference
for paper statements at no cost to the
cardholder. Currently, Direct Express®
cardholders may obtain transaction and
balance information for free by calling a
customer service number or visiting the
Direct Express® secure Web site. Upon
request, the Direct Express® card
provider will send a cardholder a paper
transaction history at no cost. In
addition, cardholders may sign up for
free text message, phone call, or email
alerts when they receive a deposit or
reach a low balance amount predetermined by the cardholder. If a
cardholder prefers a monthly paper
statement, the provider charges a fee of
$ .75 per month. Because not every
cardholder desires or would use a paper
statement, and because transaction and
balance information is available via
different mechanisms, Treasury has
determined that the cost of paper
statements should be borne by those
who want them. While other bank
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accounts may offer free monthly paper
statements, as one commenter noted,
these bank accounts generally also
require credit checks and minimum
balances, and have other requirements
that hinder the ability of recipients to
obtain accounts, none of which are
required to open a Direct Express® card
account. Two commenters suggested
that the Direct Express® card program at
a minimum offer a free annual paper
statement for those who do not elect to
receive electronic or monthly paper
statements. The Direct Express® card
provider currently makes available a
cardholder’s complete transaction
history, upon request and at no cost.
Therefore, Treasury believes that it has
adequately addressed concerns related
to free monthly statements.
c. Encourage Opt In Election at
Enrollment Time of Method for
Receiving Transaction Information. One
commenter suggested that cardholders
who sign up for a Direct Express® card
be given the opportunity at enrollment
to elect to receive paper statements, text
messages, or electronic mail messages
with transactions and balance
information. Treasury explored this
suggestion, but determined that it is not
feasible at this time given that many of
the Direct Express® card enrollments are
handled by the respective Federal
benefit agency when the beneficiary is
applying for his or her benefit. Treasury
is exploring the use of additional
mailings to cardholders to ensure that
cardholders are aware of their options
for receiving transaction and balance
information.
d. Provide Additional Convenience
Card. Two commenters suggested that
the Direct Express® card program
provide cardholders with the option of
allocating a discrete amount of their
funds to a second convenience card.
The cardholder could then give this
card to a caregiver or relative who could
use it to make purchases for the
cardholder. In this way, the cardholder
would not have to turn over his or her
primary card to the caregiver or relative
and trust the caregiver or relative not to
use all of the funds. Treasury supports
this suggestion as a way to mitigate a
cardholder’s risks and is working with
the Direct Express® card provider to
determine the feasibility and cost of
providing this option.
e. Provide Access to Checks. Two
commenters suggested that the Direct
Express® card program provide
cardholders with the ability to write
checks. Treasury has explored this
suggestion, but is concerned that adding
such an option could potentially
increase fraud opportunities, add
complexity to the card program, and
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increase costs to the cardholder. Instead,
Treasury will educate cardholders on
how to avoid the need to use checks by
making purchases with the debit card,
and if checks are necessary, where to
find low-cost money orders. In addition,
MasterCard has an initiative aimed at
increasing acceptance of its card
products by property managers. As part
of this initiative, Treasury and
MasterCard are working together to
emphasize to property managers the
importance of accepting the Direct
Express® card for rent payments.
f. Ability to Reload Cards With NonFederal Funds. Two commenters
suggested that the Direct Express® card
program be expanded to allow
cardholders to deposit funds other than
Federal payments to their card account.
Treasury does not plan to implement
this suggestion at this time because of
the increased cost to the Direct Express®
card program, increased opportunity for
fraud, and added complexity for
cardholders. Treasury has plans to
expand the card program to include as
many Federal payments as possible.
With respect to the broader need for
more safe, low-cost financial account
options, Treasury is exploring the
feasibility of offering general purpose
accounts to low- and moderate-income
tax refund recipients and encouraging
initiatives for financial products and
services that are appropriate and
accessible for millions of Americans
who are not fully incorporated into the
financial mainstream, as authorized by
the ‘‘Improving Access to Mainstream
Financial Institutions Act of 2010,’’
enacted as Title XII of the Dodd-Frank
Wall Street Reform and Consumer
Protection Act (Pub. L. 111–203, Jul. 21,
2010). The FDIC also is encouraging the
banking industry to offer safe, low-cost
transaction and basic savings account
products for low- and moderate-income
customers with its Model Safe Accounts
Pilot (https://www.fdic.gov/consumers/
template/).
g. Changes to Terms and Conditions
of the Direct Express® Card Program.
Three commenters suggested changing
some of the terms and conditions of the
Direct Express® card program. One
suggestion was to change the title of the
Direct Express® card program provider’s
terms and conditions document to
‘‘Notice of Rights and Obligations.’’
Other suggestions were to prohibit terms
that waive a cardholder’s right to a jury
trial or to bring a class action lawsuit;
to allow disputes to be governed by the
laws of the state in which the
cardholder resides, rather than the State
of Michigan, which is where the Direct
Express® card provider is located; not to
require that the recipient contact the
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merchant prior to cancelling a
preauthorized transfer; to make clearer
when the time to dispute a charge
begins; make clearer that garnishments
are not permitted, except as authorized
by law (for example, to collect
delinquent taxes or child support); and
to improve the protections under
Regulation E. Treasury will review the
terms and conditions and, at a
minimum, will ask the Direct Express®
card provider to clarify the language
regarding dispute time frames and
garnishments. At this time, Treasury
does not plan to implement the
remaining suggestions, which would
result in additional costs to the Direct
Express® card program, and perhaps
even preclude Treasury from offering a
valuable low-cost account option for
those beneficiaries who prefer a prepaid
debit card over a bank account. For
example, allowing lawsuits involving
the Direct Express® card program to be
based on various choice-of-law
provisions would increase costs for the
program to an unacceptable level,
leaving a large number of Federal
benefit recipients without any costeffective option for enjoying the safety
and convenience of direct deposit.
Requiring the Direct Express® provider
to cancel a preauthorized debit before
the cardholder has contacted the
merchant could leave cardholders
vulnerable to cancellation of needed
goods or services because of a lack of
understanding about the need to make
alternative payment arrangements for
necessary services, such as utilities. The
Direct Express® card provider follows
standard industry practices, except that
with respect to the protections afforded
under Regulation E, the Direct Express®
card provider offers an extended time
period within which to dispute a
transaction from the industry standard
of 60 days to 90 days. Treasury believes
it has obtained the best possible terms
and conditions for an account that
provides the most cost-effective,
consumer-friendly terms available.
Treasury will, however, continue to
work closely with the Direct Express®
card provider to identify and suggest
improvements to the program. Even
though satisfaction with the Direct
Express® card program among current
cardholders remains very high at 95%
(Direct Express®—Cardholder
Satisfaction and Usage Survey, March
2009, OMB Control No. 1510–0074),
Treasury is committed to taking all
feasible and cost-effective steps to
improve the program because the
agency recognizes that current users
may be different than future users in
their demographic characteristics or
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attitudes towards the use of prepaid
debit cards. In addition, it should be
noted that, at any time, benefit
recipients may choose direct deposit to
their bank account rather than the Direct
Express® card.
h. Cardholder Education. Several
commenters suggested that Treasury
should do more to educate beneficiaries
about their payment options, and
specifically about the Direct Express®
card features, fees, and terms. One
commenter suggested that the Direct
Express® card program customer service
be improved to make it easier to reach
an operator. Another commenter
suggested that cardholders should be
provided with a wallet size information
card, noting that ‘‘[t]hough the
information on the Direct Express® card
is generally quite good, it could be
improved.’’ As mentioned previously,
Treasury will be launching its expanded
cardholder education campaign
immediately to ensure that information
about the Direct Express® card and how
to use it are easily accessible to the
beneficiary population for whom the
card is intended. As part of its
education effort, Treasury is in the
process of working with the Direct
Express® card provider to develop a
wallet size information card for
cardholders and pictorial brochure with
information on how to use the card. In
addition, Treasury works continuously
with the Direct Express® card provider
to maximize and improve customer
service. For example, when Treasury
and the provider learned of the
difficulties cardholders were having in
reaching a live customer service
representative, the provider modified its
telephone system and automated
messages to make contact with a live
representative easier from a cardholder’s
perspective. Among other things,
Treasury’s plans for cardholder
education include direct mail and other
communications explaining how to use
the card to make purchases, pay bills,
get cash back, as well as information
about how to check balances and
transaction history. As appropriate,
Treasury will work with its 1,800 Go
Direct® partners to further enhance its
cardholder education efforts.
4. Regulation of the Banking Industry
and Prepaid Cards. Several commenters
suggested that Treasury take steps to
improve consumer protections
associated with financial services
products. One commenter suggested
that Section 3332 requires Treasury to
take steps to ensure that any account
established by an individual to comply
with the EFT requirement is available at
a ‘‘reasonable cost’’ and stated that
Treasury is not complying with the
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statutory mandate by providing access
to one account at a reasonable cost.
Treasury disagrees. The statute does not
require Treasury to ensure than any
account chosen by a Federal payment
recipient’s must comply with the
Section 3332(i) requirements. The
provision requires that Treasury
regulations ensure that individuals
‘‘required * * * to have an account’’
have ‘‘access to such an account at a
reasonable cost’’ and with ‘‘the same
consumer protections with respect to
the account as other account holders at
the same financial institution’’
(emphasis added). The Direct Express®
card account is an account that meets
the statutory requirements.
Nonetheless, Treasury is committed to
taking steps to resolve several concerns
raised by commenters. With respect to
protecting Federal beneficiaries from
unlawful freezing and garnishment of
protected benefits, Treasury and the
four major benefit paying agencies—
Office of Personnel Management,
Railroad Retirement Board, Social
Security Administration, and
Department of Veterans Affairs—will
soon publish a joint rule. See, Notice of
Proposed Rulemaking, Garnishment of
Accounts Containing Federal Benefit
Payments, 75 FR 20299, Apr. 19, 2010.
The rule will help ensure that
garnishment-exempt benefit payments
in an account are not improperly seized,
by requiring financial institutions to
exempt from freezing or seizure a
defined amount equivalent to benefit
payments deposited to an account prior
to a financial institution’s receipt of a
garnishment order. This new rule will
protect benefit recipients where benefit
payments are directly deposited to an
account at a financial institution.
In response to comments related to
allowing Federal payments to be
delivered to ‘‘safe’’ prepaid card
accounts, Treasury is publishing, on this
date, an interim rule amending 31 CFR
part 210 (Part 210 Interim Rule), which
generally requires that a Federal direct
deposit payment be delivered to a
deposit account at a financial institution
in the name of the recipient, subject to
certain exceptions. The Part 210 Interim
Rule allows Federal payments to be
deposited to an account accessed
through a prepaid card or similar card
that meets the following requirements,
as more fully described in the interim
rule: The account funds are insured by
the Federal Deposit Insurance
Corporation or National Credit Union
Share Insurance Fund to the extent
permitted by law, the account does not
have an attached line of credit or loan
feature that triggers automatic
repayment from the card account, and
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the issuer of the card account provides
the cardholder with the same
protections under Regulation E required
to be provided for payroll card accounts
(12 CFR 205.18).
Several other concerns raised by
commenters relating to the regulation of
bank overdraft fees, account advances
offered by financial institutions, and
setoff of fees owed by account holders
are outside the scope of this rule.
5. Delay Effective Dates. Two
commenters urged Treasury to delay the
proposed effective dates for EFT
payments under the NPRM. One
consumer advocate organization
suggested a delay ‘‘until there is a
greater confidence that people are
prepared to switch to electronic
disbursements,’’ but did not specify a
date for implementation. This
commenter urged more time for
education noting that some people
shifting to electronic payments will
need far more education or counseling
than others. Another commenter
suggested a delay to 2020. As explained
in the NPRM, Treasury has accounted
for the unique issues raised for
converting current check recipients to
electronic payments by delaying the
implementation date for those
individuals to March 1, 2013. Between
now and 2013, Treasury plans a robust
campaign to educate people about the
EFT requirement, EFT options and
costs, how to use EFT, and more.
Treasury agrees with commenters who
recommend a strong education
campaign, and as noted above, plans to
utilize and expand its existing network
of Go Direct® partners in order to
provide outreach and sufficient
information to all affected beneficiaries.
Therefore, Treasury does not believe
that there is a need to further extend the
effective dates proposed in the NPRM,
except that Treasury is delaying the
initial effective date from March 1 to
May 1, 2011.
6. Provide Waiver for Attorney Fees
for Social Security Cases. An
organization that represents Social
Security claimants’ representatives and
a number of attorneys who represent
Social Security claimants recommended
that Treasury exempt attorneys’ fee
payments from the EFT requirements for
two main reasons. First, the individual
attorneys or representatives receiving
the fee payment are not the ‘‘owners’’ of
their firm’s bank account, and in some
cases, are therefore precluded from
electronically depositing their fee
payment to the firm’s account. This is
problematic in these cases because the
Social Security Administration does not
currently make representative fee
payments directly to the firm’s account,
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nor does it currently recognize firms as
representatives. Secondly, many
attorneys state that their banks are
unwilling or unable to provide all of the
information needed to identify the
client on whose account the deposit was
made. This second point is also raised
by an individual concerned that nursing
homes would similarly be unable to
identify the resident to whom a direct
deposit payment belongs.
The Social Security Administration
recently announced that it will include
an ‘‘addenda record’’ to display
identifying information with all direct
deposit fee payments sent to
representatives. See, Social Security
Administration letter at https://
fms.treas.gov/greenbook/ssarep.pdf. The
Social Security Administration
encourages receiving financial
institutions to pass through to their
account holders, as quickly as possible,
pertinent information. In this way,
attorneys and other representatives of
Social Security claimants will be able to
identify the purpose of the payments. In
addition, the Social Security
Administration may, in the future,
recognize firms which might help
address the difficulties in using EFT for
representative fee payments.
In order to mitigate these difficulties,
and until these issues are more fully
addressed, Treasury recognizes the need
to modify one of the waivers that may
be exercised by a paying agency, rather
than Treasury, in § 208.4(f) regarding
non-recurring payments. As the
commenters pointed out, some attorneys
and representatives may receive
multiple payments in a given year for
the multiple clients they represent
before the Social Security
Administration, and thus do not meet
the technical definition of a recipient of
a non-recurring payment in § 208.4(f)
(‘‘Where the agency does not expect to
make more than one payment to the
same recipient within a one-year period,
i.e., the payment is non-recurring’’). To
address this, Treasury is modifying
§ 208.4(f) to allow Federal paying
agencies to waive the EFT requirement
for payments made to the same recipient
in a single year when these payments
are not made on a regular, recurring
basis and remittance data explaining the
purpose of the payments is not readily
available from the recipient’s financial
institution receiving the payment by
EFT.
Treasury encourages paying agencies
to contact Treasury, before invoking this
waiver, to discuss various ways that
remittance data can be made available to
payment recipients, which may negate
the need for a waiver. Treasury
discourages the use of this waiver by
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80325
agencies, and expects the waiver to be
employed on an exception basis and
only until expanded remittance data is
more widely available to attorneys and
other representatives. In addition,
Treasury notes that there are many
options for receipt of remittance data for
vendors, and therefore does not expect
agencies to use this waiver to exempt
vendor payments from the EFT
requirements.
Treasury is removing the requirement
that agencies determine that the cost of
making an EFT payment exceeds the
cost of making a payment by check, as
it may not be possible for an agency to
make this determination.
7. Privacy and Identity Theft
Concerns. Many commenters raised
concerns about electronic banking
leading to an increased risk of identity
theft. Typically, the comments
expressed concern about identity theft
through online banking. This rule does
not mandate any requirement to bank
online. Many financial institutions,
including the Direct Express® card
provider, offer online banking services
as a convenience, but account holders
are not required to use these services.
None of the comments specifically
articulated exactly how this rule would
increase a payment recipient’s risk of
identity theft. Based on Treasury’s
experience with paper checks and
electronic payments, receiving
payments by direct deposit decreases
rather than increases the risk of identity
theft. As noted in the NPRM, in fiscal
year 2009, more than 670,000 Social
Security and SSI checks were reported
lost or stolen. In fiscal year 2010, more
than 540,000 checks were reported as
lost or stolen. In fiscal year 2009,
Treasury investigated more than 70,000
cases of altered or fraudulently
endorsed checks, totaling $64 million in
estimated value, and in fiscal year 2010,
Treasury investigated almost 50,000
cases totaling $93 million in estimated
value. People intent on committing
fraud can use a stolen Treasury check,
along with other stolen or fake
identification documents, to open an
account in the recipient’s name or
otherwise impersonate a check payee. A
Treasury check that has been endorsed,
but not cashed, offers further
opportunities for identity theft.
In addition to identity theft concerns,
many commenters expressed concern
about their privacy and were opposed to
having to disclose their banking
information to the Federal Government.
Federal agencies are subject to the
Privacy Act of 1972, 5 U.S.C. 552a,
which strictly governs the collection of
personal information from individuals,
as well as the maintenance and
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disclosure of the information. Among
other things, Federal agencies are
restricted in how they may use personal
information, such as bank account
information, and must ensure that the
information is not disclosed in an
unauthorized way. Except in limited
circumstances or with proper consent,
bank account information provided by
individuals to agencies for the purpose
of receiving payment by direct deposit
may be used and disclosed only for that
purpose. For an example of agency
regulations implementing the Privacy
Act of 1972, see Treasury’s regulations
at 31 CFR part 1, subpart C.
With respect to customer account
information held by a financial
institution, including Direct Express®
card account information, the
Government is precluded from receiving
any customer-specific account
information from a financial institution,
and the financial institution is
precluded from providing any customerspecific account information to the
Government, without the account
holder’s consent or without first
following a process that provides the
account holder with an opportunity to
object to any disclosure, generally for
law enforcement purposes. See, Right to
Financial Privacy Act, 12 U.S.C. 3401, et
seq.
8. Continue to Offer the ETA. A
couple of commenters urged Treasury to
continue to offer the ETA option for
those beneficiaries who opt for this
account to receive their benefit
payments by direct deposit. Treasury
continues to offer the ETA as an
alternative to the Direct Express® card.
It is also an option for unbanked Federal
benefit recipient seeking a safe,
affordable banking relationship.
Currently, the ETA is offered by 392
financial institutions with over 53,000
branch locations. The ETA program has
over 121,000 account holders who
receive Federal benefit payments.
Although the ETA is not available on a
nationwide basis and does not include
some of the more useful features that
have become available with prepaid
debit cards in recent years, it continues
to meet the needs of some benefit
recipients in certain regions of the
country. Treasury has no plans to
eliminate the ETA option and continues
to support the ETA through its call
center and Web site. It should be noted,
however, that Treasury is directing more
of its resources to educating
beneficiaries about the Direct Express®
card since the card is available
nationwide, provides more useful
features than the ETA, and may be used
more cost-effectively than an ETA.
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Information about ETAs may be found
at https://www.eta-find.gov.
9. Require EFT to Existing Bank
Accounts. An association that
represents financial institutions
suggested that when a recipient has an
established banking relationship, the
default election should be to convert the
benefit payment to a direct deposit to
that established bank account. Through
its Go Direct® campaign, Treasury
encourages financial institutions to
work with their own customers who
receive Federal benefit and other
payments by paper check on converting
to payment by direct deposit. The Go
Direct® campaign communicates the
many benefits to financial institutions
that encourage their customers to
convert to direct deposit, which include
increasing a financial institution’s
customer base and customer loyalty,
operational and transaction-based cost
savings, and reduction of check fraud.
See www.godirect.org. Absent clear
instructions from a payment recipient,
Treasury is unable to ascertain with
certainty whether a payment recipient
has a current bank account to which
payments should be directed. Therefore,
Treasury allows each recipient to have
payments electronically delivered to an
account at a financial institution of his
or her choice since the recipient is in
the best position to determine the most
cost-effective and desirable account
option for receipt of his or her Federal
payments.
IV. Final Rule
As explained above and in the
regulatory impact assessment below,
Treasury is revising its NPRM proposal
to address the comments we received
regarding elimination of all individual
waivers from the EFT requirement.
Under the final rule, the EFT
requirement will not apply to (1)
payment recipients born prior to May 1,
1921, who are receiving Federal
payments by check on March 1, 2013;
(2) payments that are not eligible for
deposit to a Direct Express® prepaid
card account established pursuant to
terms and conditions approved by FMS;
and (3) payment recipients whose Direct
Express® card has been suspended or
cancelled. In addition, an individual
payment recipient may request a waiver
from the EFT requirement if the EFT
requirement would impose a hardship
because of the inability of a recipient to
manage an account at a financial
institution or a Direct Express® card
account due to a mental impairment or
because a recipient lives in a remote
geographic location lacking the
infrastructure to support electronic
financial transactions. Payment
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recipients requesting a waiver are
required to provide to Treasury a
written certification supporting their
request, in such form as Treasury may
prescribe. The certification requires a
recipient to identify the basis for his or
her request and provide a brief
explanation of how the exception
applies to his or her situation. The
recipient shall sign the certification
before a notary public.
V. Section-by-Section Analysis
New § 208.2(c) adds a definition for
‘‘Direct Express® card’’ as meaning the
debit prepaid card issued to recipients
of Federal benefits by Treasury’s
financial agent pursuant to requirements
established by Treasury. The Direct
Express® card features are explained in
the NPRM, in this rulemaking, and on
the Direct Express® card Web site at
https://www.USDirectExpress.com.
Redesignated § 208.2(e) (formerly
§ 208.2(d)) clarifies that the definition of
‘‘electronic benefits transfer’’ includes
disbursement through a Direct Express®
card account. As has been the case,
‘‘electronic benefits transfer’’ (EBT)
continues to include, but is not limited
to, disbursement through an ETASM and
a Federal/State EBT program.
Section 208.4(a) is divided into two
paragraphs (a)(1) and (a)(2). It is noted
that, in cases where a representative
payee has been designated by the
benefit paying agency and is receiving
payments on behalf of a beneficiary, the
representative payee is the ‘‘individual’’
for purposes of § 208.4(a). Redesignated
§ 208.4(a)(1) is revised to allow waivers
where an individual:
(i) Is receiving a Federal payment by
check prior to May 1, 2011. In such
cases, the individual may continue to
receive those payments by check
through February 28, 2013;
(ii) Files a claim for a Federal
payment prior to May 1, 2011, and
requests payment by check at the time
he or she files the claim. In such cases,
the individual may receive those
payments by check through February
28, 2013;
(iii) Was born prior to May 1, 1921,
and is receiving Federal payments by
check on March 1, 2013;
(iv) Receives payments that are not
eligible for deposit to a Direct Express®
card account. In such cases, those
payments are not required to be made
by electronic funds transfer, unless and
until such payments become eligible for
deposit to a Direct Express® card
account;
(v) Is ineligible for a Direct Express®
card because of suspension or
cancellation of the individual’s card by
the Financial Agent;
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(vi) Has filed a waiver request with
Treasury certifying that payment by
electronic funds transfer would impose
a hardship because of the individual’s
inability to manage an account at a
financial institution or a Direct Express®
card account due to a mental
impairment, and Treasury has not
rejected the request;
(vii) Has filed a waiver request with
Treasury certifying that payment by
electronic funds transfer would impose
a hardship because of the individual’s
inability to manage an account at a
financial institution or a Direct Express®
card account due to the individual
living in a remote geographic location
lacking the infrastructure to support
electronic financial transactions, and
Treasury has not rejected the request.
New § 208.4(b) requires payment
recipients requesting a waiver from the
EFT requirement because of a mental
impairment or remote geographic
location to provide Treasury with a
certification, in writing, supporting their
request in such form that Treasury may
prescribe. The individual shall attest to
the certification before a notary public
or otherwise file the certification in
such form that Treasury may prescribe.
A payment recipient requesting these
types of waivers will be required to
provide identifying information, such as
name, address, and Social Security
number, as well as a short statement
supporting the reason for the waiver
request. Unless Treasury rejects the
request, the recipient will not be
required to comply with the EFT
requirement. As noted above, in cases
where a representative payee receives
payments on behalf of a beneficiary, the
representative payee is the individual
requesting the claim based on the
representative payee’s circumstances.
Treasury will be publishing additional
guidance regarding the waiver process.
The Secretary’s waiver authority
remains unchanged, and Federal
agencies continue to have the flexibility
to waive payment by direct deposit or
other EFT method in the circumstances
described in redesignated paragraphs
(a)(2) through (a)(7) of § 208.4 (formerly
paragraphs (b) through (g)), namely, for
certain payments to payees in a foreign
country where the infrastructure does
not support EFT, for certain disaster or
military situations, for situations in
which there may be a security threat or
for valid law enforcement reasons, for
non-recurring payments, and for
unusual and/or urgent situations where
the Government would be seriously
injured unless payment is made by a
method other than EFT.
Treasury is revising redesignated
paragraph (a)(6) of § 208.4 (formerly
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Jkt 223001
paragraph (f)) which previously allowed
Federal paying agencies, rather than
Treasury, to waive the EFT requirement
for payments that are non-recurring, i.e.,
no more than one payment to the same
recipient within a one-year period.
Under the revised rule, the waiver exists
for payments made to the same recipient
in a single year when these payments
are not made on a regular, recurring
basis and remittance data explaining the
purpose of the payments is not readily
available from the recipient’s financial
institution receiving the payment by
electronic funds transfer. As mentioned
above, agencies should make limited
use of this waiver and should use this
waiver only after discussions with
Treasury to rule out other ways in
which remittance data can be made
available.
Section 208.6 is revised to remove the
provisions for the general account
requirements for Federal payments
made electronically to an account at a
financial institution. These
requirements are contained in 31 CFR
210.5 and do not need to be duplicated
in Part 208. Revised § 208.6 states that
any individual who receives a Federal
benefit, wage, salary, or retirement
payment will be eligible for a Direct
Express® card account.
Section 208.7 is revised to state that
agencies shall put into place procedures
that allow recipients to provide the
information necessary: (i) For the
delivery of their payments by EFT to an
account at a financial institution, or (ii)
to enroll for a Direct Express® card
account. Agencies no longer need to
notify individuals about their right to
invoke a hardship waiver. FMS will
provide guidance and work with
agencies to ensure that they have the
information they need to effectively
explain the rule, available waivers,
direct deposit, and features and fees of
the Direct Express® card.
Section 208.8 is revised to state that
payment recipients are required to
provide a Federal agency with the
necessary information to receive
payments electronically. To receive a
payment by direct deposit to an account
at a financial institution, a recipient will
need to provide his or her account
information. To enroll for a Direct
Express® card account, a recipient will
need to provide sufficient demographic
information to allow for an account to
be established, including information
needed for identity verification
purposes.
Section 208.11 is revised to conform
to the technical revision and delete the
reference to § 208.6.
Appendices A and B containing
Model ETASM Disclosure Notices are
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80327
removed because they no longer apply.
ETASM accounts remain available from
financial institutions that continue to
offer them. For more information about
ETASM accounts, visit https://www.etafind.gov.
VI. Procedural Analysis
Regulatory Planning and Review
It has been determined that this
regulation is a significant regulatory
action as defined in Executive Order
12866 in that this rule would have an
annual effect on the economy of $100
million or more, and this rule raises
novel policy issues arising out of the
legal mandate in 31 U.S.C. 3332.
Accordingly, this final rule has been
reviewed by the Office of Management
and Budget. The Regulatory Impact
Assessment prepared by Treasury for
this regulation is provided below.
SUMMARY OF ESTIMATED BENEFITS
AND COSTS
Benefit .................................
Cost .....................................
Net Benefits .........................
$117 million.
Not estimated.
Not estimated.
The analysis used nominal dollars in 2010.
1. Description of Need for the
Regulatory Action
a. Statutory and Regulatory History
As discussed in the Regulatory Impact
Assessment in the NPRM, this
rulemaking is necessary to expand
compliance with the electronic funds
transfer (EFT) provisions of section
3332, title 31 United States Code
(Section 3332). In 1996, Congress
enacted subsection 31001(x)(1) of the
Debt Collection Improvement Act of
1996 (Pub. L. 104–134) (DCIA), which
amended Section 3332 to generally
require that all nontax Federal payments
be made by EFT, unless waived by the
Secretary of the Treasury (Secretary).
The Secretary must ensure that
individuals required to receive Federal
payments by EFT have access to an
account at a financial institution ‘‘at a
reasonable cost’’ and with ‘‘the same
consumer protections with respect to
the account as other account holders at
the same financial institution.’’ See 31
U.S.C. 3332(f), (i)(2).
To implement Section 3332 as
Congress intended, Treasury
promulgated 31 CFR part 208 (Part 208).
Part 208 sets forth requirements for
accounts to which Federal payments
may be sent by EFT; provides that any
individual who receives a Federal
benefit, wage, salary, or retirement
payment is eligible to open an
Electronic Transfer Account (ETA) at a
financial institution that offers such
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accounts; and establishes the
responsibilities of Federal agencies and
recipients under the regulation. Part 208
also sets forth a number of waivers to
the general requirement that Federal
payments be delivered by EFT. See 31
CFR 208.4.
In conjunction with the initial
publication of Part 208, Treasury
developed the ETA, a low-cost account
offered by participating financial
institutions for those individuals who
wish to receive their Federal payments
by direct deposit. The ETA was
established with the intention that it
would eventually become available
nationwide, and thereby comply with
the statutory mandate that any person
required to receive payment by EFT
have access to an account at a financial
institution at a reasonable cost and with
standard consumer protections.
However, the ETA is not available
nationwide, and, as a result, does not
meet the statutory requirement related
to account access.
Any financial institution that wishes
to offer the ETA may do so by entering
into a financial agency agreement
agreeing to offer the ETA in accordance
with the terms and conditions
established by Treasury. See Notice of
Electronic Transfer Account Features,
64 FR 38510 (July 16, 1999). A
participating financial institution must
open an ETA for any individual who
requests one, with some limited
exceptions, provided that the individual
authorizes the direct deposit of his or
her Federal benefit, wage, salary or
retirement payments. A financial
institution may charge an account fee of
up to $3.00 per month, and may charge
other account-related fees as usually
and customarily charged to other retail
customers. ETA cardholders must be
allowed to withdraw funds at least four
times per month without incurring fees.
Checks are not offered with ETAs.
Account holders access their funds
through online debit at ATMs,
commonly referred to as ‘‘PIN debit,’’
and through POS networks. Offline
(signature) debit is not permitted.
Treasury pays a participating financial
institution a fee of $12.60 for each ETA
account established.
The hardship waivers in Part 208
prior to this rulemaking were necessary
because the ETA was not (and is not)
available to all benefit recipients across
the country. In addition, because the
ETA does not permit signature debit and
does not include bill payment capability
as a required feature, the ETA
cardholders have limited options in
paying for goods and services with an
ETA. They cannot use the ETA, for
example, to make online and telephone
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17:05 Dec 21, 2010
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purchases. The limited payment
capability of the ETA resulted in a need
for hardship exceptions for geographic,
financial, and physical disability
reasons, since individuals might not
have convenient or feasible access to
physical POS or ATM locations.
Moreover, the ETA allows monthly and
other fees which, although limited,
could still pose a financial hardship for
some benefit recipients. This meant that
a waiver for financial hardship was also
necessary.
Since its inception in 1999 through
September 2010, only 251,941 ETA
accounts have been opened, and, as of
September 2010, there are only 121,191
active ETA accounts. Anecdotal
evidence suggests that, with some
exceptions, the ETA is not a costeffective product for financial
institutions. According to a 2002 report
by the Government Accountability
Office (GAO), although many financial
institutions believed that the ETA was
a good product for the target market, the
financial institutions were reluctant to
offer the account because they did not
see the product as profitable. See,
‘‘Electronic Transfers: Use by Federal
Payment Recipients Has Increased but
Obstacles to Greater Participation
Remain,’’ GAO–02–913, page 31 (Sept.
12, 2002) (www.gao.gov/new.items/
d02913.pdf). From the consumer
perspective, reasons for lack of interest
include the inability to write checks,
limited availability of ETAs, lack of
awareness of ETAs, a difficult
enrollment process, and a personal
preference for doing business without a
bank account. Id., at 35–36.
GAO has issued at least two reports
on the Federal Government’s efforts to
increase the use of electronic payments
rather than checks. See, for example,
2002 GAO report cited above, and
‘‘Electronic Payments: Many Programs
Electronically Disburse Federal Benefits,
and More Outreach Could Increase Use,’’
GAO–08–645 (June 23, 2008) (https://
www.gao.gov/new.items/d08645.pdf). In
these referenced reports, GAO
recognizes the advantages of electronic
payments, but also recognizes the two
major historical obstacles to removing
the Part 208 individual waivers. First,
there are a high number of check
recipients who do not have a bank
account or who lack convenient access
to an account at a reasonable cost with
appropriate consumer protections.
GAO–02–913, pages 16–24 (Sept. 12,
2002); GAO–08–645, pages 19–20, 33
(June 23, 2008). Second, consumer
concerns about the improper freezing
and seizure of Federal benefit funds
typically exempt from garnishment has
led to resistance to Treasury’s efforts to
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remove the Part 208 individual waivers
to EFT requirements. GAO–08–645,
pages 20–22.
b. Technology Changes in the Banking
Industry
As discussed in the Regulatory Impact
Assessment in the NPRM, the
technological developments and
widespread acceptance of debit and
prepaid card products during the last
decade have made it feasible and
advantageous for Treasury to revise its
existing implementing regulation to
expand the scope of individuals subject
to the EFT requirements. Specifically,
the development and implementation of
the Direct Express® card, a MasterCard ®
prepaid debit card developed by
Treasury exclusively for Federal benefit
recipients, means that Treasury can now
comply with the requirement of Section
3332 to ensure that individuals required
to receive Federal payments by EFT
have access to an account at a financial
institution that is reasonably priced and
subject to standard consumer
protections.
Reloadable prepaid debit cards, which
were a small specialty product in the
1990s, are now widely available and can
be used at a vast number of merchant
locations across the country, not only to
purchase goods and services, but also to
obtain cash through cashback
transactions at POS locations. With the
expansion of the Internet and other
technological advances, consumers have
the ability to make online purchases
with a debit card, as well as the ability
to pay for goods and services over the
telephone, resulting in the mitigation of
some past obstacles to electronic
payment acceptance. Even for those
without access to the Internet, or who
buy goods and use services from
vendors who do not accept debit card
payments, debit cards can be used to
purchase money orders, thereby
eliminating the step of having to cash a
check or carry large amounts of cash to
complete necessary financial
transactions.
The ‘‘2007 Federal Reserve Payments
Study, Noncash Payment Trends in the
United States: 2003–2006,’’ sponsored
by the Federal Reserve System (released
December 10, 2007) (https://
www.frbservices.org/files/
communications/pdf/research/
2007_payments_study.pdf), highlights
the growing acceptance of debit cards in
the United States. According to the
study, debit cards now surpass credit
cards as the most frequently used
payment type. The Federal Reserve
noted that the highest rate of growth
was in automated clearing house (ACH)
payments, which grew about 19 percent
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per year, followed closely by debit card
payments. The annual use of debit cards
increased by about 10 billion payments
over the survey period to 25.3 billion
payments in 2006, an annual growth
rate of transactions of 17.5% from 2003
to 2006. Many financial service
providers offer general prepaid branded
reloadable cards intended for recipients
of wages, incentive or bonus payments,
state benefits and child support
payments, and other types of high
volume or regularly recurring payments.
Many states offer or require the use of
electronic payment cards for those who
receive state benefits, such as temporary
assistance to needy families.
Treasury’s experience with offering
electronic payment card products dates
back to 1989, and illustrates how
Treasury’s products have evolved and
how acceptance of these products has
grown. In 1989, Treasury offered a debit
card product, known as the SecureCard,
on a pilot basis in Baltimore, Maryland,
at no cost to SSI recipients. The
undeveloped nature of the POS system
at that time presented the primary
challenge in that pilot. To make the card
useful, Treasury installed POS
equipment at various local merchants, at
a substantial cost to the Government. In
1992, Treasury initiated the Direct
Payment Card pilot for Social Security
and SSI recipients in Texas, which had
a better developed POS infrastructure,
and subsequently extended the pilot to
Social Security recipients in Argentina.
From 1992 through 1997, approximately
46,000 recipients enrolled, and the
program was well-received by
recipients. Building on the success of
the Direct Payment Card pilot, in 1996,
Treasury joined a Federal-State
electronic benefits transfer (EBT)
program known as the Benefit Security
Card program. The Benefit Security
Card was offered to Federal and/or state
benefit recipients in eight southeastern
states, known as the Southern Alliance
of States, which included Alabama,
Arkansas, Florida, Georgia, Kentucky,
Missouri, North Carolina, and
Tennessee. Treasury’s Benefit Security
Card program allowed benefit recipients
to access their Federal and/or state
benefits via a single debit card. When
Treasury terminated the card program in
January 2003, approximately 51,000
Federal benefit recipients were enrolled
in the program. Although customers
were pleased with the product, Treasury
and most states were concerned about
cardholder costs, which were scheduled
to increase at the time Treasury
terminated the program. At the end of
2006, Treasury initiated a small Direct
Express® card program to gauge the
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market for a branded debit card,
reloadable only with Federal benefit
payments. As part of the pilot, Treasury
sent letters to 35,000 Social Security
and SSI check recipients in Chicago and
southern Illinois, offering them the
opportunity to sign up for a Direct
Express® card to receive their Federal
benefit payments electronically. In
addition, Treasury included information
about the program in check envelopes
mailed to all Illinois Social Security and
SSI check recipients. The card features
offered for the pilot program were
similar to the current Direct Express®
card product, although the fees were
slightly higher.
2. Provision
Treasury is implementing this rule in
two phases. The first phase would
require all new benefit recipients to sign
up for direct deposit to a bank account
of the recipients’ choice or to a Direct
Express® card account, beginning May
1, 2011. The second phase would begin
on March 1, 2013, at which time all
recipients of Federal benefit and other
nontax payments would receive their
payments by direct deposit, either to a
bank account or to a Direct Express®
card account.
Those receiving their benefit
payments by check before May 1, 2011,
could continue to do so through
February 28, 2013, after which those
recipients would convert to direct
deposit. For Federal benefit recipients,
this means that individuals who file
claims for Federal benefits before May 1,
2011, and who request check payments
when they file, would be permitted to
receive payments by check through
February 28, 2013. Individuals who file
claims for benefits on or after May 1,
2011, would receive their payments by
direct deposit. Individuals receiving
their payments by direct deposit prior to
May 1, 2011, would continue to do so.
In this final rule, Treasury waives the
EFT requirement for recipients born
prior to May 1, 1921 who are receiving
Federal payments by check on March 1,
2013, for payments that are not eligible
for deposit to a Direct Express® card
account, and for recipients whose Direct
Express® card has been suspended or
cancelled. In addition, this rule allows
a recipient to request a waiver from the
EFT requirement on the basis that EFT
would impose a hardship because of the
recipient’s inability to manage an
account at a financial institution or a
Direct Express® card account due to a
mental impairment, or because the
recipient lives in a remote geographic
location lacking the infrastructure to
support electronic financial
transactions. The waiver request is
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80329
considered effective unless Treasury
rejects the request.
3. Baseline
a. Amount of Federal Disbursement
The baseline amount of Federal
disbursement described in the NPRM is
updated as follows. In fiscal year 2010,
Treasury disbursed almost 85% of its
nontax payments electronically, or more
than 793 million payments. Despite the
general requirement that Federal
payments be made electronically, and
Treasury’s efforts to persuade check
recipients to convert to direct deposit,
Treasury nevertheless continues to print
and mail many millions of checks each
year, at a substantially higher cost to the
Government than if those payments
were delivered by EFT. For example, of
the approximately 143 million checks
disbursed for nontax payments, in fiscal
year 2010, more than 130 million of
them were Federal benefit checks
mailed to almost 11 million benefit
recipients, causing avoidable paymentrelated problems for many check
recipients, and resulting in extra costs to
taxpayers of more than $117 million
that would not have been incurred had
those payments been made by EFT.
Social Security (retirement, disability,
and survivors benefits) and SSI
payments represent more than 92
percent, or approximately 120 million,
of those benefit check payments. The
remaining 10 million benefit check
payments are made to recipients of civil
service retirement, railroad retirement,
Black Lung, and Veterans benefits.
Although the direct deposit payments
rate has increased since 1996, when it
was 58%, the rate has climbed only
slowly since fiscal year 2005 when it
first reached 80%.
b. Affected Population
As noted above, in fiscal year 2010,
Treasury disbursed 130 million checks
to almost 11 million benefit recipients.
Treasury estimates that approximately 4
million of those recipients do not have
bank accounts.
Treasury recognizes the demographic
differences between payment recipients
who are more willing to accept direct
deposit and those who are not. Treasury
also recognizes that there are a variety
of reasons why check recipients do not
switch to direct deposit. Because the
majority of its check payments are made
to Social Security and SSI recipients,
Treasury’s research focuses on this
population. During implementation of
its rule, Treasury will continue its
research efforts to ensure that the needs
of all check recipients are adequately
addressed and take appropriate action.
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While recognizing that the results of
the study is not generalizable to the U.S.
population, Treasury’s study,
‘‘Understanding the Dependence on
Paper Checks—A Study of Federal
Benefit Check Recipients and the
Barriers to Boosting Direct Deposit’’
(2004), sheds some insight on
individuals who choose to receive
Federal benefits through paper checks
(OMB Control No. 1510–0074). The
average age of a Social Security check
recipient was 66 years old. Sixty-one
percent of the Social Security check
recipients were female; 39% were male.
Thirty-five percent of the Social
Security check recipients had not
completed high school, while 26% had
some college education or beyond. Sixty
percent of Social Security recipients
were retired; 27% did not have bank
accounts; 12% received some other form
of government assistance; and, 27% had
a disability.
Comparatively, the average age of a
SSI check recipient was 50. Seventy
percent of the SSI check recipients were
female; 30% were male. Fifty-one
percent of the SSI recipients had not
completed high school, while 15% had
some college education or beyond. Only
21% of SSI recipients were retired; 68%
did not have a bank account; 42%
received some other form of government
assistance, and 42% had a disability.
According to Treasury research in
2007 (SSA & SSI Check Recipient
Survey, OMB Control No. 1510–0074),
the check recipient population
demographics had not changed
significantly. The 2007 survey found
that 28% of Social Security check
recipients did not have a bank account,
but that 9% more SSI recipients had
bank accounts than in 2004 (in 2007,
59% of SSI recipients did not have a
bank account).
The above-referenced Treasury
research shows that younger benefit
recipients convert to direct deposit at a
faster rate than older benefit recipients.
Younger benefit recipients who have
had their payments for less than a year
are signing up for direct deposit at rates
that far exceed their proportions in the
population. Close to 50% of those Social
Security and SSI check recipients who
converted to direct deposit had been
receiving their benefits for less than one
year. Conversely, only 16% of Social
Security check recipients and 15% of
SSI recipients who had been receiving
their payments nine (9) years or longer
signed up for direct deposit.
Treasury and the Social Security
Administration found that, in fiscal year
2010, 79.1% of new Social Security
enrollees signed up for direct deposit
either to an existing bank account or to
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17:05 Dec 21, 2010
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a Direct Express® card account. Since
September 2008, the Social Security
Administration has been offering new
Social Security and SSI recipients the
option of signing up for a Direct
Express® card, in addition to direct
deposit at a financial institution, at the
time they enroll for benefits. Social
Security is also allowing individuals to
sign up at local offices and by
telephone. The Direct Express® card has
been a major contributor in the decline
of Social Security and SSI check
payments over the last two years, but
has had an especially significant impact
on the SSI check payment volume. The
average monthly payment amount for an
SSI check recipient is $545, whereas the
average monthly payment amount for a
Social Security check recipient is $808
for beneficiaries who receive their
payment on the third of the month, and
$915 for all other Social Security check
recipients. There has been a year-overyear decrease in SSI checks of 6.91% in
March 2010, compared to March 2009,
which is significantly greater than the
3.81% decline in March 2009, compared
to March 2008. The number of all
nontax checks decreased from 148
million in fiscal year 2009 to 143
million in fiscal year 2010.
4. Assessment of Potential Costs and
Benefits
a. Potential Costs
There are potential short-term costs
associated with the rulemaking. First,
there are intangible emotional costs for
individuals who are fearful or resistant
to direct deposit. In its 2004 research,
Treasury learned that there are some key
differences among Social Security check
recipients, SSI check recipients, and
those that receive their benefit payments
by direct deposit. Although these
differences do not necessarily explain
why certain individuals are more
resistant than others to receiving
payments by direct deposit, the data
helps Treasury properly target its public
education campaign. For example,
because the data described below shows
that Social Security check recipients are
more likely than SSI check recipients to
have a bank account, Treasury can
direct its resources to informing Social
Security check recipients about the
benefits of directly depositing payments
to an existing bank account. For SSI
recipients who are less likely to have a
bank account, Treasury can focus its
Direct Express® card information to that
population.
Compared to SSI check recipients,
Social Security check recipients are
older (average age 66), more likely to
have a bank account, more likely to be
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Sfmt 4700
male and retired, less likely to have a
disability, less likely to receive some
other form of government assistance,
less likely to depend on their benefit as
their sole source of income, and more
likely to be Caucasian. SSI recipients are
likely to be younger (average age 50),
less likely to have a bank account, more
likely to have a representative payee
acting on their behalf, more likely to be
African-American, more likely to be
female, more likely to live in a city,
more likely to receive some other form
of benefit payment, and more likely to
depend on others for assistance with
daily chores and errands. Direct deposit
recipients are more technologically
savvy than either Social Security or SSI
check recipients. They are more likely
to own a cell phone or to use a personal
computer and the Internet. Compared
with check recipients, direct deposit
beneficiaries responding to the survey
were more likely to have confidence in
banks, to believe that computers are
secure, and to feel that ATMs are safe.
Despite these demographic
differences, Treasury has found that the
reasons for resistance to direct deposit
among check recipients have remained
fairly constant over the years. Many
people express a desire to see the
physical payment in check form. Others
feel a greater sense of control when
handling checks, and many, especially
those receiving SSI, believe that
receiving checks helps them to better
manage their money and maintain their
standard of living. Barriers that need to
be overcome can be grouped into four
general categories: informational (those
who do not understand how direct
deposit works); emotional (those who
just prefer to receive checks); inertia
(those who are receptive to electronic
payments, but need to be motivated to
sign up); and mechanical (those who do
not have bank accounts, and in some
cases, do not want bank accounts).
Treasury expects most recipients to
pay less for EFT payments than for
check payments. While some
individuals may be able to cash
government checks at no cost, there are
often fees of up to $20 or more for
cashing a check, according to Treasury’s
research in 2007 (SSA & SSI Check
Recipient Survey, OMB Control No.
1510–0074). The Direct Express® card
program is structured so that there are
several ways for cardholders to access
their funds and use their card without
paying any fees. The Direct Express®
card account fees compare favorably to
those charged by financial service
providers offering general purpose
reloadable cards, which often charge
fees for sign-up, monthly maintenance,
ATM withdrawals, balance inquiries,
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and customer service calls. Cardholders
may use their card to make purchases
and get cash back at a POS location
without paying a fee; obtain cash from
any MasterCard® member bank teller
window without paying a fee; and make
one free ATM cash withdrawal for each
benefit payment deposited to the card
account (the free ATM cash withdrawal
is available until the end of the month
following the month of deposit). If the
cardholder makes a withdrawal using an
ATM within the Direct Express®
surcharge-free ATM network, the
cardholder will not pay a surcharge fee
to an ATM owner. In addition, there are
many other features that cardholders
can access without paying a fee,
including unlimited customer service
calls (with or without live operators);
optional automated low balance alerts
or deposit notifications; and online or
telephone transaction history and other
account information. There is no fee to
sign up for the card, close the account,
or to obtain one replacement card per
80331
year. Importantly, there are no
overdrafts, minimum balance
requirements, or credit requirements to
sign up for the card. The few fees that
are charged for the card include $.90 for
ATM transactions after free ATM
transactions are used, $.75 per month
for optional paper statements, fees for
using the card outside the United States,
and replacement cards beyond the free
replacement card. By way of
illustration, sample Direct Express®
cardholder scenarios follow:
FIG. 2—DIRECT EXPRESS® CARD FEES: SAMPLE SCENARIO 1
Fees
(with ATM
surcharge
of $2.33) 5
Fees
(with no ATM
surcharge)
Direct Express® Card
transactions
1st ATM withdrawal (free with 1st deposit) ...........................................................................
Three bill payments ................................................................................................................
Eight POS transactions ..........................................................................................................
Weekly Balance Inquiry .........................................................................................................
One Deposit ...........................................................................................................................
Total Monthly Fee ...........................................................................................................
FREE
FREE
FREE
FREE
FREE
..............................................
..............................................
..............................................
..............................................
..............................................
$2.33
FREE
FREE
FREE
FREE
FREE ..............................................
2.33
FIG. 3—DIRECT EXPRESS® CARD FEES: SAMPLE SCENARIO 2
Fees
(with no ATM
surcharge)
Direct Express® Card
transactions
Fees
(with ATM
surcharge
of $2.33)
1st ATM withdrawal (free with 1st deposit) .............................................................................................................
2nd ATM withdrawal ................................................................................................................................................
Eight POS transactions ...........................................................................................................................................
Weekly Balance Inquiry ...........................................................................................................................................
One Deposit .............................................................................................................................................................
FREE
$.90
FREE
FREE
FREE
$2.33
3.23
FREE
FREE
FREE
Total Monthly Fee .............................................................................................................................................
.90
5.56
FIG. 4—DIRECT EXPRESS® CARD FEES: SAMPLE SCENARIO 3
Fees
(with no ATM
surcharge)
Direct Express® Card
transactions
1st ATM withdrawal (free with 1st deposit) ..........................................................................
Bank Teller Cash Withdrawal ...............................................................................................
Eight POS transactions ........................................................................................................
Weekly Balance Inquiry ........................................................................................................
One Deposit .........................................................................................................................
Total Monthly Fee .........................................................................................................
FREE
FREE
FREE
FREE
FREE
Fees
(with ATM
surcharge
of $2.33)
................................................
................................................
................................................
................................................
................................................
$2.33
FREE
FREE
FREE
FREE
FREE ................................................
2.33
FIG. 5—DIRECT EXPRESS® CARD FEES: SAMPLE SCENARIO 4
emcdonald on DSK2BSOYB1PROD with RULES
Direct Express® Card
transactions
Fees
(with no ATM
surcharge)
Fees
(with ATM
surcharge
$2.33)
1st ATM withdrawal (free with 1st deposit) ..................................................................
Purchase Money Order for $700 at US Post Office (USPS) to pay rent ....................
Eight POS transactions ................................................................................................
Weekly Balance Inquiry ................................................................................................
FREE .....................................................
$1.50 (to USPS) ....................................
FREE .....................................................
FREE .....................................................
$2.33.
1.50 (to USPS).
FREE.
FREE.
5 The bankrate.com 2010 checking study cited an
average $2.33 surcharge fee per withdrawal (https://
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17:05 Dec 21, 2010
Jkt 223001
www.bankrate.com/finance/checking/banks-takinga-bigger-bite-with-atm-fees.aspx).
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Sfmt 4700
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Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations
FIG. 5—DIRECT EXPRESS® CARD FEES: SAMPLE SCENARIO 4—Continued
Fees
(with ATM
surcharge
$2.33)
Direct Express® Card
transactions
Fees
(with no ATM
surcharge)
One Deposit ..................................................................................................................
FREE .....................................................
FREE.
Total Monthly Fee .................................................................................................
$1.50 ......................................................
$3.83.
FIG. 6—DIRECT EXPRESS® CARD FEES: SAMPLE SCENARIO 5
Fees
(with no ATM
surcharge)
Direct Express® Card
transactions
Fees
(with ATM
surcharge
of $2.33)
FREE
$4.50
FREE
FREE
FREE
$2.33
16.15
FREE
FREE
FREE
Total Monthly Fee .............................................................................................................................................
emcdonald on DSK2BSOYB1PROD with RULES
1st ATM withdrawal (free with 1st deposit) .............................................................................................................
5 additional ATM withdrawals ..................................................................................................................................
One POS transaction ...............................................................................................................................................
Weekly Balance Inquiry ...........................................................................................................................................
One Deposit .............................................................................................................................................................
4.50
18.48
Even in Scenario 5, which is not the
recommended way to use the Direct
Express® card, a cardholder incurs less
expense than what some beneficiaries
pay to cash their Treasury checks.
Treasury expects that, with its expanded
cardholder education, fees incurred
under Scenarios 1 through 4 would be
more typical.
Treasury expects to continue to incur
expenditures for the public education
related to the implementation of the
new rule and to temporarily expand its
telephone and online direct deposit
enrollment center to accommodate those
converting from check payments to
direct deposit to comply with the new
rule, whether the conversion is to an
account at a financial institution or to a
Direct Express® card account. However,
such expenditures will taper off after
the new rule is fully implemented, since
direct deposit enrollment in the future
will occur at the time of benefit
enrollment. Federal benefit agencies
may incur costs to temporarily expand
customer service centers to
accommodate recipients’ questions and
enrollments until the new rules are fully
implemented.
Treasury expects increased costs for
its call center and Web site used to
enroll check recipients into direct
deposit, although these costs are
expected to drop off after 2013, when
the rule would be fully implemented.
The education costs, estimated at $10
million over the next three years, are
costs that Treasury would have incurred
even without the rule, and for
potentially longer than the next three to
five years. Similarly, Treasury expects
benefit paying agencies to incur some
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initial costs for customer service
training for customer service
representatives responsible for
educating new enrollees and current
check recipients about the new rules,
but these costs are expected to be more
than offset by the cost savings expected
once customer service centers no longer
have to respond to individual inquiries
related to check problems. The one-time
costs to increase customer service
capacity at the Treasury enrollment
center (both telephone and online)
could total as high as $20 million from
the effective date of the final rule
through 2013. These costs include
Treasury’s costs for processing waiver
requests. After 2013, Treasury expects
these costs to drop off significantly.
The Go Direct® campaign, sponsored
by Treasury and the Federal Reserve
Banks, highlights the need for this
educational program. Despite the
success of the campaign with more than
five million direct deposit enrollments
achieved since 2005 as a result of the
campaign’s activities, an estimated 11
million Federal benefit recipients still
receive checks each month. Treasury
research shows that the likelihood of
current check recipients switching to
direct deposit remained generally
unchanged from 2004 to 2007, with
55% of banked Social Security check
recipients surveyed in 2007 being very
unlikely to change to direct deposit,
down from 59% in 2004. The
percentage of banked Social Security
check recipients likely to switch to
direct deposit went from 27% in 2004
to 28% in 2007. Comparatively, 40% of
banked SSI check recipients were likely
to switch to direct deposit in 2007, up
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only one percentage point since 2004.
While Treasury research shows that
direct deposit education has a positive
impact on the likelihood of a check
recipient to switch to direct deposit, the
effort is time consuming,
administratively burdensome, costly,
and resource-intensive. During the
period July 2009 through June 2010,
Treasury spent $4.5 million on its Go
Direct® campaign, and expects to spend
another $4 million during the period
July 2010 through June 2011. Prior
years’ costs have ranged from $5 million
to $10 million for Treasury to establish
and sustain its presence in target
markets to promote and encourage
check recipients to convert to direct
deposit.
Finally, and less directly, financial
institutions may experience some costs
associated with converting their check
recipient customers to direct deposit,
but Treasury does not expect this to be
a significant burden since financial
institutions already enroll a significant
number of direct deposit recipients
through Treasury’s Go Direct®
campaign.
b. Potential Benefits
The potential benefits of the rule to
the Government and taxpayers are
significant. As noted above, in fiscal
year 2010, Treasury mailed more than
130 million Federal benefit checks to
approximately 11 million benefit
recipients, resulting in extra costs to
taxpayers of more than $117 million
that would not have been incurred had
those payments been made by EFT.
Without the rule change and given the
current trends, the number of checks
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Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations
that Treasury prints and mails each year
is expected to increase significantly over
the coming years, primarily as a result
of the aging of the baby boomer
generation. Beginning in 2008, the first
wave of 78 million baby boomers
became eligible for Social Security
benefits. Even as the more
technologically-savvy baby boomers
enter the rolls, while improving, the
direct deposit rate for fiscal year 2010
climbed no higher than 79.1% for new
Social Security enrollees. With the
increase in retiring baby boomers,
Treasury expects to issue approximately
60 million new payments each year to
approximately 5 million newly enrolled
recipients (based on Social Security
Administration actuarial data). Of those
60 million payments, an estimated 9
million would be made by check based
on the current overall direct deposit/
check ratio (85 percent/15 percent) for
Social Security payments. By 2020, the
Social Security Administration projects
there will be 18.6 million more Social
Security beneficiaries than in fiscal year
2009, which would result in more than
223 million additional payments each
year. At the current direct deposit/check
ratio, this would mean 33.5 million
additional checks each year beginning
in 2020, at a cost of $31 million each
year, leading to a total annual cost of
more than $156 million more than if
those payments were made by direct
deposit.
These projected cost savings do not
take into account future increased costs
in postage, paper, and salaries; the cost
of issuing benefit checks other than
Social Security and SSI; or the costs
agencies incur in handling inquiries and
authorizing replacement checks. For
example, the Social Security
Administration expects administrative
savings resulting from a drop in nonreceipt and lost check actions. The
Social Security Administration also
expects to save money by eliminating
the ‘‘Payment Delivery Alert System,’’
which is a joint effort among the Social
Security Administration, Treasury, and
the U.S. Postal Service to locate and
deliver delayed Social Security and SSI
checks.
Those who receive their payments by
direct deposit do not have to worry
about a lost or stolen check, or carrying
around large amounts of cash that can
be easily lost or stolen. Each year,
approximately half a million
individuals call Treasury to request
claims packages related to problems
with check payments. For example, in
fiscal year 2009, more than 670,000
Social Security and SSI checks were
reported lost or stolen, and in fiscal year
2010, more than 540,000 checks were
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17:05 Dec 21, 2010
Jkt 223001
reported lost or stolen. In fiscal year
2009, Treasury investigated more than
70,000 cases of altered or fraudulently
endorsed checks, totaling $64 million,
and in fiscal year 2010, Treasury
investigated almost 50,000 cases,
totaling $93 million. When checks are
misrouted, lost in the mail, stolen, or
fraudulently signed, Treasury must send
replacement checks to the recipient.
This can result in a delay in payment,
especially if fraud or counterfeiting is
involved, thereby creating a hardship
for benefit recipients who rely on these
payments for basic necessities such as
food, rent, or medication. In contrast,
individuals receiving Federal payments
electronically rarely have any delays or
problems with their payments. Nine out
of ten problems with Treasurydisbursed payments are related to paper
checks even though checks constitute
only 19 percent of all Treasurydisbursed payments made by the
Government.
These projected savings also do not
account for the costs that would no
longer be incurred by banks and credit
unions for cashing checks and
reimbursing the Government when there
are alterations, forgeries, or
unauthorized indorsements of Federal
benefit checks. In fiscal year 2009, it
cost the banking industry $69.3 million
to reimburse the Treasury for checks
that had been fraudulently altered or
counterfeited, or contained a forged or
unauthorized indorsement. In fiscal year
2010, these costs increased to $88
million.
5. Alternative Approaches Considered
Treasury considered three alternative
approaches to achieving the benefits of
direct deposit other than the approach
described in this rulemaking notice.
First, Treasury could have eliminated
the individual EFT waivers sooner for
everyone, i.e., eliminate the waivers for
all benefit recipients on the same
effective date, but Treasury was
concerned about the impact of such a
rule on payment recipients if the
amount of time to educate the public
about the rule’s requirements and
benefits was inadequate. It is important
for Treasury and benefit agencies to be
prepared to respond to recipients’
inquiries about the new rules, which
requires sufficient time to train agency
customer service representatives,
educate those affected by the new rules,
and to implement any process changes
that may be required. Treasury will
work closely with the agencies to ensure
that implementation requirements are
understood and can be addressed in the
time frame in the rule.
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80333
Second, Treasury also considered
phasing in the elimination of the
individual EFT waivers over a longer
period of time. Treasury is concerned
that such a delay results in additional
costs to individuals who will be delayed
in realizing the benefits of direct
deposit. Treasury intends to begin its
public education campaign immediately
upon the promulgation of this final rule.
Treasury will monitor the progress of its
campaign, and adjust the campaign as
necessary to ensure maximum
effectiveness. In addition, a delayed
implementation results in additional
costs to the Government and taxpayers.
For every year that Treasury delays full
implementation of the EFT rule, the
Government spends at least $117
million more for check payments than it
would otherwise spend if recipients
were receiving EFT payments.
Finally, Treasury considered
eliminating all EFT waivers, and
whether to institute a formal application
process for individuals seeking to
invoke a waiver to the EFT requirement.
Treasury is concerned that such an
approach would require the
unnecessary development of a new
bureaucratic infrastructure to process
the applications, and would impose
administrative burdens on both
Government agencies and benefit
recipients. After reviewing comments
received in response to the NPRM,
Treasury retained waivers for recipients
born prior to May 1, 1921 who are
receiving Federal payments by check on
March 1, 2013, for payments that are not
eligible for deposit to a Direct Express®
card account, and for recipients whose
Direct Express® card has been
suspended or cancelled. In addition,
this rule allows a payment recipient to
request a waiver from the EFT
requirement on the basis that EFT
would impose a hardship because of the
recipient’s inability to manage an
account at a financial institution or a
Direct Express® card account due to a
mental impairment, or because the
recipient lives in a remote geographic
area lacking the infrastructure to
support electronic financial
transactions. Recipients requesting
waivers are required to submit a
certification with a short statement
explaining why they need a waiver. The
certification will be signed by the
individual requesting the waiver before
a notary public, or in such form that
Treasury may prescribe. The waiver
request is considered effective unless
Treasury rejects the request.
The availability of the Direct Express®
card negates the need for other
individual waivers. Agencies retain the
ability to waive EFT requirements for
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classes of payments for various reasons.
Finally, in an unusual or exceptional
circumstance, the Secretary has the
authority to waive the EFT requirement,
but Treasury does not anticipate
invoking this authority except in rare
situations.
emcdonald on DSK2BSOYB1PROD with RULES
6. Other Issues
a. Financial Agent
Building on the ‘‘lessons learned’’ in
previous programs and the Direct
Express® card program pilot, Treasury
issued an announcement in 2007
seeking a financial institution qualified
to act as a Treasury-designated financial
agent to provide debit card services for
Federal benefit recipients nationwide,
through the Direct Express® card
program. Treasury has unique legal
authority to designate a financial
institution as its financial agent to
disburse Federal benefit payments
electronically, which includes the
establishment of an account meeting
certain requirements, maintenance of an
account, the receipt of Federal payments
electronically, and the provision of
access to funds in the account on the
terms specified by Treasury. See 12
U.S.C. 90; 31 CFR 208.2. Fifteen
financial institutions responded, and
after careful review of the applications,
Treasury selected Comerica Bank as its
agent based on various criteria,
including the proposed cardholder fees.
Treasury considered, but rejected,
selecting multiple financial agents
(although it has the option to do so in
the future) primarily to ensure that the
selected financial agent would be able to
maintain a sufficient volume of active
accounts in order to cost-effectively
sustain a program with the lowest
possible cardholder fees. The financial
agent selection process used by
Treasury enabled Treasury to obtain
debit card services with the most value
for benefit recipients, including, among
other things, better consumer
protections than those offered by most
prepaid card products, a surcharge-free
ATM network of more than 53,000
surcharge-free ATMs, free low balance
alerts and deposit notification,
unlimited free customer service calls,
and the ability to use the debit card
product to access Federal benefit
payments without incurring a fee.
Treasury provides oversight to confirm
that its financial agent operates the
Direct Express® card program to provide
maximum value at a reasonable cost to
cardholders. The card program is now
available to recipients of Social
Security, SSI, Veterans compensation
and pension, civil service retirement,
and railroad retirement benefit
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17:05 Dec 21, 2010
Jkt 223001
payments. This allows Federal payment
recipients to receive multiple types of
Federal payments to a single Direct
Express® card account.
b. Garnishment
Treasury has also addressed the
concerns about the improper freezing
and seizure of benefit funds exempt
from garnishment. Treasury and the four
major benefit paying agencies—Office of
Personnel Management, Railroad
Retirement Board, Social Security
Administration, and Department of
Veterans Affairs—published a notice of
proposed rulemaking and will soon
publish a joint rule. The rule will help
ensure that garnishment-exempt benefit
payments in an account are not
improperly seized, and will protect
benefit recipients where benefit
payments are directly deposited to an
account at a financial institution.
Regulatory Flexibility Act Analysis
It is hereby certified that the rule will
not have a significant economic impact
on a substantial number of small
entities. The rule applies to individuals
who receive Federal payments, and does
not directly impact small entities.
Accordingly, a regulatory flexibility
analysis under the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.) is
not required.
Unfunded Mandates Act of 1995
Section 202 of the Unfunded
Mandates Reform Act of 1995, 2 U.S.C.
1532 (Unfunded Mandates Act),
requires that the agency prepare a
budgetary impact statement before
promulgating any rule likely to result in
a Federal mandate that may result in the
expenditure by State, local, and tribal
governments, in the aggregate, or by the
private sector, of $100 million or more
in any one year. If a budgetary impact
statement is required, section 205 of the
Unfunded Mandates Act also requires
the agency to identify and consider a
reasonable number of regulatory
alternatives before promulgating the
rule. We have determined that the rule
will not result in expenditures by State,
local, and tribal governments, in the
aggregate, or by the private sector, of
$100 million or more in any one year.
Accordingly, we have not prepared a
budgetary impact statement or
specifically addressed any regulatory
alternatives.
List of Subjects in 31 CFR Part 208
Accounting, Automated Clearing
House, Banks, Banking, Electronic funds
transfer, Financial institutions,
Government payments.
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Frm 00048
Fmt 4700
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For the reasons set out in the
preamble, 31 CFR part 208 is amended
to read as follows:
■
PART 208—MANAGEMENT OF
FEDERAL AGENCY DISBURSEMENTS
1. The authority citation for part 208
continues to read as follows:
■
Authority: 5 U.S.C. 301; 12 U.S.C. 90, 265,
266, 1767, 1789a; 31 U.S.C. 321, 3122, 3301,
3302, 3303, 3321, 3325, 3327, 3328, 3332,
3335, 3336, 6503; Pub. L. 104–208, 110 Stat.
3009.
2. In § 208.2, redesignate paragraphs
(c) through (o) as paragraphs (d) through
(p), respectively, add new paragraph (c),
and revise redesignated paragraph (e) to
read as follows:
■
§ 208.2
Definitions.
*
*
*
*
*
(c) Direct Express® card means the
prepaid debit card issued to recipients
of Federal benefits by a Financial Agent
pursuant to requirements established by
Treasury.
*
*
*
*
*
(e) Electronic benefits transfer (EBT)
means the provision of Federal benefit,
wage, salary, and retirement payments
electronically, through disbursement by
a financial institution acting as a
Financial Agent. For purposes of this
part, EBT includes, but is not limited to,
disbursement through an ETAsm, a
Federal/State EBT program, or a Direct
Express® card account.
*
*
*
*
*
■ 3. Amend § 208.4 as follows:
■ a. Remove the introductory text;
■ b. Revise paragraph (a);
■ c. Add paragraph (a)(1);
■ d. Redesignate paragraphs (b) through
(g) as paragraphs (a)(2) through (a)(7).
■ e. In redesignated paragraph (a)(4),
further redesignate paragraphs (1) and
(2) as paragraphs (a)(4)(i) and (ii);
■ f. Revise redesignated paragraph
(a)(6); and
■ g. Add new paragraph (b).
The revisions and additions read as
follows:
§ 208.4
Waivers.
(a) Payment by electronic funds
transfer is not required in the following
cases:
(1) Where an individual:
(i) Is receiving a Federal payment by
check prior to May 1, 2011. In such
cases, the individual may continue to
receive those payments by check
through February 28, 2013;
(ii) Files a claim for a Federal
payment prior to May 1, 2011, and
requests payment by check at the time
he or she files the claim. In such cases,
the individual may receive those
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Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations
emcdonald on DSK2BSOYB1PROD with RULES
payments by check through February
28, 2013;
(iii) Was born prior to May 1, 1921,
and is receiving payment by check on
March 1, 2013;
(iv) Receives a type of payment that
is not eligible for deposit to a Direct
Express® card account. In such cases,
those payments are not required to be
made by electronic funds transfer,
unless and until such payments become
eligible for deposit to a Direct Express®
card account;
(v) Is ineligible for a Direct Express®
card because of suspension or
cancellation of the individual’s card by
the Financial Agent;
(vi) Has filed a waiver request with
Treasury certifying that payment by
electronic funds transfer would impose
a hardship because of the individual’s
inability to manage an account at a
financial institution or a Direct Express®
card account due to a mental
impairment, and Treasury has not
rejected the request; or
(vii) Has filed a waiver request with
Treasury certifying that payment by
electronic funds transfer would impose
a hardship because of the individual’s
inability to manage an account at a
financial institution or a Direct Express®
card account due to the individual
living in a remote geographic location
lacking the infrastructure to support
electronic financial transactions, and
Treasury has not rejected the request.
*
*
*
*
*
(6) Where the agency does not expect
to make payments to the same recipient
within a one-year period on a regular,
recurring basis and remittance data
explaining the purpose of the payment
is not readily available from the
recipient’s financial institution
receiving the payment by electronic
funds transfer; and
*
*
*
*
*
(b) An individual who requests a
waiver under paragraphs (a)(1)(vi) and
(vii) of this section shall provide, in
writing, to Treasury a certification
supporting that request, in such form
that Treasury may prescribe. The
individual shall attest to the
certification before a notary public, or
otherwise file the certification in such
form that Treasury may prescribe.
■ 4. Revise § 208.6 to read as follows:
§ 208.6
Card.
Availability of the Direct Express®
An individual who receives a Federal
benefit, wage, salary, or retirement
payment shall be eligible to open a
Direct Express® card account. The
offering of a Direct Express® card
account shall constitute the provision of
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17:05 Dec 21, 2010
Jkt 223001
EBT services within the meaning of
Public Law 104–208.
■ 5. Revise § 208.7 to read as follows:
§ 208.7
Agency responsibilities.
An agency shall put into place
procedures that allow recipients to
provide the information necessary for
the delivery of payments to the recipient
by electronic funds transfer to an
account at the recipient’s financial
institution or a Direct Express® card
account.
■ 6. Revise § 208.8 to read as follows:
§ 208.8
Recipient responsibilities.
Each recipient who is required to
receive payment by electronic funds
transfer shall provide the information
necessary to effect payment by
electronic funds transfer.
■ 7. Revise the third sentence in
§ 208.11 to read as follows:
§ 208.11
Accounts for disaster victims.
* * * Treasury may deliver payments
to these accounts notwithstanding any
other payment instructions from the
recipient and without regard to the
requirements of §§ 208.4 and 208.7 of
this part and § 210.5 of this chapter.
* * *
■ 8. Remove Appendix A and Appendix
B to Part 208.
Dated: December 16, 2010.
Richard L. Gregg,
Fiscal Assistant Secretary.
[FR Doc. 2010–32117 Filed 12–21–10; 8:45 am]
BILLING CODE 4810–35–P
DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 210
RIN 1510–AB24
Federal Government Participation in
the Automated Clearing House
Financial Management Service,
Fiscal Service, Treasury.
ACTION: Interim final rule.
AGENCY:
The Department of the
Treasury, Financial Management
Service (FMS) is amending its
regulation governing the use of the
Automated Clearing House (ACH)
system by Federal agencies to permit the
delivery of Federal payments to prepaid
debit cards that meet certain criteria. To
be eligible to receive Federal payments,
a card must provide the cardholder with
pass-through deposit or share insurance
and the card account must not have an
attached line of credit or loan feature
SUMMARY:
PO 00000
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Fmt 4700
Sfmt 4700
80335
that triggers automatic repayment from
the card account. In addition, the issuer
of the card account must provide the
cardholder with all of the consumer
protections that apply to a payroll card
under the Federal Reserve Board’s
Regulation E.
DATES: This interim final rule is
effective January 21, 2011. Comments
must be received on or before February
22, 2011.
ADDRESSES: You can download this
interim final rule at the following Web
site: https://www.fms.treas.gov/ach. You
may also inspect and copy this interim
final rule at: Treasury Department
Library, Freedom of Information Act
(FOIA) Collection, Room 1428, Main
Treasury Building, 1500 Pennsylvania
Avenue, NW., Washington, DC 20220.
Before visiting, you must call (202) 622–
0990 for an appointment.
In accordance with the U.S.
government’s eRulemaking Initiative,
FMS publishes rulemaking information
on https://www.regulations.gov.
Regulations.gov offers the public the
ability to comment on, search, and view
publicly available rulemaking materials,
including comments received on rules.
Comments on this rule, identified by
docket FISCAL–FMS–2010–0003,
should only be submitted using the
following methods:
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions on the Web site for
submitting comments.
• Mail: Walt Henderson, Financial
Management Service, 401 14th Street,
SW., Room 337, Washington, DC 20227.
The fax and e-mail methods of
submitting comments on rules to FMS
have been decommissioned.
Instructions: All submissions received
must include the agency name
(‘‘Financial Management Service’’) and
docket number FISCAL–FMS–2010–
0003 for this rulemaking. In general,
comments received will be published on
Regulations.gov without change,
including any business or personal
information provided. Comments
received, including attachments and
other supporting materials, are part of
the public record and subject to public
disclosure. Do not disclose any
information in your comment or
supporting materials that you consider
confidential or inappropriate for public
disclosure.
FOR FURTHER INFORMATION CONTACT: Walt
Henderson, Director of the EFT Strategy
Division, at (202) 874–6619 or
walt.henderson@fms.treas.gov; or
Natalie H. Diana, Senior Counsel, at
(202) 874–6680 or
natalie.diana@fms.treas.gov.
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Agencies
[Federal Register Volume 75, Number 245 (Wednesday, December 22, 2010)]
[Rules and Regulations]
[Pages 80315-80335]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-32117]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 208
RIN 1510-AB26
Management of Federal Agency Disbursements
AGENCY: Financial Management Service, Fiscal Service, Treasury.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Department of the Treasury (Treasury), Financial
Management Service (FMS), is amending its regulation to require
recipients of Federal nontax payments to receive payment by electronic
funds transfer (EFT), effective May 1, 2011. The effective date is
delayed until March 1, 2013, for individuals receiving Federal payments
by check on May 1, 2011; and for individuals who file claims for
Federal benefits before May 1, 2011, and request check payments when
they file. Individuals who do not choose direct deposit of their
payments to an account at a financial institution would be enrolled in
the Direct Express[supreg] Debit MasterCard[supreg] card program, a
prepaid card program established pursuant to terms and conditions
approved by FMS. Treasury waives the EFT requirement for recipients
born prior to May 1, 1921, who are receiving payments by paper check on
March 1, 2013; for payments not eligible for deposit to a Direct
Express[supreg] prepaid card account; and for recipients whose Direct
Express[supreg] card has been suspended or cancelled. In addition, this
rule establishes the criteria under which a payment recipient may
request a waiver if the
[[Page 80316]]
EFT requirement creates a hardship due to his or her mental impairment
or remote geographic location.
DATES: This rule is effective February 22, 2011.
ADDRESSES: You can download this rule at the following Web site: https://www.fms.treas.gov/eft. You may also inspect and copy this rule at:
Treasury Department Library, Room 1428, Main Treasury Building, 1500
Pennsylvania Avenue, NW., Washington, DC 20220. Before visiting, you
must call (202) 622-0990 for an appointment. In accordance with the
U.S. government's eRulemaking Initiative, FMS publishes rulemaking
information on https://www.regulations.gov. Regulations.gov offers the
public the ability to comment on, search, and view publicly available
rulemaking materials, including comments received on rules.
FOR FURTHER INFORMATION CONTACT: Walt Henderson, Director, EFT Strategy
Division; Natalie H. Diana, Senior Counsel; or Ronda Kent, Senior
Counsel, at eft.comments@fms.treas.gov or (202) 874-6619.
SUPPLEMENTARY INFORMATION: On June 17, 2010, the Department of the
Treasury (Treasury), Financial Management Service (FMS), published a
notice of proposed rulemaking (NPRM) at 75 FR 34394, requesting comment
on a proposed amendment to 31 CFR part 208 (Part 208), which implements
the requirements of 31 U.S.C. 3332. Section 3332, title 31, United
States Code, as amended by subsection 31001(x)(1) of the Debt
Collection Improvement Act of 1996 (Pub. L. 104-134) (Section 3332),
generally requires that all Federal nontax payments be made by
electronic funds transfer (EFT), unless waived by the Secretary. The
Secretary must ensure that individuals required to receive Federal
payments by EFT have access to an account at a financial institution
``at a reasonable cost'' and with ``the same consumer protections with
respect to the account as other account holders at the same financial
institution.'' See 31 U.S.C. 3332(f), (i)(2). Direct deposit is the
primary method used to make EFT Federal payments.
The NPRM proposed to amend Part 208 to require all recipients of
Federal nontax payments to receive payments by EFT, effective March 1,
2011, with a delayed effective date of March 1, 2013 for individuals
receiving Federal payments by check on March 1, 2011, and for
individuals who file claims for Federal benefits before March 1, 2011
and request check payments when they file. Recipients receiving
payments by direct deposit prior to March 1, 2011, would continue to do
so under the proposed rule.
Treasury's proposed rule stated that a Federal payment recipient
could choose to have payments directly deposited to his or her own
account at the recipient's financial institution. The NPRM stated that
individuals who did not choose direct deposit of their payments to an
account at a financial institution would be enrolled in the Direct
Express[supreg] \1\ Debit MasterCard[supreg] card program, a prepaid
card program established pursuant to terms and conditions approved by
FMS. The proposed rule contemplated that, beginning on March 1, 2013,
all recipients of Federal benefit and other non-tax payments would
receive their payments by direct deposit, either to a bank account or
to a Direct Express[supreg] card account.
---------------------------------------------------------------------------
\1\ Direct Express[supreg] is a registered service mark of the
Financial Management Service, U.S. Department of the Treasury. The
Direct Express[supreg] Debit MasterCard[supreg] card is issued by
Comerica Bank, pursuant to a license by MasterCard International
Incorporated. MasterCard[supreg] and the MasterCard[supreg] Brand
Mark are registered trademarks of MasterCard International
Incorporated.
---------------------------------------------------------------------------
Treasury sought comment on all aspects of the proposed rule, and
specifically requested comments regarding (1) exceptional circumstances
where specific types of individual EFT waivers could be needed, (2) the
costs to recipients for accessing their benefit payments received by
paper check compared to those received by EFT, and (3) alternative
phase-in approaches.
Treasury is finalizing the proposal in the NPRM to require, in
general, that all Federal nontax payment recipients receive payments by
EFT. The March 1, 2011 effective date has been changed to May 1, 2011.
There remains a delayed effective date of March 1, 2013, for: (1)
individuals receiving Federal payments by check on May 1, 2011; and (2)
individuals who file claims for Federal benefits before May 1, 2011 and
request check payments when they file. In addition, after consideration
of the comments received, Treasury is modifying its proposed
elimination of all individual waivers from the EFT requirement.
Instead, Treasury will automatically waive the EFT requirement for: (1)
A recipient born prior to May 1, 1921, who is receiving Federal
payments by check on March 1, 2013; (2) a payment that is not eligible
for deposit to a Direct Express[supreg] prepaid card account; and (3) a
recipient whose Direct Express[supreg] card has been suspended or
cancelled. Also, the final rule establishes the criteria under which a
payment recipient may request a waiver if the EFT requirement creates a
hardship due to his or her mental impairment or remote geographic
location.
I. Background
Part 208 sets forth the general rule requiring Federal payments to
be made by EFT and the requirements for accounts to which Federal
payments may be sent by EFT. ``Federal payment'' means any nontax
payment made by an agency, including, but not limited to, Federal wage,
salary, and retirement payments; vendor and expense reimbursement
payments; benefit payments; and miscellaneous payments. See 31 CFR
208.2(g). Federal payments include payments made to representative
payees and other authorized payment agents. See 31 CFR 210.5(b)(1). For
Part 208 purposes, ``agency'' means any department, agency, or
instrumentality of the United States Government, or a corporation owned
or controlled by the Government of the United States. See 31 CFR
208.2(a).
As explained in the NPRM, Part 208 provides that any individual who
receives a Federal benefit, wage, salary, or retirement payment is
eligible to open an Electronic Transfer Account (ETA) at a financial
institution that offers such accounts, and establishes the
responsibilities of Federal agencies and recipients under the
regulation. Part 208 also sets forth a number of waivers to the general
requirement that Federal payments be delivered by EFT. See 31 CFR
208.4. Among the waivers previously included in the regulation were
waivers for situations in which an individual determined that payment
by EFT would impose a hardship due to a physical or mental disability
or a geographic, language or literacy barrier, or would impose a
financial hardship. See 31 CFR 208.4(a).
Treasury has reviewed the comments received in response to the
NPRM, and, as described in more detail below, modified its proposal to
eliminate all individual waivers from the EFT requirements. The
Secretary's waiver authority remains unchanged, and Federal agencies
continue to have the ability to waive payment by direct deposit or
other EFT method in the circumstances described in paragraphs (b)
through (g) of Sec. 208.4, namely, for situations where the
infrastructure in a foreign country does not support EFT, for certain
disaster or military situations, for situations in which there may be a
security threat or for valid law enforcement reasons, for non-recurring
payments, and for unusual and/or urgent situations where the Government
would be seriously injured unless payment is made by a method other
[[Page 80317]]
than EFT. The final rule revises the criteria for the agency waiver
related to non-recurring payments, as described below.
II. Summary of NPRM Comments
Treasury received 33 comment letters and 1,087 comments solicited
by and sent to a consumer advocate organization via its Web site. Of
the 33 comment letters, three were from consumer advocate groups. One
of the groups submitted its comments on behalf of its low-income
clients, another consumer advocate organization, and 23 national,
state, and local advocates for low and moderate income recipients of
Federal benefits. While the consumer advocate groups generally
acknowledged the benefits of EFT, all three groups opposed the complete
elimination of waivers for individuals for whom EFT might impose a
hardship and suggested improvements to the Direct Express[supreg] card
and changes to the Direct Express[supreg] card terms and conditions. In
addition, the three groups recommended that Treasury issue consumer
protection rules for individuals whose benefit payments are delivered
electronically to prohibit predatory loans, the unlawful freezing or
garnishing of benefit payments legally exempt from garnishment, and the
offsetting of overdraft and other bank fees against benefit payments.
Three comment letters were from associations that represent
financial institutions. One commenter supported Treasury's proposal,
provided that payments would be delivered, by default, to a recipient's
existing bank account and that recipients would be allowed to elect
direct deposit to reloadable prepaid cards issued by insured depositary
institutions. Another commenter supported Treasury's proposal,
including the alternative debit card option, because of the potential
cost savings to credit unions. The third association commenter also
supported Treasury's proposal and urged Treasury not to include
individual waivers in the final rule.
A national electronic payments association and one financial
institution submitted comment letters supporting Treasury's proposal.
The electronic payments association supported the Direct
Express[supreg] card as a safe, convenient, and reasonably priced
alternative for unbanked Federal benefit recipients. The financial
institution urged Treasury to consider expanding its regulations to
allow direct deposit of Federal payments to general purpose reloadable
prepaid debit cards.
Fourteen attorneys and an association that represents Social
Security claimants' representatives recommended that Treasury waive the
EFT requirements for attorneys and other representatives who receive
fee payments for representing Social Security claimants. The
association and the attorneys stated that, when fee monies are
electronically deposited into an attorney's account, the attorney does
not receive adequate information to determine which client the fee
payment is for. In addition, the association and the attorneys stated
that many attorneys and other representatives, as associates or
employees of a firm, are precluded from accepting direct deposit of
representative fees into their own personal bank account. These fee
payments must be deposited directly to accounts owned by their firms.
This is problematic because the Social Security Administration will
only make representative fee payments to individual attorneys or
representatives, most of whom are not the owners of their firm's bank
account, and therefore cannot accept or direct payments to them.
A national trade association representing neighborhood financial
service providers, such as check cashers, remittance servicers, short-
term lenders and bill payment providers, did not support Treasury's
proposal. It viewed the proposal as depriving Americans of the right of
choice with respect to the delivery of Federal nontax payments,
disproportionately affecting low- and moderate-income individuals.
Treasury received six comment letters from individual or
unidentified commenters with various concerns. One of these commenters,
a coordinator of a local Volunteer Income Tax Assistance program,
supported the proposed rule, encouraged Treasury to discontinue the ETA
program, and suggested modifying the Direct Express[supreg] card
program to provide at least one surcharge-free automated teller machine
(ATM) withdrawal at any ATM. Another commenter, a certified public
accountant, raised concerns about whether the proposed rule would
create problems if nursing homes are unable to clearly identify the
resident for whom a benefit payment has been directly deposited to the
nursing home's trust account. Another individual suggested that
Treasury clarify that it continues to support the ETA as an option for
receiving Federal benefit payments by direct deposit. Another
individual suggested that Treasury require financial institutions to
allow recipients of Federal funds to obtain the full amount of their
payment in one transaction with minimal charge. An individual attorney
raised a concern that direct deposit of Social Security disability or
SSI benefits could inadvertently lead to disqualification from Medicaid
whereas an individual receiving a paper check payment can control when
the payment is deposited into his or her account. An unidentified
individual opposed the proposed rule primarily because the commenter
believed that benefit recipients are entitled to choose to receive
their payments by paper check, and did not agree with Treasury's
underlying rationale for the proposed rule.
In addition to its own comment, one consumer advocate organization
sent Treasury 1,087 comments it solicited and received through its Web
site. Sixty-three of the Web site commenters expressed support for
Treasury's proposed rule, but most of the commenters opposed the
proposal for one or more of the following reasons: (1) 845 of the
commenters cited a preference for allowing those who wish to continue
to receive a paper check to do so (more than 140 of the commenters
already receive their payments electronically, but were concerned for
others who may choose not to do so); (2) 615 of the commenters cited an
objection to bank fees, including Direct Express[supreg] card fees,
with approximately 482 commenters objecting to requiring a benefit
recipient to pay fees to receive a monthly paper statement; (3) 558
commenters cited concerns about requiring benefit recipients to bank
online and/or discomfort with adapting to new payment technologies,
especially for older benefit recipients; (4) 475 commenters cited
concerns about whether electronic banking would lead to increased
identity theft; (5) 410 commenters cited concerns about providing bank
account information to the Social Security Administration or other
Federal agencies; and (6) 134 commenters were concerned about the
ability of elderly benefit recipients to change the way they receive
their benefit payments. Approximately 125 of the commenters simply
expressed general opposition to Treasury's proposal. Other
miscellaneous reasons for opposing Treasury's proposal included
preference for checks (65 commenters), concerns about EFT processing
(13 commenters) and improper garnishment (6 commenters), opposition to
prepaid cards (21 commenters), concerns about access to the banking
system (35 commenters), need for access to a free account (18
commenters), and hardship (10 commenters).
Finally, three Federal government agencies submitted comments for
Treasury's consideration. One agency
[[Page 80318]]
expressed uncertainty about whether recipients of payments from that
agency would qualify for the Direct Express[supreg] card. Two agencies
raised concerns about making payments to recipients who reside in
geographically remote areas with no access to electronic financial
services.
III. Treasury's Responses to NPRM Comments
In developing the final rule, Treasury has attempted to implement
the requirements of Section 3332 on balance with concerns expressed by
different commenters. The final rule essentially adopts the core
provisions of the proposed rule, and also makes available several
important waivers for individuals in circumstances in which Treasury
finds that requiring EFT could create a significant hardship for those
individuals. The final rule reflects the view of the commenters who
generally agree that receiving payments by EFT is beneficial to
recipients and taxpayers for the reasons described in the NPRM and this
final rule. Treasury has addressed the concerns raised by those opposed
to the EFT requirement, and will continue to monitor carefully whether
recipients are subject to additional hardships in the future because of
the requirements of this final rule. Treasury's responses to the NPRM
comments are as follows.
1. Retain Paper Check as a Payment Option
Many commenters voiced a preference for Treasury to allow
recipients the choice of a paper check as a way to receive their
Federal payments. Treasury recognizes that the paper check has been an
important Federal payment instrument for at least 150 years. Treasury
also recognizes that choice, as expressed by many of the commenters, is
an important American value. While Congress mandated that all non-tax
payments be made electronically, Part 208 continues to offer payment
recipients the choice of how to receive their payments in an electronic
format. Payment recipients have many financial account options
available to them, and in fiscal year 2010, more than 80% of all non-
tax payment recipients selected their own accounts for the purpose of
receiving payments by EFT. Further, Congress conditioned its mandate on
Treasury making available to payment recipients an account at a
financial institution ``at a reasonable cost'' and with ``the same
consumer protections with respect to the account as other account
holders at the same financial institution.'' See 31 U.S.C. 3332(f),
(i)(2).
The Direct Express[supreg] card, which is now a nationwide option
for most Federal benefit recipients, meets these statutory account
requirements. There are no monthly fees and most services are free, so
it is possible for an individual to use the Direct Express[supreg] card
for free. There are no fees for cardholders to sign up for or activate
the card; receive deposits; make purchases at retail locations, online
or by telephone; get cash at retail locations and financial
institutions; or check the card's balance at an ATM, by telephone or
online. Transaction history and other account information are available
at no cost online or by telephone, but if desired, a cardholder may
receive a monthly paper statement for $ .75 per month. There are no
fees for declined transactions and, in rare instances when overdrafts
occur, there are no overdraft fees.
Cardholders can choose to receive free automated text, email or
telephone ``low balance'' alerts or ``deposit notifications'' when
money is deposited to their card account. Cardholders may close their
Direct Express[supreg] card account at any time without a fee. There
are no inactivity fees and there is no charge for bank teller cash
withdrawals at MasterCard[supreg] member banks. The free services and
minimal fees are fully disclosed on the Direct Express[supreg] Web site
(www.USDirectExpress.com), in materials available to interested
applicants, and in materials that are sent to new cardholders along
with the card. Fee and features information are also available by
calling the Direct Express[supreg] toll-free call center.
Cardholders may make purchases anywhere Debit MasterCard[supreg] is
accepted, including millions of retail locations worldwide, online, or
by telephone. The Direct Express[supreg] card provider does not impose
any limits on the number of transactions a cardholder may conduct with
a card. Similarly, cardholders may make cash withdrawals and check
their account balances at ATMs. A cardholder is allowed one free ATM
cash withdrawal for every Federal payment the cardholder receives,
valid until the end of the month following the month of receipt. For
subsequent ATM cash withdrawals, a cardholder pays a fee to the card
issuer of $.90 per ATM withdrawal in the United States. ATM owners
often charge ATM users additional fees, known as ``surcharge fees;''
however, a Direct Express[supreg] cardholder may make cash withdrawals
at more than 53,000 Direct Express[supreg] card surcharge-free network
ATMs without paying any surcharge fees. The Direct Express[supreg] card
surcharge-free ATM network consists of ATMs owned by a variety of
entities who have agreed to offer surcharge-free ATM access to Direct
Express[supreg] cardholders. Cardholders are provided with information
on how to recognize the various logos that identify a surcharge-free
ATM, the Direct Express[supreg] card Web site has an ATM locator
feature to assist cardholders in finding a surcharge-free ATM, and
cardholders may call the customer service department with any questions
on how to locate a surcharge-free ATM. The Direct Express[supreg] card
provider does not impose a daily limit for ATM withdrawals, although
many ATM owners do set limits on the maximum amount of cash that may be
withdrawn by any debit cardholder. ATM owners' daily ATM withdrawal
limits typically range from $200 to $1,000.
Direct Express[supreg] cardholders are protected by the Federal
Reserve Board's Regulation E (12 CFR part 205, which implements the
Electronic Funds Transfer Act (Regulation E)), which generally provides
certain protections to a cardholder whose card is lost or stolen,
subject to reporting requirements. In fact, Direct Express[supreg]
cardholders have 90 days to report unauthorized transactions rather
than the typical 60 days offered by most financial institutions. Card
balances are covered by deposit insurance by the Federal Deposit
Insurance Corporation (FDIC) to the extent allowed by law and Direct
Express[supreg] cardholders are not at risk for an improper garnishment
or the related freezing of funds in the card account. More information
about the Direct Express[supreg] card, including a list of all fees and
the terms and conditions of card use, can be found at
www.USDirectExpress.com.
In light of the choices available to payment recipients, as well as
the benefits of electronic payments to recipients and the Government,
Treasury believes it is appropriate to make all Federal nontax payments
electronically.
2. Provide Limited Waivers From EFT Requirement
a. Limited Waivers for Hardship Based on Mental Impairment and
Geographic Barriers
In its NPRM, Treasury requested comments about ``examples of
exceptional circumstances where specific types of individual EFT
waivers could be needed, even with the availability of the Direct
Express[supreg] card for Federal benefit recipients.'' See 75 FR 34394,
at 34395. After review and consideration of all of the comments,
[[Page 80319]]
Treasury agrees with those commenters who urged Treasury to reconsider
its proposed elimination of individual waivers from the EFT requirement
for claims of hardships due to mental disability or geographic
barriers. Treasury does not agree, however, that such reconsideration
should be extended to the elimination of waivers related to physical
disability, language or literacy barriers, or where payment by EFT
would impose a financial hardship. None of the commenters provided
specific examples of how physical disability or language or literacy
barriers would make receiving payments by EFT more difficult than
receiving payments by paper check and Treasury does not find any basis
for maintaining a waiver for such conditions. In addition, although
several commenters urged Treasury to consider that any fees charged for
use of the Direct Express[supreg] card could create a financial
hardship, the Direct Express[supreg] card is structured in such a way
that it may be used at no cost to the payment recipient, thus
minimizing a beneficiary's risk of incurring a financial hardship to
receive and use his or her benefits. Treasury recognizes that more
education regarding how to use the card for free is needed and is
expanding its program to provide such information to Direct
Express[supreg] cardholders in various ways, including direct mail,
informational pictorial brochures, online videos, and more.
One consumer advocate organization urged Treasury to retain a paper
check option for those who articulate a ``legitimate'' reason for
receiving payments by paper check, including physical or mental
disability that makes it difficult to use a debit card; difficulty
accessing funds without incurring fees, costs, or inconvenience;
availability of a less expensive and more beneficial alternative using
a paper check; dispute with the participating financial provider of the
debit card; concerns over privacy or financial security; literacy and
technology barriers; and need to accommodate assistance provided by a
representative payee or family member. This commenter proposed that
Treasury accept individuals' statements about the need for a paper
check without inquiry or review. Another consumer advocate organization
similarly urged Treasury to reconsider its proposal to eliminate
individual waivers with respect to people with mental disabilities,
emotional disorders, or other disabilities making the use of the Direct
Express[supreg] card difficult; people who live in rural areas, or even
inner city areas, where there is not ready access to banks and
automated teller machines (ATMs); and other hardships that make both a
bank account and the Direct Express[supreg] card unusable for the
payment recipient. This organization also suggested that Treasury not
review waiver requests because the costs of policing a waiver process
would far outweigh the costs associated with letting recipients who
would not qualify for a waiver receive a paper check. Another consumer
advocate organization also objected to the elimination of the provision
allowing recipients to determine on their own whether they qualify for
a waiver to obtain their Federal payments by paper check. Unlike the
other two consumer advocate organizations, this organization urged
Treasury to offer the broadest waiver possible to allow any individual
who wants his or her payments by paper check to receive them that way.
After reviewing the comments, Treasury has reconsidered its
proposed elimination of the waivers related to mental disability and
geographic barriers. A consumer advocate organization commented on the
need to provide a waiver for individuals who have mental or emotional
disabilities, for example, someone with an anxiety disorder that makes
it difficult to receive benefits electronically, but not by paper
check. Another commenter cited his parents with poor memories stating
that having their payments deposited electronically would simply add to
their confusion and problems in taking care of their own finances. In
recognition of individuals within the payment recipient population who
may have mental impairments that do not hinder their ability to manage
their financial transactions using checks or cash, but for whom EFT
would present a significant hardship, Treasury is retaining a waiver
from the EFT requirement for an individual payment recipient for whom
EFT would impose a hardship because of his or her inability to manage a
bank account or prepaid debit card due to a mental impairment. Treasury
notes that, in those cases where a beneficiary suffers from a mental
disability necessitating the appointment of a representative payee, the
representative payee is the ``recipient'' of a Federal payment under
this rule. In those cases, it is the condition of the representative
payee and not the beneficiary that is the determining factor as to
whether a waiver is appropriate.
Two Federal agencies cited the need to consider the inability of
payment recipients who live in remote and less developed areas of the
country to access their payments electronically. For example, according
to one agency, many recipients of Individual Indian Money payments live
in remote and less developed areas such as Alaska and on reservations
throughout Indian Country in an environment lacking many amenities
including public infrastructure such as roads and convenient access to
providers of goods and services. The other agency noted that Regional
Advisory Council members appointed under the Alaska National Interest
Lands Conservation Act (ANILCA) travel to council meetings held in off-
roadway bush villages where it is highly unusual for most village
merchants to have the infrastructure to accept charge cards. These
villages are cash economies with check cashing capabilities, but no
ability to process electronic financial transactions. In its comment,
one consumer advocate organization cited the lack of access to banks
and ATMs in the majority of Montana, rural parts of Alaska, and some
rural parts of Missouri. The fact that an area is rural or remote does
not necessarily preclude the use of electronic financial services. As
these examples demonstrate, it is the combination of being in an area
that is rural or remote plus being in an area lacking the
transportation or other infrastructure (for example, access to the
Internet and online banking) necessary to access electronic financial
services. Therefore, Treasury is including in the final rule a waiver
from the EFT requirement for an individual recipient who lives in a
remote area lacking the infrastructure to support electronic financial
transactions.
Under this final rule, to assert one of these two waivers based on
mental impairment or geographic barrier, a Federal payment recipient is
required to provide to Treasury a written certification supporting his
or her request, in such form as Treasury may prescribe. The individual
is required to sign the certification before a notary public, or
otherwise file the certification in such form that Treasury may
prescribe. Treasury will publish guidance describing the waiver
process.
b. Automatic Waivers for Recipients Born Prior to May 1, 1921 Who Are
Receiving Federal Payments by Check on March 1, 2013; for Payments Not
Eligible for the Direct Express[supreg] Card; and for Recipients Whose
Direct Express[supreg] Card Has Been Suspended or Cancelled
In addition to the limited waivers from the EFT requirement for
hardship claims due to mental impairment and geographic barriers,
Treasury has added automatic waivers for: (1) A recipient
[[Page 80320]]
born prior to May 1, 1921, who is receiving Federal payments by check
on March 1, 2013; (2) a payment that is not eligible for deposit to a
Direct Express[supreg] prepaid card account; and (3) a recipient whose
Direct Express[supreg] card has been suspended or cancelled.
Many commenters were concerned about the ability of elderly check
payment recipients to adapt to electronic money technologies. For
example, one consumer advocate organization explained that ``[p]eople
who are older are more likely to be unaccustomed to or uncomfortable
using the technology involved in electronic disbursements.'' An
individual commenter noted: ``Many of us older people do not understand
and get confused by this paperless society * * * '' On the other hand,
another commenter believed that paper checks cause problems for older
people noting that through her work as a coordinator of a Volunteer
Income Tax Assistance program in Missouri, she has ``witnessed
firsthand the hardships that * * * elderly * * * individuals face when
a Treasury Check is lost or misdirected through the mail.'' Many senior
citizens receive their benefit payments electronically, and are very
capable of managing their finances electronically.
In recognition of the concerns raised by the commenters about the
elderly, Treasury has established an automatic waiver from the EFT
requirement for recipients born prior to May 1, 1921, who are receiving
Federal payments by check on March 1, 2013. According to the Social
Security Administration, almost 80% of Social Security recipients who
will turn 80 years old in 2011 receive their payments electronically.
By comparison, fewer than 72% of Social Security recipients who will
turn 90 years old in 2011 receive their payments electronically.
Further, for most of the population of elderly benefit recipients, the
EFT requirement is not effective until March 2013, giving Treasury,
Federal agencies, community organizations, and others more than two
years to educate individuals so they may become comfortable with and
adapt to the requirement. Between the publication of the final rule and
the effective date for current check recipients, Treasury will work
with Federal agencies and various organizations to educate all affected
individuals, including the elderly and long-time check recipients,
about how to use direct deposit or the Direct Express[supreg] debit
card.
Treasury has also waived the EFT requirement for any payment that
is not eligible for a Direct Express[supreg] card account and for those
payment recipients whose Direct Express[supreg] card has been suspended
or cancelled by the card issuer due to improper, fraudulent, or
unauthorized use. The Direct Express[supreg] card program currently
accepts Social Security, SSI, and Veterans compensation and pension
benefit payments, as well as Railroad Retirement benefit, Black Lung
benefit, and civil service retirement benefit payments. If a recipient
receives a payment for which the Direct Express[supreg] card is
unavailable (for example, an Individual Indian Money payment or a
pension benefit payment), then the individual is automatically exempt
from the EFT requirement for that payment type. Once the card becomes
available for the payment type, then the recipient will be required to
switch to an EFT payment option. If the individual also receives other
types of Federal payments that are accepted by the Direct
Express[supreg] card, those payments remain subject to the EFT
requirement.
Further, under the terms and conditions of the Direct
Express[supreg] card program, the card issuer reserves the right to
suspend or cancel the Direct Express[supreg] card for reasons such as
cardholder breach of the account terms and conditions, multiple
cardholder claims of unauthorized transactions, a card being used for
an unlawful purpose, or other similar reasons. Treasury agrees that the
card provider needs to retain the right to suspend or cancel an
individual's card account in these types of cases, and recognizes that
in the few instances where suspension or cancellation occurs, the
payment recipient may have no other way to receive his or her payment
except by a paper check.
c. Elimination of Waivers Based on Hardship Due to Physical Disability,
Language or Literacy Barriers, or Where Payment by EFT Would Impose a
Financial Hardship
Given the availability of the Direct Express[supreg] card and
Treasury's expansion of its public education campaign describing how to
use the Direct Express[supreg] card, physical disability, language or
literacy barriers, and fees no longer present hardships requiring
waivers from the EFT requirement.
i. Physical Disability. As noted above, Treasury requested specific
examples of the types of hardships that could make it difficult to use
EFT as compared to a paper check, but none were cited by the many
commenters. While Treasury recognizes that not all physical disability
barriers have been eliminated, the Americans With Disabilities Act of
1990, Public Law101-336 (Jul. 26, 1990), and the advent of many
services that benefit the physically disabled, such as accessible
transportation, public accommodations, and online banking, have
generally rendered receiving benefit payments by EFT no more difficult
than receiving payments by paper check. In some cases, EFT payments may
even be easier for the recipient. With the elimination of this waiver,
Treasury recognizes that for those who are physically disabled, the
ability to travel in remote and rural areas may be limited, but
considers this to be more a hardship due to a geographic barrier,
described above, than solely because of a physical disability. In
addition, as suggested by two commenters, Treasury is working with the
Direct Express[supreg] card provider to determine the feasibility of
providing cardholders with an additional convenience card that could be
loaded via the Internet or by telephone with a cardholder-determined
amount of funds for use by a caregiver or relative to make purchases on
behalf of the cardholder.
ii. Language Barriers. None of the commenters urged Treasury to
continue the waiver from the EFT requirements based on hardship due to
language barriers. All of the Direct Express[supreg] cardholder
materials are in English and Spanish, and the Direct Express[supreg]
card provider offers both English and Spanish support through its
automated telephone service and its customer service representatives.
Callers may choose to speak with a customer service representative in
either language. In addition, the Direct Express[supreg] card provider
offers real-time free interpreter services in virtually any language a
caller requires. For example, in September 2010, the Direct
Express[supreg] card provider handled customer service calls in 19
different languages in addition to English, including languages such as
Mandarin, Urdu, Tagalog, and Tigrinya.
iii. Literacy Barriers. None of the commenters specifically urged
Treasury to continue its waiver based on hardship due to literacy
barriers, although several commenters alluded to the difficulties
people have due to a lack of basic literacy skills. For example, one
commenter noted that the constituents she works with in a poor, rural
area of Georgia are often barely literate and deal with cash because
they understand it. Treasury recognizes that lack of basic literacy
skills hinders many in managing their financial affairs, and
understands the challenges associated with moving some individuals to
payment by EFT from payment by paper check. The delayed effective date
of the rule for those currently receiving paper checks to March 2013,
gives Treasury
[[Page 80321]]
additional time to expand its public education efforts related to EFT
options. Among other things, through its Go Direct [supreg] campaign,
Treasury will work with more than 1,800 partners who know their
communities best to help educate check recipients about the benefits of
direct deposit, the options for receiving payments electronically, and
how to safely and cost-effectively use the Direct Express[supreg] card.
With the assistance of its partners, Treasury is able to tailor its
education efforts to meet the differing needs of local communities.
Treasury especially recognizes the need for and importance of
expanded cardholder education for existing and new Direct
Express[supreg] cardholders. While Treasury recognizes that the current
pool of Direct Express[supreg] cardholders may not resemble future
Direct Express[supreg] cardholders in either demographic
characteristics or attitudinal variables, according to research
conducted in March 2009 (Direct Express--Cardholder Satisfaction and
Usage Survey, OMB Control No. 1510-0074), 95 percent of Direct
Express[supreg] cardholders are satisfied with the card.\2\ Eight in
ten satisfied cardholders cite convenience, safety or immediate access
to money as reasons for their satisfaction. Eighty-six percent of those
surveyed said they would recommend the card to a friend or family
member who receives Federal benefits. Despite this high satisfaction
rate, Treasury believes that many Direct Express[supreg] cardholders
may be unaware of important features that promote proper card usage and
reduce fees, such as the availability of free text message alerts on
their cell phones when a deposit is made or when their balance is low,
the surcharge free ATM network, the ability to get cash back at point-
of-sale (POS) locations for free, or even the ability to make purchases
at retail locations for free. Using its research, including recent
research conducted with respect to cardholder education materials sent
to approximately 7,000 newly enrolled Direct Express[supreg]
cardholders who receive Veterans compensation and pension benefit
payments, Treasury will develop materials, such as informational
pictorial brochures, and methods for further educating benefit
recipients as necessary, and as suggested by several commenters.
---------------------------------------------------------------------------
\2\ Summaries of all of the surveys conducted by or on behalf of
Treasury that are cited in this rulemaking may be found at https://www.fms.treas.gov/eft.
---------------------------------------------------------------------------
In addition, Treasury continues to work with its Go Direct[supreg]
partners to promote financial education. For example, through its
partnership with the Federal Deposit Insurance Corporation (FDIC), the
Go Direct[supreg] campaign is working to raise awareness of the value
of financial education through the FDIC's award-winning Money Smart
financial education program. The Money Smart program is a comprehensive
financial education curriculum designed to help individuals outside the
financial mainstream enhance their financial skills and create positive
banking relationships. Many Go Direct[supreg] campaign partners have
used the Money Smart curriculum in their financial education efforts,
including banks, credit unions, law enforcement and crime prevention
organizations, aging and senior organizations, library systems, and
community and disability organizations.
iv. Financial Hardship. Many commenters suggested that the cost of
receiving payments electronically is higher than receiving payments by
paper check for many benefit recipients, and expressed concern that
Treasury's EFT requirement will create a financial hardship for many of
America's most vulnerable population. Treasury's goal is to provide
Federal beneficiaries and other payment recipients with a low-cost
option for receipt of Federal payments, which goes beyond the
requirement in Section 3332 that Treasury make available an account at
a ``reasonable cost.'' See 31 U.S.C. 3332(i)(2)(a). In addition to low-
cost accounts available from financial institutions and other financial
service providers around the country, Federal payment recipients have
at least one low-cost option--the Direct Express[supreg] card--and many
recipients potentially have a second option--the Electronic Transfer
Account (ETA), an account developed by Treasury in 1999. Although the
ETA is not available on a nationwide basis and does not include some of
the more useful features that have become available with prepaid debit
cards in recent years (thus making the Direct Express[supreg] card a
more cost-effective and useful option in most cases), the ETA continues
to meet the needs of some benefit recipients and will continue to be
available.
The Direct Express[supreg] card offers a user-friendly low-cost
option for Federal benefit payment recipients (see Direct
Express[supreg] card fee tables below). The account fees are structured
so that even those cardholders without access to surcharge-free ATMs
can use their cards for free because they can access their funds
through free POS purchases either in-store or online, can get cash back
for free at retail locations, and can get cash for free at any
MasterCard[supreg] member financial institution. The Direct
Express[supreg] surcharge-free ATM network has more than 53,000
surcharge-free ATMs, and the Direct Express[supreg] card program
provider continues to identify opportunities to expand the network
further.
While many commenters expressed concern about having to pay fees to
the Direct Express[supreg] card provider, or pay fees to receive a
paper statement, Treasury believes that these fees are generally lower
than costs that could be imposed for cashing a Treasury check and
managing financial transactions on a cash basis. The Direct
Express[supreg] fee tables are as follows:
Standard Free Services
----------------------------------------------------------------------------------------------------------------
Service Fee
----------------------------------------------------------------------------------------------------------------
Purchases at U.S. merchant locations................ FREE
Cashback with purchase.............................. FREE
Cash from bank tellers.............................. FREE
Customer service calls.............................. FREE
Web account access.................................. FREE
Deposit notification................................ FREE
Low balance notification............................ FREE
Card replacement-One free per year.................. FREE
ATM balance inquiry................................. FREE
ATM denial of service............................... FREE
[[Page 80322]]
ATM cash withdrawal in the U.S. including the One free withdrawal with each deposit to your Direct
District of Columbia, Guam, Puerto Rico, and U.S. Express[supreg] Card Account.*
Virgin Islands. Surcharge by ATM owner may apply.
----------------------------------------------------------------------------------------------------------------
* For each Federal government deposit to your Card Account, Comerica Bank will waive the fee for one ATM cash
withdrawal in the U.S. The fee waiver earned for that deposit expires on the last day of the following month
in which the deposit was credited to the Card Account.
The ONLY Fees You Can Be Charged
----------------------------------------------------------------------------------------------------------------
Optional service Fee
----------------------------------------------------------------------------------------------------------------
ATM cash withdrawals after free transactions are $0.90 each withdrawal (after free transactions are used).
used in U.S. including the District of Columbia,
Guam, Puerto Rico, and U.S. Virgin Islands.
Surcharge by ATM owner may apply.
Monthly paper statement mailed to you............... $0.75 each month.
Funds transfer to a personal U.S. bank account...... $1.50 each time.
Card replacement after one free each year........... $4.00 after one (1) free each year.
Overnight delivery of replacement card.............. $13.50 each time.
ATM cash withdrawal outside of U.S. Surcharge by ATM $3.00 plus 3% of amount withdrawn.
owner may apply.
Purchase at Merchant Locations outside of U.S....... 3% of purchase amount.
----------------------------------------------------------------------------------------------------------------
The low fees and nationwide availability of the Direct
Express[supreg] card more than satisfy the statutory requirement of 31
U.S.C. 3332 for Treasury to make available an account at a financial
institution ``at a reasonable cost'' and with ``the same consumer
protections with respect to the account as other account holders at the
same financial institution.'' See 31 U.S.C. 3332(f), (i)(2).
A recent report comparing fees for general purpose reloadable
prepaid cards helps illustrate the low cost of using a Direct
Express[supreg] card. A consumer advocate organization conducted a case
study showing the wide variations in fee structures for four prepaid
card products. See, ``Prepaid Cards: Second-Tier Bank Account
Substitutes,'' Consumers Union (September 2010) (https://www.defendyourdollars.org/pdf/2010PrepaidWP.pdf). Using a sample
consumer scenario,\3\ the report stated that, for the four prepaid card
products studied, monthly fees ranged from $15.45 to $43.75 for the
first and second months of card use. In contrast, as shown in Figure 1,
below, a Direct Express[supreg] cardholder under the same scenario
would spend no more than $ .90 per month if using surcharge-free ATMs
(one free ATM withdrawal per deposit, with a $ .90 per ATM withdrawal
charge after that), and no more than $7.89 per month if no surcharge-
free ATMs were used, assuming the average $2.33 surcharge fee per
withdrawal cited in the 2010 checking study by bankrate.com (https://www.bankrate.com/finance/checking/banks-taking-a-bigger-bite-with-atm-fees.aspx).\4\ There is no online bill paying service currently offered
in the Direct Express[supreg] card program, so a cardholder would pay
his or her own bills directly to the vendor or retailer, with no fee
being charged by the provider. The Direct Express[supreg] card provider
does not impose charges for POS purchases, balance inquiries, or for
receiving a deposit.
---------------------------------------------------------------------------
\3\ The sample consumer scenario in the cited report consisted
of a cardholder making the following transactions in a month: Three
ATM withdrawals, three bill payments (rent, utilities, phone), eight
point-of-sale purchases (groceries and meals once a week), weekly
balance inquiry, and two deposits.
\4\ The consumer scenarios used in the cited report assumed that
the cardholder did not incur any ATM surcharge fees.
Fig. 1--Direct Express[supreg] Card Fees: Sample Scenario
------------------------------------------------------------------------
Fees (with
Fees (with ATM
Direct Express[supreg] Card transactions no ATM surcharge
surcharge) of $2.33)
------------------------------------------------------------------------
1st ATM withdrawal (free with 1st deposit).... FREE $2.33
2nd ATM withdrawal (free with 2nd deposit).... FREE 2.33
3rd ATM withdrawal............................ $ .90 3.23
Three bill payments........................... FREE FREE
Eight POS..................................... FREE FREE
Weekly Balance Inquiry........................ FREE FREE
Two Deposits.................................. FREE FREE
-------------------------
Total..................................... .90 7.89
------------------------------------------------------------------------
In addition, the Direct Express[supreg] card does not have any
monthly fees, fees for activating the card, or fees for customer
service calls, which can drive up costs of other prepaid card products.
By educating Direct Express[supreg] cardholders to learn how to avoid
multiple ATM withdrawals, cardholders can quickly learn how to incur no
monthly fees whatsoever.
The regulatory impact assessment, below, contains additional
scenarios describing the Direct Express[supreg] card fees based on card
usage.
Costs incurred to use the Direct Express[supreg] card can compare
favorably to the cost of cashing a check and conducting necessary cash
transactions. While some individuals may be able to cash government
checks at no cost, there are often fees of up to $20 or more for
cashing a check, according to Treasury's research in 2007 (SSA & SSI
Check Recipient Survey, OMB Control No. 1510-0074). Check recipients
may also incur money order and postage costs to pay bills that are not
incurred with the Direct Express[supreg] card.
3. Suggested Changes to Direct Express[supreg] Card Program. Various
Commenters Suggested a Number of Ways That the Direct Express[supreg]
Card Should Be Changed
a. ATM Cash Withdrawal Fees. A few commenters suggested a range of
ways to maximize a cardholder's ability to access his or her cash from
an ATM for free. Suggestions ranged from providing cardholders with at
least one surcharge-free ATM withdrawal to providing free unlimited ATM
withdrawals and expanding the current surcharge-free network.
Treasury's current Direct Express[supreg] card offers sufficient
opportunities for a cardholder to access his or her cash without
incurring a fee.
[[Page 80323]]
The Direct Express[supreg] card program offers one free ATM withdrawal
for each deposit received. The free withdrawal is valid until the last
day of the month following the month of receipt of the deposit. Thus,
if a cardholder receives two deposits in January 2011, the cardholder
is entitled to two free ATM cash withdrawals that are good until
February 28, 2011. In addition, cardholders may obtain cash at retail
locations and bank tellers without incurring a fee. The Direct
Express[supreg] card provider does not impose limits on the number of
cash back or teller transactions a cardholder may conduct, although
merchants may impose a limit on the amount of cash back a cardholder
may receive.
After using available free withdrawals, Direct Express[supreg]
cardholders who choose to withdraw additional cash from an ATM are
charged a fee by the Direct Express[supreg] card provider of $ .90 per
withdrawal. The card provider does not impose any limits on ATM
withdrawals. If the cardholder withdraws cash from an ATM that is not
in the Direct Express[supreg] network, the ATM owner may charge the
cardholder an additional fee, known as a ``surcharge,'' which can range
from $1.00 to $3.50 or more. If the cardholder uses one of the more
than 53,000 Direct Express[supreg] surcharge-free ATMs, the cardholder
can avoid a surcharge fee. The Direct Express[supreg] card provider
continues to look for ways to expand the network, and Treasury will
continue to educate current and new cardholders about alternative ways
to get cash without paying a fee and how to use their card to pay for
goods and services.
b. Free Monthly Paper Statements. Several commenters stated a
preference for paper statements at no cost to the cardholder.
Currently, Direct Express[supreg] cardholders may obtain transaction
and balance information for free by calling a customer service number
or visiting the Direct Express[supreg] secure Web site. Upon request,
the Direct Express[supreg] card provider will send a cardholder a paper
transaction history at no cost. In addition, cardholders may sign up
for free text message, phone call, or email alerts when they receive a
deposit or reach a low balance amount pre-determined by the cardholder.
If a cardholder prefers a monthly paper statement, the provider charges
a fee of $ .75 per month. Because not every cardholder desires or would
use a paper statement, and because transaction and balance information
is available via different mechanisms, Treasury has determined that the
cost of paper statements should be borne by those who want them. While
other bank accounts may offer free monthly paper statements, as one
commenter noted, these bank accounts generally also require credit
checks and minimum balances, and have other requirements that hinder
the ability of recipients to obtain accounts, none of which are
required to open a Direct Express[supreg] card account. Two commenters
suggested that the Direct Express[supreg] card program at a minimum
offer a free annual paper statement for those who do not elect to
receive electronic or monthly paper statements. The Direct
Express[supreg] card provider currently makes available a cardholder's
complete transaction history, upon request and at no cost. Therefore,
Treasury believes that it has adequately addressed concerns related to
free monthly statements.
c. Encourage Opt In Election at Enrollment Time of Method for
Receiving Transaction Information. One commenter suggested that
cardholders who sign up for a Direct Express[supreg] card be given the
opportunity at enrollment to elect to receive paper statements, text
messages, or electronic mail messages with transactions and balance
information. Treasury explored this suggestion, but determined that it
is not feasible at this time given that many of the Direct
Express[supreg] card enrollments are handled by the respective Federal
benefit agency when the beneficiary is applying for his or her benefit.
Treasury is exploring the use of additional mailings to cardholders to
ensure that cardholders are aware of their options for receiving
transaction and balance information.
d. Provide Additional Convenience Card. Two commenters suggested
that the Direct Express[supreg] card program provide cardholders with
the option of allocating a discrete amount of their funds to a second
convenience card. The cardholder could then give this card to a
caregiver or relative who could use it to make purchases for the
cardholder. In this way, the cardholder would not have to turn over his
or her primary card to the caregiver or relative and trust the
caregiver or relative not to use all of the funds. Treasury supports
this suggestion as a way to mitigate a cardholder's risks and is
working with the Direct Express[supreg] card provider to determine the
feasibility and cost of providing this option.
e. Provide Access to Checks. Two commenters suggested that the
Direct Express[supreg] card program provide cardholders with the
ability to write checks. Treasury has explored this suggestion, but is
concerned that adding such an option could potentially increase fraud
opportunities, add complexity to the card program, and increase costs
to the cardholder. Instead, Treasury will educate cardholders on how to
avoid the need to use checks by making purchases with the debit card,
and if checks are necessary, where to find low-cost money orders. In
addition, MasterCard has an initiative aimed at increasing acceptance
of its card products by property managers. As part of this initiative,
Treasury and MasterCard are working together to emphasize to property
managers the importance of accepting the Direct Express[supreg] card
for rent payments.
f. Ability to Reload Cards With Non-Federal Funds. Two commenters
suggested that the Direct Express[supreg] card program be expanded to
allow cardholders to deposit funds other than Federal payments to their
card account. Treasury does not plan to implement this suggestion at
this time because of the increased cost to the Direct Express[supreg]
card program, increased opportunity for fraud, and added complexity for
cardholders. Treasury has plans to expand the card program to include
as many Federal payments as possible.
With respect to the broader need for more safe, low-cost financial
account options, Treasury is exploring the feasibility of offering
general purpose accounts to low- and moderate-income tax refund
recipients and encouraging initiatives for financial products and
services that are appropriate and accessible for millions of Americans
who are not fully incorporated into the financial mainstream, as
authorized by the ``Improving Access to Mainstream Financial
Institutions Act of 2010,'' enacted as Title XII of the Dodd-Frank Wall
Street Reform and Consumer Protection Act (Pub. L. 111-203, Jul. 21,
2010). The FDIC also is encouraging the banking industry to offer safe,
low-cost transaction and basic savings account products for low- and
moderate-income customers with its Model Safe Accounts Pilot (https://www.fdic.gov/consumers/template/).
g. Changes to Terms and Conditions of the Direct Express[supreg]
Card Program. Three commenters suggested changing some of the terms and
conditions of the Direct Express[supreg] card program. One suggestion
was to change the title of the Direct Express[supreg] card program
provider's terms and conditions document to ``Notice of Rights and
Obligations.'' Other suggestions were to prohibit terms that waive a
cardholder's right to a jury trial or to bring a class action lawsuit;
to allow disputes to be governed by the laws of the state in which the
cardholder resides, rather than the State of Michigan, which is where
the Direct Express[supreg] card provider is located; not to require
that the recipient contact the
[[Page 80324]]
merchant prior to cancelling a preauthorized transfer; to make clearer
when the time to dispute a charge begins; make clearer that
garnishments are not permitted, except as authorized by law (for
example, to collect delinquent taxes or child support); and to improve
the protections under Regulation E. Treasury will review the terms and
conditions and, at a minimum, will ask the Direct Express[supreg] card
provider to clarify the language regarding dispute time frames and
garnishments. At this time, Treasury does not plan to implement the
remaining suggestions, which would result in additional costs to the
Direct Express[supreg] card program, and perhaps even preclude Treasury
from offering a valuable low-cost account option for those
beneficiaries who prefer a prepaid debit card over a bank account. For
example, allowing lawsuits involving the Direct Express[supreg] card
program to be based on various choice-of-law provisions would increase
costs for the program to an unacceptable level, leaving a large number
of Federal benefit recipients without any cost-effective option for
enjoying the safety and convenience of direct deposit. Requiring the
Direct Express[supreg] provider to cancel a preauthorized debit before
the cardholder has contacted the merchant could leave cardholders
vulnerable to cancellation of needed goods or services because of a
lack of understanding about the need to make alternative payment
arrangements for necessary services, such as utilities. The Direct
Express[supreg] card provider follows standard industry practices,
except that with respect to the protections afforded under Regulation
E, the Direct Express[supreg] card provider offers an extended time
period within which to dispute a transaction from the industry standard
of 60 days to 90 days. Treasury believes it has obtained the best
possible terms and conditions for an account that provides the most
cost-effective, consumer-friendly terms available. Treasury will,
however, continue to work closely with the Direct Express[supreg] card
provider to identify and suggest improvements to the program. Even
though satisfaction with the Direct Express[supreg] card program among
current cardholders remains very high at 95% (Direct Express[supreg]--
Cardholder Sa