ETA Progress Report
Montgomery, Monty, Independent Banker
Electronic accounts for the 'unbanked' progress
As the business world races toward a paperless future and more financial transactions are conducted electronically, the problem of reaching so-called unbanked consumers-individuals without checking or savings accounts-becomes more significant. To encourage this group to establish banking relationships, the U.S. Treasury Department introduced the Electronic Transfer Account, a lowcost direct deposit program created to entice unbanked individuals to join the financial mainstream.
Created four years ago, ETAs are bank accounts that allow recipients of federal government payments to receive their funds electronically by direct deposit at any financial institution displaying the ETA symbol. Anyone receiving Social Security payments, veterans' benefits, supplemental security income, railroad retirement benefits, or civil service or military benefits is eligible to open an ETA. Customers living in Arkansas, Alabama, Florida, Georgia, Kentucky, Missouri, North Carolina and Tennessee can also have their state benefits deposited into their ETA accounts. Other payments may be allowed at the discretion of the institution.
ETAs can only be offered by federally insured banks, savings and loans or credit unions. Nonfinancial organizations, such as check cashing facilities and investment companies, cannot participate. This rule prevents third-party organizations from charging customers additional fees, which would defeat the program's low-cost features. For $3 (or less) per month, accountholders can enjoy the convenience and security of electronic banking. However, the ETA differs from regular direct deposit accounts in a number of ways.
For instance, though ETAs are federally insured like other bank accounts, there is no minimum balance requirement (unless stipulated by law). Likewise, there are no check writing privileges-money can only be withdrawn in person at the ETA provider's main office or branch locations, or through participating ATMs or pointof-sale devices with a debit card. Four withdrawals and four balance inquiries are allowed each month free of charge. And, like a regular bank account, customers receive a monthly statement listing all deposits and withdrawals.
No participating financial institution may refuse to open an ETA if the customer is a federal benefit, wage, salary or retirement payment recipient. An individual can be refused if (1) he or she previously held an ETA at any financial institution that was closed due to fraud, or (2) if the customer requesting the account had a previous ETA closed for abuse at the institution.
Because the ETA targets lower-income earning individuals who may have had trouble qualifying for a bank account or managing a previous account, the program has the potential to help many people establish or re-establish credit. Under CRA rules, depository institutions are encouraged to help meet the credit needs of their communities, including low- and moderate-income neighborhoods. Therefore, the ETA can help some banks comply with the act.
Community Bank Connection
Acceptance of the ETA program is an area where community banks have outpaced their larger competitors. "The smaller financial institutions were really the first to sign up to offer the ETA," says the Treasury's ETA program manager, Eleanor Kelly. "That may be because they have a simpler decision-making process. Or it may be easier to introduce a new product in a smaller financial institution. I also think that they [community banks] are very community-service oriented."
One community bank that has been relatively successful promoting the ETA is the Fall River Five Cents Saving Bank in Fall River, Mass. Having jumped on the ETA bandwagon in late 1999, Fall River's program boasts more than 200 accounts. Its promotion strategy is straightforward, says Mary Costa, the bank's vice president. "We do it in-house. We decorate the lobby with balloons, and they [Treasury] have provided us with pencils and little gifts that we hand out to the people. …