Magazine article American Banker

Treasury Weighs Pro-Bank Approach to EBT Accounts

Magazine article American Banker

Treasury Weighs Pro-Bank Approach to EBT Accounts

Article excerpt

The Treasury Department is mulling whether to design a standard electronic account that any bank could offer to federal benefits recipients who are noncustomers, an agency official said Tuesday.

Or the agency may bid the work out to big players and let local banks subcontract, said Donald V. Hammond, acting fiscal assistant secretary.

After dragging its feet for months, the Treasury Department is considering these pro-bank changes to its plan for electronic payment of government benefits in order to spark more interest among financial institutions in these accounts.

The Treasury had planned to bid out contracts to banking organizations or consortia on a regional basis, but small banks complained that method would bar them from competing for the business.

"We got concerned that the notion of the large-scale regional competitive selection may not get us the kind of local penetration that we are looking for," Mr. Hammond said.

The Treasury is running out of time. Under a 1996 law, the government must begin delivering all payments except tax refunds electronically by Jan. 1, 1999.

The Treasury proposed last September a regulation to implement the law that gives the agency an extra year to roll out government-sponsored accounts for benefits recipients without bank accounts.

The main hang-up still remains designing a government-sponsored electronic account that these noncustomers can afford and banks consider profitable enough to offer, Mr. …

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