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OVERSIGHT OF THE IMPLEMENTATION OF THE ELECTRONIC FUNDS TRANSFER
PROVISIONS OF THE DEBT COLLECTION IMPROVEMENT ACT OF 1996
=======================================================================
HEARING
before the
SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
INFORMATION, AND TECHNOLOGY
of the
COMMITTEE ON
GOVERNMENT REFORM
AND OVERSIGHT
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
FIRST SESSION
__________
JUNE 18, 1997
__________
Serial No. 105-63
__________
Printed for the use of the Committee on Government Reform and Oversight
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COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT
DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California
J. DENNIS HASTERT, Illinois TOM LANTOS, California
CONSTANCE A. MORELLA, Maryland ROBERT E. WISE, Jr., West Virginia
CHRISTOPHER SHAYS, Connecticut MAJOR R. OWENS, New York
STEVEN SCHIFF, New Mexico EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California PAUL E. KANJORSKI, Pennsylvania
ILEANA ROS-LEHTINEN, Florida GARY A. CONDIT, California
JOHN M. McHUGH, New York CAROLYN B. MALONEY, New York
STEPHEN HORN, California THOMAS M. BARRETT, Wisconsin
JOHN L. MICA, Florida ELEANOR HOLMES NORTON, Washington,
THOMAS M. DAVIS, Virginia DC
DAVID M. McINTOSH, Indiana CHAKA FATTAH, Pennsylvania
MARK E. SOUDER, Indiana ELIJAH E. CUMMINGS, Maryland
JOE SCARBOROUGH, Florida DENNIS J. KUCINICH, Ohio
JOHN B. SHADEGG, Arizona ROD R. BLAGOJEVICH, Illinois
STEVEN C. LaTOURETTE, Ohio DANNY K. DAVIS, Illinois
MARSHALL ``MARK'' SANFORD, South JOHN F. TIERNEY, Massachusetts
Carolina JIM TURNER, Texas
JOHN E. SUNUNU, New Hampshire THOMAS H. ALLEN, Maine
PETE SESSIONS, Texas HAROLD E. FORD, Jr., Tennessee
MICHAEL PAPPAS, New Jersey ------
VINCE SNOWBARGER, Kansas BERNARD SANDERS, Vermont
BOB BARR, Georgia (Independent)
ROB PORTMAN, Ohio
Kevin Binger, Staff Director
Daniel R. Moll, Deputy Staff Director
William Moschella, Deputy Counsel and Parliamentarian
Judith McCoy, Chief Clerk
Phil Schiliro, Minority Staff Director
------
Subcommittee on Government Management, Information, and Technology
STEPHEN HORN, California, Chairman
PETE SESSIONS, Texas CAROLYN B. MALONEY, New York
THOMAS M. DAVIS, Virginia PAUL E. KANJORSKI, Pennsylvania
JOE SCARBOROUGH, Florida MAJOR R. OWENS, New York
MARSHALL ``MARK'' SANFORD, South ROD R. BLAGOJEVICH, Illinois
Carolina DANNY K. DAVIS, Illinois
JOHN E. SUNUNU, New Hampshire
ROB PORTMAN, Ohio
Ex Officio
DAN BURTON, Indiana HENRY A. WAXMAN, California
J. Russell George, Staff Director and Chief Counsel
Mark Brasher, Professional Staff Member
John L. Hynes, Professional Staff Member
Andrea Miller, Clerk
David McMillen, Minority Professional Staff Member
C O N T E N T S
----------
Page
Hearing held on June 18, 1997.................................... 1
Statement of:
Creque, Marcelyn, volunteer director, American Association of
Retired Persons............................................ 158
Hawke, John D., Under Secretary for Domestic Finance,
Department of the Treasury; and Mark D. Catlett, Chief
Financial Officer, Department of Veterans' Affairs......... 16
McEntee, Elliott, president and chief executive officer,
National Automated Clearing House Association; Dina
Nichelson, president, American League of Financial
Institutions; and Margot Saunders, managing attorney,
National Consumer Law Center............................... 176
Wagner, G. Martin, Associate Administrator, General Services
Administration............................................. 5
Letters, statements, etc., submitted for the record by:
Catlett, Mark D., Chief Financial Officer, Department of
Veterans' Affairs:
Information concerning visitors to the AFC............... 156
Prepared statement of.................................... 101
VA OIG evaluation of electronic data interchange
implementation......................................... 109
VA strategic plan........................................ 30
Creque, Marcelyn, volunteer director, American Association of
Retired Persons, prepared statement of..................... 161
Hawke, John D., Under Secretary for Domestic Finance,
Department of the Treasury, prepared statement of.......... 21
Horn, Hon. Stephen, a Representative in Congress from the
State of California, prepared statement of................. 3
McEntee, Elliott, president and chief executive officer,
National Automated Clearing House Association, prepared
statement of............................................... 178
National Check Cashers Association, Inc., prepared statement
of......................................................... 232
Nichelson, Dina, president, American League of Financial
Institutions, prepared statement of........................ 196
Saunders, Margot, managing attorney, National Consumer Law
Center, prepared statement of.............................. 205
Wagner, G. Martin, Associate Administrator, General Services
Administration, prepared statement of...................... 7
OVERSIGHT OF THE IMPLEMENTATION OF THE ELECTRONIC FUNDS TRANSFER
PROVISIONS OF THE DEBT COLLECTION IMPROVEMENT ACT OF 1996
----------
WEDNESDAY, JUNE 18, 1997
House of Representatives,
Subcommittee on Government Management, Information,
and Technology,
Committee on Government Reform and Oversight,
Washington, DC.
The subcommittee met, pursuant to notice, at 9:35 a.m., in
room 2247, Rayburn House Office Building, Hon. Stephen Horn
(chairman of the subcommittee) presiding.
Present: Representatives Horn and Maloney.
Staff present: J. Russell George, staff director and chief
counsel; Mark Brasher and John L. Hynes, professional staff
members; Andrea Miller, clerk; David McMillen, minority
professional staff member; and Ellen Rayner, minority chief
clerk.
Mr. Horn. The Subcommittee on Government Management,
Information, and Technology will come to order.
The Debt Collection Improvement Act of 1996, passed by
Congress last April, included a provision to move the Federal
Government toward direct deposit and electronic payments. This
will reduce dramatically the problems of lost, stolen,
counterfeit, and forged checks. It will also provide an
opportunity for Federal agencies to reengineer their functions
by taking advantage of electronic technology.
The new law requires Federal payments to be made
electronically by 1999, unless the beneficiary falls under an
exemption available for hardships. Congress gave the Department
of the Treasury flexibility in implementing a sensible payment
system. We look forward with great interest to the release of
the Department's proposed rule on implementation.
I'm somewhat concerned, however, that this rule is not yet
available for public comment. The rule will affect millions of
people. It will require complex changes by citizens, the
financial sector, and the Government. For these reasons I'm
concerned that the delays may endanger public support and
acceptance. I urge the Secretary of the Treasury to publish the
proposed rule without delay. It needs to be done right, but
part of doing it right is doing it quickly.
The Department of the Treasury and other Federal agencies
will need to conduct an aggressive public education campaign
throughout 1998. They will need to provide information on how
recipients can receive payments electronically. Without a rule,
agencies cannot undertake this education campaign, answer the
public's questions, and take the necessary steps to ensure that
the transition to electronic payments is complete on January 1,
1999.
Thorny questions remain, especially regarding individuals
without bank accounts. The Secretary of the Treasury has broad
discretion in resolving such questions. We are fortunate today
to have the Honorable Jerry Hawke, Under Secretary of the
Treasury, be the point man on the electronic funds transfer for
the Secretary.
The proposed rule is not the only major project in
electronic payments. The General Services Administration
recently issued a draft solicitation and request for comments
for the next generation of fleet, travel, and purchase card
programs. These programs will be merged into one single card.
This may be the best vehicle the Federal Government has to
promote wider use of so-called smart cards, where data are
stored on the card itself rather than in a central computer
that must be accessed.
Electronic payments are just one aspect of electronic
commerce. In the finance office of the future, we will need to
coordinate the Government's technological improvements with
private sector standards to ensure compatibility and
interoperability.
Recently the Department of Agriculture showed what can be
accomplished. It found that processing the paper transaction
for an average order worth $185 cost $85 in administrative
expenses. By contrast, processing the same order with the
purchase card cost only $32. The purchase card also provided
opportunities to reduce processing costs further to $17.
In the private sector, General Electric has been able to
re-engineer its procurement systems by putting them on the
Internet, thus ensuring wider vendor participation. Costs have
gone down, and the procurement process has been compressed.
General Electric has found that small businesses benefit the
most. We would like to see Federal agencies obtain similar
success in flattening organizational hierarchies, reducing
costs, and engendering greater competition in the future.
This scale of change will be difficult. We're fortunate to
have a well-regarded expert here with us to discuss this issue
of electronic commerce, Marty Wagner of the General Services
Administration.
Mark Catlett of the Department of Veterans' Affairs has
been a leader of pushing that agency toward electronic
payments. His position in the Chief Financial Officers' Council
can be very helpful in sharing experiences with other Chief
Financial Officers who have been less successful with their
agency payment system.
We are also fortunate to have with us today representatives
of business organizations for our second panel, and
representatives of consumer organizations for our third panel.
These witnesses can discuss intelligently the issues
surrounding the new electronic funds transfer law. We welcome
all these witnesses, and we look forward to their testimony.
[The prepared statement of Hon. Stephen Horn follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Horn. We will now begin with the first panel, the
Honorable John D. Hawke, Under Secretary for Domestic Finance.
Is he here yet? He'll be here at 10.
So, Mr. Wagner, Associate Administrator, General Services
Administration, will begin. Welcome, Mr. Wagner. And as you
know the routine, raise your right hands.
[Witness sworn.]
Mr. Horn. Thank you very much. The gentleman has affirmed
the oath and may begin.
STATEMENT OF G. MARTIN WAGNER, ASSOCIATE ADMINISTRATOR, GENERAL
SERVICES ADMINISTRATION
Mr. Wagner. Mr. Chairman, we do appreciate your interest
because we think making electronic commerce work in the Federal
Government is going to depend in part on both the support and
guidance of the legislative branch. I was particularly
impressed by your remarks at the beginning, because it showed
that you understood how important business process re-
engineering and not simply using it as a new way of using, you
know, with electrons to replace with atoms.
I did make a prepared statement. Rather than read it, if I
can submit it to the record?
Mr. Horn. Right. It automatically with all witnesses goes
in when I introduce you and then summarize any way you would
like.
Mr. Wagner. OK. If I might summarize very quickly. We see
electronic commerce is the technology of electronic commerce as
a great enabler. It facilitates change, but should not be used
for its own sake. That would be one of our first premises. Our
second is that in order to be successful, we have to ride
commercial systems. The Government, big as it is, is a small
tail on a fairly large dog, and we need to recognize that
following the lead of the commercial sector is, in fact, the
way to go. The third premise is that we're trying to follow a
unitary vision, a single face to industry, at the same time
recognizing that individual agencies and individual firms have
unique requirements that they need to do themselves. So there
is, in fact, a balancing between the single face goal and then
recognizing the diversity across the economy.
Now, we have made some progress, but I have to say there is
a great deal still to do. We have had a great deal of success
so far in the use of commercial cards using magnetic stripes,
but we're only beginning to use the smart cards. In the new RFP
that the Federal Supply Service of GSA has out as a draft for
comment that you alluded to earlier, we are consciously
embracing this unitary integrated vision. It's not simply
viewed as a device to do business as usual.
The second area that I think we've been fairly successful
in is the use of the Internet and the WorldWide Web. For
example, the catalogs, like GSA Advantage! and many other
catalogs fielded by government agencies, seem to be a pretty
effective tool for connecting government customers. At least
for small purchases where you need a warehouse and to see what
you need in the overall system. Finally, electronic benefits
transfer, where we're moving from a paper-based world to card
delivery systems, which may--and I'm sure the Treasury
Department will be dealing with these issues--may also deal
with concerns of the unbanked.
On the electronic benefits transfer, if I could point out,
this is not a normal role for GSA, but we are working with the
actual agencies, which is the Agriculture Department, and
Health and Human Services. They, in fact, make the policies. We
are a coordination function, a single point of contact.
And I have to confess, we do have in our own area certain
things we view as mightily important. For example, we do not
want the EBT card vision to actually take us backward from
where we have been in paper. Right now a food stamp, for
example, is good anywhere in the United States. We've embraced
a unitary vision with EBT, with commercial systems. There's
something called the Quest Mark, which follows commercial
operating rules. To the extent we all--all States and the
Federal Government-use this commercial system. We will then
build something that is national in scope rather than creating
new stovepipes.
If I could make one question, we have, I believe, in
section 30 in the DOD authorization bill on the Senate side, a
recommendation for repeal of what was called FACNET provisions
passed a few years ago before the Congress. It, in fact,
illustrates how quickly this technology moves. It was a good
idea for the time. GAO has now recommended, as are we, that it
be--it be repealed because it is pushing the Government toward
what is a good solution, but not ``the'' good solution. So we
would urge you to consider whether you might embrace that
approach.
And with that quick summary of my testimony, I would be
happy to answer any questions you might have.
[The prepared statement of Mr. Wagner follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Horn. Well. It's an excellent summary, and we
appreciate all you're doing in this area.
In terms of FACNET, have you and the administrator sent a
letter to the various Members of the committee?
Mr. Wagner. I do not know the exact process. There has been
certainly some process between the Office of Federal
Procurement Policy and the Congress. If I could submit that for
the record later on, the process.
Mr. Horn. Yes, we would like to. And we'll be glad to
followup on that. I assume it has the clearance of OMB that's
in accord with the program of the President.
Mr. Wagner. Yes, sir, it does.
Mr. Horn. OK. Let me just ask a few questions here. There
are going to be some questions we also ask Under Secretary
Hawke.
Your testimony asks for our support for new legislation
that you say will provide more flexibility for electronic
commerce. How will it do so?
Mr. Wagner. Well, primarily this is the FACNET point I just
mentioned. By pushing agencies toward a specific solution that
basically is an electronic data interchange hub-based system,
that tends to take energy away from the more recently developed
Internet web-based approaches. So it gives us more flexibility
to pursue where the technology is going rather than where the
technology looked like it was going 3 years ago.
Mr. Horn. Your testimony identified the potential of smart
cards. What are the barriers in implementing smart cards all
across Federal agencies?
Mr. Wagner. The barriers to smart cards, I think there are
really two. There is the one I think that all agencies are
aware of: It's new and it's hard to do. There are issues of you
can't just decide you're going to get smart cards. You have to
worry about readers. So you have to find a cluster of a need
for smart cards and deploy both the infrastructure and the
cards themselves. That's the issue that all agencies are
currently working on.
Where we become concerned, it's back to my earlier point of
a single face to industry. We're really quite worried that if
we just do smart cards wherever they make sense, and that's a
good idea, we run the risk of creating whole new stovepipes and
separate domains. And you alluded in your remarks to the need
to reengineer. So we're worried that the way smart cards might
be done in an EPA where I once worked or a Treasury Department
where that I once worked, if they're too different, we're going
to end up having compatibility problems later on. We're, in
fact, working with the agencies on some degree of commonality
and how smart cards would work.
Mr. Horn. How much infrastructure is already in place on
the smart cards?
Mr. Wagner. I do not have any good figures, but it's
scattered and spotty in there. It's starting to appear to be
there's a lot more than we might have realized. The Department
of Defense has done a fair amount of work. It's--but I would--
if I could submit to you a more--what I would do off the top of
my head would be anecdotal.
Mr. Horn. Well, I don't want to cause you a lot of trouble.
I just want to see the job done, but I was curious if you had a
sense of that and the places where we're really lagging?
Mr. Wagner. Where we're really lagging? I think we're all
feeling our way forward. And there is, in fact, some dance when
you're going through a new technology where what is new is
always proprietary and unique to specific companies and
specific requirements. As we move through those, we want those
new services and features, but we don't want to lock ourselves
in. So that's the process we're going through. There's a danger
of crystallizing too soon on the wrong technology.
Mr. Horn. Your testimony described a vision for the future
where smart card systems are used as an integral part of the
Government's internal business process. Can you describe how
distant this future vision really is, and what is your
timeframe for achieving that vision?
Mr. Wagner. OK. My timeframe is basically to achieve a lot
within the next 2 years, with a time horizon of about 5 years,
and part of a time horizon of 5 years with a technology that
moves as quickly as this, it's quite dangerous to speculate too
far in the future.
In the very near term we have the FSS card RFP, which will
be hopefully awarded in the early part of the next calendar
year. That would be a good vehicle for implementing smart card
technologies and integrated solutions. We're also working with
piloting, the planning model. Pure planning doesn't work, you
have to do experiments. There is, for example, work with the
Treasury Department on intragovernmental transfers where we're
moving money within the Federal Government, but currently using
cards to do it is more costly than it should be. We're working
with--there's a Treasury pilot, a GSA pilot, and then we'll be
trying to have a framework for learning through them.
But the basic time horizon is within 2 years to see
substantial penetration of smart cards. By that I mean you can
see them, you can count them, you know what they're doing, to
be using them to some degree in a standard way. Recognizing
that what the world looks like in 2 years is going to be
different from what we think it is. We'll have to reset for our
next 2 years and then 5 years.
Mr. Horn. In the last Congress, the House introduced smart
identification cards. Employees were told that locked doors
would open when important staff approached, and all sorts of
new capabilities would be added on to this smart card. The new
Congress brings new ID cards. Now they're of the cheap plastic
variety again, and those new features were never implemented.
Does GSA risk getting ahead of the private sector and bringing
out a smart card when this contract is awarded or of procuring
a card that we do not need?
Mr. Wagner. I do not think we're actually running the risk.
In the original draft that went out for industry comment, we,
in fact, had a requirement for hybrid cards, which is another
term for smart cards. It has the chip on it. We removed that as
a mandatory requirement, but have that as value added. The
approach we take embraces the current mag stripe
infrastructure, but looks for migration paths as you move into
a smart card future. We think it is very important to do
experiments to pilot and learn from those pilots and then
adjust accordingly.
The, if we get--in fact, there's a good, perhaps a
standard, phrase. We like to be on the ``leading edge, but not
the bleeding edge.'' We plan to be sitting there just behind
the innovative commercial leaders, not so far behind as to be
left behind, but not so close up as to get our own blood on
those edges. Sorry for that.
Mr. Horn. I sympathize with that observation from long
experience.
Your testimony describes some of the accomplishments in
implementing electronic benefit transfer systems. What goals
are you trying to achieve for the electronic benefits transfer
program, and what is GSA's role in the mission?
Mr. Wagner. Well, our main role is to coordinate and
facilitate the move toward this unitary vision. We are working
actively with the involved agencies as well as the States to
facilitate that move to that common vision. I think that what
we see as the most important thing that GSA does, as
distinguished from major policy calls by other agencies, is
that, when you use that EBT card, that it may be different
contracts and different States, but it's in accordance with the
uniform infrastructure using the Quest Mark and the standard
operating rules; that it's as nationwide and is more effective
than the current, for example, paper food stamp-based program.
Mr. Horn. Let me ask you the question, as I mentioned
earlier, that I will also be asking Under Secretary Hawke.
We will swear in our other two witnesses, and you are right
on time, gentlemen. Thank you very much.
But, Mr. Wagner, let me ask you, in April, the Subcommittee
on Government Management, Information, and Technology held a
hearing on the Debt Collection Improvement Act of 1996. I asked
Jerry Murphy to examine with the General Services
Administration whether an administrative offset feature could
be incorporated into Federal credit card systems to offset
Federal payments to deadbeat vendors who are delinquent on
Federal debts. These cards will be accepted by millions of
vendors, some of whom will owe money to the Federal Government.
These payments will represent $30 billion in disbursements over
5 years. Is there any progress on that front?
Mr. Wagner. Yes, there is some progress. I should emphasize
you've hit on a very key issue in how to implement the act. In
current RFP, the act applies to the prime contract vendors, and
we have that covered, and any payments to them will go through
the offset process.
The question you allude to is agency action, purchases of
50 or 100 or some small item from vendor A, and it goes into
the credit card system, and it's settled according to the
operating rules followed by millions of businesses.
We do not yet have a good answer on that question. What we
have done is we have solicited input from the industry on how
best to address this concern. We're working with the Treasury
Department on how to do that. But when I mentioned--it's
important to keep in mind, as you yourself have pointed out,
that when you are in the commercial system, you have to
recognize they're following commercial rules. Working through
that process with the Treasury Department is likely to take
some time, but we want to begin now because this contract is a
multiple award contract, likely to last for many, many years.
And the fact that we may not be able to do something today,
according to the banking system rules, doesn't mean that over
the life of the contract that it will not be possible later on.
We'll be working toward coming up with a solution. We'd also
appreciate any guidance you may have to give us on this issue.
Mr. Horn. Well, Mr. Wagner, you've done an outstanding job.
Can you stay with us a little bit----
Mr. Wagner. Yes.
Mr. Horn [continuing]. In case questions come up when the
Under Secretary testifies and Mr. Catlett?
Gentleman, if the two latecomers are here--or early
arrivals, I should say.
[Witnesses sworn.]
Mr. Horn. Thank you, gentlemen.
Both witnesses have affirmed.
Let's start with Under Secretary Hawke. I know you're in a
tight schedule this morning. You've already delivered one major
address to change Federal policy. This is your next appearance.
So, thank you for coming.
STATEMENTS OF JOHN D. HAWKE, UNDER SECRETARY FOR DOMESTIC
FINANCE, DEPARTMENT OF THE TREASURY; AND MARK D. CATLETT, CHIEF
FINANCIAL OFFICER, DEPARTMENT OF VETERANS' AFFAIRS
Mr. Hawke. Mr. Chairman, this is my most important
appearance today, and I appreciate the opportunity to be here.
We're shooting for the 10 o'clock schedule that we understood
was the timing.
Mr. Horn. You're right. You're ahead of time. So please
proceed with your testimony any way you would like to give it.
As you know, it's automatically included and if you would
please like to summarize.
Mr. Hawke. Thank you. I will truncate my prepared
statement, Mr. Chairman, and we appreciate the opportunity to
appear before you today to discuss the implementation of the
new EFT 1999 mandate. This law, which as you know, excludes
only tax refunds, is going to have far-reaching implications
for millions of Americans.
The electronic transfer initiative includes four distinct
elements. After July 26, 1996, all Federal payments, except tax
refunds, to newly eligible recipients who have bank accounts
must be made by EFT. And that is proceeding well, Mr. Chairman.
We understand that 85 percent or more of new recipients are
coming onstream with electronic payments.
Starting January 1, 1999, all Federal payments, with the
exception of tax refunds, must be made by EFT. Treasury is
mandated to ensure that all recipients who are required to
receive payments electronically have access to an account at a
financial institution at a reasonable cost and with the same
protections as other account holders at that financial
institution. And finally, the Secretary is authorized to grant
waivers based on recipient hardship, for classes of checks, or
where otherwise necessary.
Our goal, Mr. Chairman, is to issue payments by a method
that will provide the best service to recipients at the lowest
possible cost to taxpayers and with the greatest degree of
transaction security. Attached to my written statement is a
chart that shows the benefits of EFT. As the chart shows, EFT
will save taxpayers money. The Government's cost for an EFT
payment is only 2 cents--this is right at the back of my
statement--while check payments cost the Government 43 cents
each. We estimate that full implementation of EFT 1999 will
save taxpayers approximately $500 million over 5 years in
postage and check production costs alone.
This chart also shows a drastic decrease in payment
inquiries and claims under EFT as compared to the paper check
environment. The chart further shows that EFT increases
transaction security and significantly reduces opportunities
for crime.
Mr. Chairman, I would like to share with you now the
principles that Treasury has formulated to guide it in the
implementation of EFT 1999. First, the transition from a paper-
based system to an electronics system should be accomplished
with the interests of recipients ranking of paramount
importance. We should maximize private sector competition for
the business of handling Federal payments so recipients not
only have a broad range of choice of payment services and
service providers, but also that they receive their payments at
a reasonable cost with substantial consumer protections and
with the greatest possible convenience, efficiency, and
security. All recipients, and especially those having special
needs like the elderly individuals with physical, mental, or
language barriers and those living in remote or rural
communities, should not be disadvantaged by the transition to
electronic payments.
Finally, the EFT 1999 program should, to the maximum extent
possible, seek to bring into the mainstream of our financial
system those millions of Americans for whom the system is as a
practical matter not presently available. And I should say, Mr.
Chairman, that overarching these principals is the major
objective of reducing the costs to the government and taxpayers
of the whole payments process.
Since the passage of the Debt Collection Improvement Act in
April of last year, we've made significant progress in our
implementation efforts. In July of last year, we released an
interim rule implementing the first phase of the conversion
from check to EFT. That is the phase relating to new recipients
who come onstream and who have bank accounts.
In addition to reviewing the comments received in response
to the interim rule, Treasury has undertaken extensive outreach
efforts. These include meetings with various interest groups,
including consumer groups, vendors, financial trade
associations, and financial services providers, including bank
and nonbank entities. Our outreach efforts to consumer
organizations began in earnest with a meeting that I convened
last November. Treasury representatives have met with 11
different consumer groups over the 9 months since July 1966. We
also held an EFT 1999 consumer briefing session in April that
was attended by over 30 consumer groups.
Our representatives have met with 17 financial services
providers since the publication of the interim rule. These
providers include financial institutions as well as nonbank
entities, such as check cashers, automatic bill payers, and
other financial services providers.
In addition, we held an EFT 1999 briefing session that was
attended by a number of financial trade associations. In
partnership with the Federal Reserve Banks and the American
Bankers Associations, we've reached over 1,000 financial
institutions in nationwide seminars held since October 1996,
and these seminars will continue through this fall.
Part of our objective here, Mr. Chairman, has been to raise
the level of awareness of the financial services industry to
what's coming down the pike in respect to EFT 1999. In April of
this year, we met with a group of Government vendors to discuss
their concerns regarding EFT 1999. And since the passage of the
legislation, we've worked closely with Federal agencies, the
Federal Reserve, and financial institutions.
We've seen tremendous momentum in converting benefit check
payments to EFT. The Social Security Administration, for
example, has seen its direct deposit enrollment rate nearly
triple since its legislation went into effect July 26th of last
year. This results from the laws requiring that all newly
entitled recipients with bank accounts receive payments by EFT.
From fiscal year 1996 year-end to mid-fiscal 1997, the
percentage of all Treasury-disbursed EFT payments has increased
4 percentage points, from 53 to 57 percent of total Treasury
disbursements.
The immediate challenge that we're facing is publishing a
proposed rule to implement the second phase of EFT 1999. Our
goal in this rulemaking process is to develop policies that are
simple, clear, and most importantly, effective in dealing with
the difficult issues associated with mandatory EFT. We
anticipate a mid-July 1997 release date for the proposed
regulation, with a 90-day comment period, after which we'll put
out a rule in final form.
By far the most complex and controversial policy issue
confronting us in our efforts to implement EFT 1999 is how to
meet the needs of recipients without bank accounts. Under the
existing Federal payment system, electronic payments may only
be deposited into accounts at financial institutions that are
members of automated clearinghouses. As a result, the
population of Federal payment recipients without bank accounts
is currently precluded from receiving the benefits of direct
deposit.
Secretary Rubin has made it one of his high priorities to
encourage people without bank accounts to move into the
financial services mainstream. And financial services providers
offer many services that are critically important, if not
essential, to virtually all American families. These may
include access to federally insured deposits, the opportunity
to earn interest on deposits, the availability of personal
credit, and access to home mortgages. Some 40 million American
households with incomes under $25,000 need these services.
Many payments recipients without bank accounts have told us
that the lack of reasonably priced financial services currently
prevents them from moving into the financial mainstream. As a
result, Treasury has devoted significant efforts to increasing
the availability of low-cost banking services. Our Direct
Deposit Too program encourages banks to offer a reasonably
priced direct deposit account. Direct Deposit Too is based on a
model account, based on debit card access with no minimum
account requirement. And we've suggested this to banks as a
low-cost alternative to traditional checking accounts. For
recipients who are unable to obtain low-cost financial services
through the private sector, Treasury is also developing a
nationwide electronic benefits transfer system.
We recognize that some recipients of checks will be unable
to receive payments electronically because of their personal
circumstances. In the proposed regulation, Treasury will
solicit comments on the circumstances under which a recipient
should be granted a waiver from receiving payment
electronically. We will take into account not only geographic,
physical, financial, and mental barriers, but other compelling
circumstances.
A major issue associated with implementing the mandatory
EFT requirement is how we convert vendor payments to electronic
funds transfer. Although vendor payments comprise only 2
percent of total Federal payments, they represent a much larger
percentage of nonbenefit agency payments, between 10 and 30
percent depending on the agency.
Vendor EFT enrollment has increased approximately 60
percent from fiscal year 1996 year-end to mid-fiscal 1997.
However, the total percentage of vendor participation is still
only 26 percent. Historically, vendors have been slow to enroll
voluntarily in the EFT program, partly because of obstacles
associated with disbursing electronic payments to vendors. One
major challenge is that many vendors are not able to access the
remittance information that's transmitted along with electronic
payments. As a result, when payments are credited to their
accounts, it may be difficult for them to reconcile their
accounts receivable. This problem occurs because many small to
medium-sized banks do not have the special software that's
needed to translate to readable form the information that's
transmitted with electronic payments.
It's estimated that there are approximately 11,000 banks
capable of accepting an electronic payment. Fewer than 1,000
can translate the remittance data into a readable form for
their customers. We're presently working with other Federal
agencies, financial institutions, and vendors to address these
problems and develop low-cost solutions.
I would like to discuss briefly one of the most significant
aspects of our plan to implement EFT 1999. Aside from our other
implementation efforts, we plan to conduct a comprehensive
public education campaign to ensure that there's sufficient
information available to stakeholder groups and the public
about the requirements of the mandatory EFT legislation and
about the benefits of electronic transfers.
In fiscal 1997, we'll provide informational services to
financial institutions to ensure they're operationally prepared
for handling the increased demand for EFT services. In
addition, we will continue our interaction with consumer
groups, government vendors, financial trade associations, and
other government agencies to ensure they're aware of the
implications of the EFT legislation. We'll also roll out a
nationwide public awareness campaign that will encourage check
recipients to convert voluntarily to electronic fund transfer
in advance of the January 1, 1999 deadline.
In summary, the objectives of this campaign will be to
partner with the private sector and other Federal agencies, to
educate consumers to make good choices, and to minimize
disruption to recipients while adding value to the way they
conduct their finances.
In conclusion, Mr. Chairman, the Treasury Department
believes that this legislative mandate provides an important
opportunity for us to provide the high quality of service that
our customers want and need and at the same time to lower the
cost to taxpayers. Benefit recipients have told us that they
want to be able to receive their payments at points that are
easily accessible and increase their safety and security if
this can be done at a reasonable cost. Our proposed regulations
will attempt to address these needs. We welcome, encourage, and
look forward to the public comments that we will receive on our
forthcoming proposal, and we look forward to working with the
committee as we move forward on this initiative. Thank you, Mr.
Chairman.
Mr. Horn. Well, we thank for you that very full statement.
[The prepared statement of Mr. Hawke follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Horn. Now we welcome Mr. Catlett. Mark Catlett is the
Chief Financial Officer of the Department of Veterans' Affairs,
and we're glad to see you here again.
Mr. Catlett. Thank you, Mr. Chairman.
Mr. Horn. And the statement, you don't have to read it. It
is in the record. If you would like to summarize it.
Mr. Catlett. Yes, sir, I would.
Mr. Horn. And we can get to questions.
Mr. Catlett. Mr. Chairman, it is my pleasure to be here
today on behalf of the VA to testify on the Debt Collection
Improvement Act of 1996. I'm here today to provide you some
insight into our electronic commerce activities with the
thousands of vendors that we do business with daily that are
vital to accomplishing our VA mission.
The VA realized some time ago that EFT, electronic data
interchange [EDI], and electronic commerce [EC] were the
business solution to streamlining procurement and payment
processes. As early as 1995, VA developed an electronic
commerce strategic plan. I have a copy here. I will be happy to
submit it to you for your information.
Mr. Horn. Right. Without objection it will be in the record
at this point.
[The information referred to follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Catlett. In this strategic plan we identified a series
of activities and improvements we sought to implement in order
to bring about EDI and electronic commerce. With the completion
of these improvements, the VA has met its goals as outlined in
this plan. The VA now provides a number of alternative
solutions for EC and EDI processing, including the use of the
IMPAC card for micropurchases, and a prime vendor payment
system for purchases of pharmaceutical and hospital supplies.
In combination, EDI and EC alternative solutions have led VA to
be one of the leading agencies in promoting EC solutions for
acquisition, finance, and payment-related processes.
Currently, VA processes 30 percent of its invoices, 99.6
percent of its receiving reports, and 49 percent of its vendor
payments electronically. Through development of EFT payment
capabilities and enthusiastic promotional efforts, VA has been
highly successful in significantly increasing the number of
payees receiving salary, travel, and benefit payments.
Through the EC and EDI processes, programs currently in
place, and the significant enhancements scheduled for the
immediate future, VA offers a comprehensive EC/EDI/EPT program.
All of these electronic commerce activities have resulted in a
reduction of close to 10 million paper transactions annually
for the VA. In 1990, we were transactioning paper mostly at our
finance center in Austin and at our medical centers primarily
over 11 million pieces of paper. We hope by the end of 1997 to
be at about 1.3 million pieces of paper.
This has obviously benefited the VA. We believe it has also
benefited our trading partners and the various payment
recipients. We are in a position to implement, essentially meet
the mandatory requirements of the act of all electronic
payments by January 1999.
I will just add a few other updates and highlights of our
activities to give you some sense of the activities that we
have underway. In EDI, the VA utilizes a full EDI cycle for the
procurement and payment process. At the end of April 1997, VA
had 485 trading partner relationships, primarily our largest
trading partners, established with vendors wishing to receive
electronic requests for proposals to submit their offers.
During fiscal year 1996, the VA received 180,060 EDI invoices,
not including our credit card activity.
Our Austin Finance Center staff worked closely with
Treasury's Austin Regional Finance staff to implement the first
application of the American National Standard Institutes X-12
820 payment instruction and remittance advice. By the end of
fiscal year 1996, over 40 percent of VA payments were issued as
EDI payments. To promote and enhance EFT participation in May
1997, the VA mailed letters to over 50,060 of our 200,060
vendors currently receiving paper checks. To date, we have had
positive responses from almost 11,060 of those vendors. In June
1997, this month, VA will contact a second group of 50,060
vendors. The process will continue until all vendors have been
contacted and enrolled.
The IMPAC Visa purchase card is used almost exclusively now
in the Department for micropurchases, those purchases under
$2,500. We have had great expansion in this past year. At the
beginning of fiscal year 1996, less than 1 percent of our
micropurchases were done on purchase cards. As of April 1997,
we're over 90 percent. This is due largely to VA's internally
developed credit card system which has made it convenient for
our employees as well as for the vendors. This system
electronically processes all VA's Visa transactions. In the
month of April, 140,060. The transactions are posted to our
accounting system automatically, and, of course, electronically
remits payments to the bank card contractor. VA has received
$2.7 million in rebates, and has been recognized for this
credit card system, with the Hammer Award by Vice President
Gore.
Further, Mr. Chairman, we intend and have begun to expand
this activity to our Prime Vendor Alternative Payment Program,
which will streamline VA's multibillion-dollar prime vendor
payment process. Using a payment system based on the credit
card system I have just mentioned, VA can now accept an
electronic transfer file for prime vendor transactions, post
those transactions to our accounting system, and, again remit
the electronic payment to the contract bank.
Thank you for this opportunity to share our views and
innovative initiatives on electronic commerce as it relates to
the Debt Collection Act.
Mr. Horn. Well thank you very much Mr. Catlett.
[The prepared statement of Mr. Catlett follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Horn. Could you tell us, is there any experience we
have in terms of auditing where electronic data interchanges
are more difficult to audit than paper ones? What do we know
about that when it gets--have you had any chance to even look
at possible fraud, that kind of thing?
Mr. Catlett. Mr. Chairman, I'll get that for the record. In
general, I know our Inspector General has begun to look at this
issue as we have expanded greatly, particularly in the credit
card area. The general information that I have for you today is
that there is less fraud and less chance for abuse in that
program. I don't believe we have an official report from the
IG, but they have done some preliminary investigative work, and
I'll be glad to provide that for the record.
[The information referred to follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Horn. Good, I'll appreciate it. I would be glad to
receive for the record what I thought you would answer, and you
did. I also need to know if there are problems and what we need
to do in that area to solve them.
Now, let me get back to the questions with Mr. Hawke, and
then we'll pursue questions with all of you. This question
relates, Mr. Secretary, to the unbanked. Most ATMs have a $300-
per-transaction cash limit, while Social Security checks
average about $700. How does the Department of the Treasury
propose to ensure that the beneficiaries will not have to go
three times to the ATM to withdraw their money if they need it
immediately with all the hassle, the delays, and the costs that
that entails?
Mr. Hawke. Well, that is a problem, Mr. Chairman, that
we're very concerned about. We would never create a mandatory
account that would prevent a recipient from getting all the
cash they need. There is of course, a security feature to those
limitations on ATM disbursements as well as a kind of a
logistical reason for them. But that's one of the questions we
are going to be addressing as we try to formulate the
specifications for the account that we will provide.
I think it's important to remember here that many
recipients will be choosing accounts at a financial institution
of their choice. And we're trying to encourage as much
competition among the financial sector as possible to offer
consumers voluntary choices of accounts that they can opt into
the way they do today. So the forces of competition will play a
role here.
What we're most challenged by right now is how we fulfill
our mandate to assure that everybody has access to an account.
And that's the option where we will probably be going out and
procuring account services. We will write the specifications
for that account, and this is one of the issues that we'll have
in mind very much when we do that.
Mr. Horn. One often reads about fraudulent activities that
occur are really--people that prey on senior citizens at the
time the check is coming. Now, I don't know if the ATM helps
deter some of that, since I guess they can stand there and file
it several times to get all the cash out of the account. But
sometimes tellers, when they see people in the bank, can spot
that type of thing and sort of alert people that one is
withdrawing under pressure what's in the account. Has much
thought been given to that?
Mr. Hawke. Not to that specific issue, Mr. Chairman. But we
believe that, generally speaking, an electronic account is
going to be more secure and provide more protections for
recipients than the present paper check. Today the recipient of
a check is forced to convert that into cash all at once. And
they take the risk not only of theft of the cash, but loss of
the check and forgery and alteration. In the electronic
environment, we would hope that we can structure an account,
and that the private sector institutions will offer accounts
that will encourage thrift; that is, will encourage individuals
to leave their funds in the account so that they're not forced
to take them all out on the first day. And that not only
provides a security feature for the individual, but also is one
of those factors that's important in trying to get the unbanked
people into the banking system, make them accustomed to using
bank accounts and comfortable with that.
Mr. Horn. Well, I think you're absolutely right. I think a
lot of theft goes on when those checks arrive, right out of
mailboxes. And this way you would at least know the money is
automatically deposited in your bank account. And I must say my
bias is I can't believe someone wouldn't want it deposited in
their account and not waste their time as we used to to have to
go to the bank, put the check in, and all the rest of it. So if
we want to protect senior citizens, I would think this is the
way to protect them.
Later witnesses will argue that only federally regulated
and insured institutions be permitted to be the conduits of
electronic Federal payments. This would have the effect of
excluding certain businesses, such as check cashing firms.
These firms have the infrastructure in place in many poor
neighborhoods with no banks, but many assert these firms engage
in predatory practices. What's your reaction to this?
Mr. Hawke. Mr. Chairman, I think we need to determine who
can be the conduit; that is, who can have the relationship with
the recipient, and what kind of institutions we can deliver
payment to. Right now we can only deliver payment to
institutions that are members of automated clearinghouses. That
essentially means depository financial institutions.
Just as with paper checks, there's a limit to what we can
do to restrict the arrangements that an individual makes once
the funds come into the possession of the individual. An
individual who receives a check today, can take that check and
cash it at any place they want or do whatever they choose with
it. So, by analogy, there are limitations to what we can do
with respect to an individual's ability to engage in other
relationships once the payment goes into an account.
Now, we do feel rather strongly that as far as the account
that we're concerned about what we've come to call the default
option, that is the option that we provide for recipients who
don't have a bank account and haven't chosen one of their own,
that those should be in federally insured and regulated
financial institutions to provide the maximum safety for those
individuals for whom we are providing the account. As I say,
the arrangements that individuals make with other parties with
respect to the treatment of that account once the funds are in
there in the individual's names is something that we probably
have very little ability to affect.
Mr. Horn. This question concerns the proposed benefits
security card, Vice President Gore's proposal, as we know, to
have all Federal benefits on a single card. Have you considered
whether some seniors or veterans would not want their payments
associated with the concept that might imply public assistance
payment or welfare benefit, and might that damage acceptability
of the card? What's your thinking at this point?
Mr. Hawke. Yes. That is a concern that we are aware of and
sensitive to and we haven't decided exactly what the
interaction will be between the EBT programs and the EFT
program. There are lots of reasons why we might not require a
Federal recipient to use the benefit security card. For
example, the benefit security card is a medium for
transmitting, in many cases, family benefits like food stamps,
where they're available to a number of members of the family.
But in electronic funds transfer, the transfer has to be made
to an individual who is the designated recipient of that
payment. There may be different features in the default option
account that we provide that would lead us to want to make that
available rather than forcing people onto a benefit security
card. But that's an issue that we have very much in mind.
Mr. Horn. Mr. Catlett, has the VA given any consideration
to this idea of the proposed benefits security card? Since you
have a number of benefits to render, I just wonder how you feel
about it at this point?
Mr. Catlett. Sir, we estimate about 9 percent of our
beneficiaries are unbanked at this point. We have not looked at
those specific issues in detail that we have addressed here. In
general as an option, I endorse the idea that the safety and
convenience is something that we ought to promote with our
veterans. We have some issues there in terms of thinking that
all 130 percent of our veterans will be able to be
electronically receiving payments by January 1999, but we are
making great progress in expanding the number who are
participating in the EFT program.
Mr. Horn. Has the Chief Financial Officers' Council looked
into the benefit security card in any way? Is there a subgroup
or task force?
Mr. Catlett. There have been discussions, and I know Marty
has been to the council speaking to us about that.
Mr. Horn. Do you want to add anything, Mr. Wagner, just to
the benefit security card, the degree to which it's being
considered in the executive branch?
Mr. Wagner. The specific issue of stigma, I'm going to have
to do some thinking about it. My top-of-my-head reaction is
you're looking for a delivery platform that's a single face
delivery platform to deliver multiple services, whatever they
may be. And it sounds to me like there's a real risk. But the
way to deal with it is you address it as a broad-based solution
rather than just an extension of a welfare or a food stamps
program.
But I think I have to go back and discuss that potential
issue. That could be--the way it's perceived. It's also an
empirical question, what they really feel rather than what
people say they feel. We'll look into it.
Mr. Horn. Thank you.
Mr. Secretary, the issue of cost has emerged as a key issue
concerning the implementation of the EFT law. How will cost be
apportioned between the Treasury, vendors who provide EFT
services via contractor relationships, and recipients of
Federal benefit program payments?
Mr. Hawke. Well, Mr. Chairman, with respect to what I call
the default option, that is the account that we will procure
and make available to those unbanked recipients that don't
otherwise choose their own account, we don't view that as a
subsidized account. That is an account where we will set the
specifications of the account in the invitation for bids. And
we'll get competitive bidding from companies that will offer
this with the expectation of getting a substantial volume of
payments.
Our mandate under the statute is to make sure that that's a
reasonable cost. But there is no mandate for us to subsidize an
account. And we're concerned about what the effect of that
would be. Ideally, the private sector would respond to this new
initiative with a wide variety of account configurations that
would be of appeal to people who are receiving electronic
payments. And first off, we would like to see the processes of
competition work. If we come out with a subsidized account, it
may undermine that process. So we have to be very careful in
that regard.
Mr. Horn. Your testimony briefly mentioned the
disincentives in the Prompt Payment Act to use EFT for vendors.
Could you describe some of those disincentives?
Mr. Hawke. Well, the principal problem with respect to
vendors is the problem of transmitting payments information
along with the payment. Particularly larger vendors, who are
recipients of a lot of payments, are going to have difficulty
identifying a particular payment to a particular invoice. And
that's the major problem that that's inhibiting us from moving
ahead on the vendor side. When electronic data interchange
becomes more readily usable, we think that problem will tend to
disappear.
Mr. Horn. Mrs. Creque, who represents the American
Association of Retired Persons, AARP, and who will be a witness
after this panel, notes the possibility of nursing homes or
other institutions with the financial interest in payees being
designated as an authorized payment agent. Have you looked into
this possibility?
Mr. Hawke. We've been considering that possibility. And
there are presently arrangements that the Social Security
Administration sanctions with respect to the designation of
third parties to receive payments on behalf of individuals who
are incapacitated or the like. We don't propose to change those
or really expand those relationships at all. Again, we believe
that our mandate is to transmit funds to an account in the name
of the individual recipient. And in cases of particular
hardship, we would grant waivers, where appropriate, to allow
an individual to continue to receive a check.
Mr. Horn. Now, I'll ask you the question that I asked Mr.
Wagner. In April, the Subcommittee on Government Management,
Information, and Technology held a hearing on the Debt
Collection Improvement Act of 1996. At that time, I asked Jerry
Murphy to examine with GSA whether an administrative offset
feature could be incorporated into Federal credit card systems
to offset Federal payments to deadbeat vendors who are
delinquent on Federal debts. These cards will be accepted by
millions of vendors, some of whom will owe money to the Federal
Government. These payments will represent $30 billion in
disbursements over 5 years. Is there any progress on that
front?
Mr. Hawke. I think Mr. Wagner said about what I would have
said on that question. We've asked GSA to build into the new
card the capacity for offset, and we're working with them to
try to see how that could best be done.
Mr. Horn. Well, we thank you.
And we move now to Mr. Catlett for a few questions. And
your testimony noted that 49 percent of the vendor payments are
processed electronically. That compares with a mere 12 percent
governmentwide. This was accomplished in an organization where
each hospital director jealously protects his or her turf. Do
you have any feeling why other agencies haven't been as
successful as the VA? Or does modesty keep you from answering
that question?
Mr. Catlett. Mr. Chairman, I would like to answer that
question from our perspective.
Mr. Horn. Yes.
Mr. Catlett. Which is, I believe, one reason, as you
recognize, we do have activities across the country. But some
time ago, before we even reached electronic payments, had
centralized the process in our financial transactions. So that
clearly has given us a capability. All this information, as I
noted, nearly 130 percent comes electronically from the
facilities now to our center in Texas. And that's been the
focus of our activity, to develop these relationships with our
trading partners and with the vendors.
As I mentioned, there were 485 where we have full process.
We've gone after the largest ones first. Despite having
hundreds of facilities, there are several hundred companies
that probably do 80 percent. It's the 80/20 rule here; 80
percent of our business, probably, with the top 20--clearly
with the top 20 percent of our 200,060 vendors, and I'm sure
it's higher than that. So we've been able, through having a
centralized activity, to address the industry in that way.
Mr. Horn. As the VA have shown, if management makes the
electronic payments a priority, it can dramatically increase
the volume of electronic payments. What leadership has the CFO
Council provided in the area of electronic payments?
Mr. Catlett. The CFO Council you're speaking about?
Mr. Horn. Yeah.
Mr. Catlett. The--we have a--1 of the 12 subcommittees that
work on issues regularly and routinely in the--for the Council
has identified this as an issue. Actually, the--my Deputy, the
Deputy CFO for the VA, has been the chair of that group and has
led that activity. So we are--there are regular activities or
monthly reports to the CFO Council on this. We designate this.
And I can't say exactly. We've had our annual retreats over the
last 4 years now. And 2 or 3 years ago this was identified as
one of the areas that needed attention. And so once I've
identified that and we establish a subcommittee, the work of
that subcommittee has proceeded and has been regularly reported
to the Council. So it's been designated as a high priority in
the CFO Council.
Mr. Horn. OK. I understand you're the legislative chairman
in the Council?
Mr. Catlett. Yes, sir.
Mr. Horn. Any pitches you want to make while you're on the
record.
Mr. Catlett. No, sir, not at this moment.
Mr. Horn. OMB can't do anything to you since I asked you
the question.
Mr. Catlett. Thanks for the offer, but I'll pass for the
time being.
Mr. Horn. Your testimony also mentioned that your 10
million paper transactions have been eliminated. I think we'll
all give a cheer to that. That's a lot of paper, a lot of trees
saved. The Sierra Club ought to be giving you an award, I
think, or Secretary Brown, as he leaves. Has this allowed you
to downsize and re-engineer the accounting department?
Mr. Catlett. Yes, sir. I was thinking about coming up when
the National Performance Review identified the 252,060
reduction in staff was identified, I was skeptical at that
time. They were identifying 50 percent for personnel, finance,
procurement, having worked in this job for 4 years and realized
what we have been able to do, I think that is a realistic goal.
We have not reached the 50 percent goal yet, but we will be
able to do so. There are more activities for us to centralize
in terms of processing our financial and procurement
activities. So it is very possible that we are well on our way
to meeting that goal.
Mr. Horn. Well, that's a very impressive record. And I
guess I'd ask you how active you've been on making these vendor
payments electronically? And do people in other agencies come
to you since you have a success story here and say, OK, how did
you get it done?
Mr. Catlett. Yes, sir. In the past 6 months GSA and DOD
have been to our Austin Finance Center to look at our financial
management processes. I think, even DOD's CFO, Mr. Hummer, has
been there as well. And I can provide for the record those
others who have been there. I'll make a little plug here other
than legislative.
Obviously we have two interests here. In that consolidation
going on, we are a franchise activity, hoping to sell those
services, cross-service other agencies with that. But we, of
course, as well are introducing them and sharing with them our
technology and our practices and processes down there that they
may want to emulate.
[The information referred to follows:]
Visitors to the AFC
Veterans Canteen Service--Art Austerman
VHA MCCR--Barbara Mayerick
VHA HAC--Director and IRM staff member
Social Security Administration--John Moellar
Treasury Financial Management--Central Office
Federal Communications Commission, Washington, DC
VA Foreign Services Officer--Diane Fuller.
VAMC San Antonio, TX--Chief of Subsistence, Chief of Supply
Services, Fiscal Officer, and Chief of Accounting.
Department of Defense--Dr. John Hamre, Under Secretary of
Defense, Comptroller and CFO; Col. Derald Emory, Military
Assistant to Dr. Hamre; Bruce Carnes, Deputy Director for
Resource Management, DFAS; Ron Good, Office of the Deputy CFO.
Department of Agriculture (USDA)/National Finance Center
(NFC)--18 visitors.
Department of the Army, Ft. Sam Houston, TX--Lt. Col.
Gloria Kitsopoulos, Denise Johnson, Joe Demariano.
Immigration and Naturalization Service (INS), Dallas, TX--3
visitors (Assistant Director for Finance was one).
USMC (Retired), Okinawa, Japan--Colonel Roberts.
Mr. Horn. As I understand it, now, of the 39 million
benefit payments, slightly more than half were made
electronically. And that mirrors the rate, as I understand it,
governmentwide. Is that your approximation?
Mr. Catlett. We're now over 60 percent. In the past year we
have made some increases. We've been canvassing.
Mr. Horn. Why has the VA's success with converting vendors
not been equaled with similar success on the beneficiary side?
Mr. Catlett. Right. And, well--for our employees we are at
94 percent, which I think is comparable. We have recently gone
to--the 50 percent number that you are speaking to was a number
I was familiar with. Frankly, until I was preparing for this
hearing, and in the last year, we have increased it at another
10 percent. We have been doing outreach. We have been stuffing
checks to our veterans and making our pitches to the
convenience and safety of the program. And there's been a
response and an increase here in the past year.
Mr. Horn. Let me speculate. Is it because you as CFO have
the authority over vendor payments, but the VA Benefit
Administration is less helpful with respect to beneficiaries?
Mr. Catlett. No, sir, that is not the case.
Mr. Horn. You're going to defend them.
Mr. Catlett. No, it's more than a defense. They have been
very active in this. It's their cost that they save. They, like
all the rest of us, want to reduce their costs as well as
providing excellent service to veterans. There is safety and
convenience for veterans that they believe in, and they are
promoting and assisting us. They have staff very active in
making outreach efforts to veterans. But as I have said, it is
their mail costs that we are saving as each recipient agrees to
receive an electronic payment.
Mr. Horn. So you think there is cooperation and there will
be progress in this area?
Mr. Catlett. Yes, sir. I mean, again, this is a cohort of
the population that I think that are--you know, the older
Americans that are--as we at least intuitively say--will be
those that are most difficult to convert, particularly as you
get to the final numbers.
Mr. Horn. The last question is for Mr. Hawke. You note that
only 1,060 out of the 10,060 financial institutions are capable
of using financial EDI or electronic data interchange. That
seems low, especially when we're asking citizens to increase
the use of technology. What's Treasury planning to do to get
the banks up to speed in this area?
Mr. Hawke. Well, we have been working with the banking
trade associations on this problem. And in part, it's a
question of getting the proper software installed and getting
the right systems installed. I think progress is going to have
to be made toward this. This is the wave of the future. And
banking institutions that want to really provide the services
that their customers are demanding, are going to have to come
along with this. However, in smaller banks where they don't
have the software and systems capacity right now, progress is a
little slower than we would like.
Mr. Horn. I would think they would leap at the opportunity
of having a check deposited and sitting there for days before
somebody might use it. And we all know what they can do in
gaining a little interest over the weekend. So I'm sort of
amazed if they aren't jumping at it.
What's your reaction? Do you think----
Mr. Hawke. Oh, I agree. Just as a general principle, we
would like to see float eliminated from the payment system;
but, in effect, float is going to be the mechanism for
absorbing a lot of the costs that might otherwise be passed on
to customers here.
Mr. Horn. Well, I thank you all for coming. Mrs. Maloney,
who made our quorum, told me she has no questions for you.
She's going between four or five meetings this morning, as we
all are, and the full committee will be meeting shortly.
So we thank you.
Mr. Catlett. Thank you.
Mr. Horn. And you all did a good job, and we appreciate
having the latest information on this since we think this is a
tremendously important opportunity.
Mr. Hawke. Thank you, Mr. Chairman.
Mr. Horn. We're going to call one witness out of order,
because she has a plane to catch, and we are never sure between
bells ringing on the floor or in committee when we're going to
have to leave. So if Marcelyn Creque, the volunteer director of
the American Association of Retired Persons, will come forward
out of order. Ms. Creque, if you would just stand, we'll give
you the oath. All witnesses here are under oath.
[Witness sworn.]
Mr. Horn. OK the witness does affirm.
We're glad to accommodate you. Where are you going back to
today?
Ms. Creque. Chicago, just for tonight. Then I'll be off for
North Dakota tomorrow.
Mr. Horn. Well, I hope things are coming along out there.
That's a sad situation.
Ms. Creque. Yes. We have been actively involved in helping
people try to restructure their lives.
STATEMENT OF MARCELYN CREQUE, VOLUNTEER DIRECTOR, AMERICAN
ASSOCIATION OF RETIRED PERSONS
Ms. Creque. Mr. Chairman and members of the committee, AARP
appreciates this opportunity to present our views regarding the
impending implementation of mandatory electronic funds transfer
or EFT. My name is Marcy Creque, and I am the regional
volunteer director for AARP's Midwest region. On behalf of the
association, thank you for drawing attention to this important
issue.
Mr. Chairman, AARP has been active in the debate regarding
mandatory conversion to EFT prior to the enactment of the law,
and we were pleased to work with you on this issue.
While we recognize that direct deposit was a desirable
option for many, the association did not favor mandating EFT
for all recipients of Federal payments. We believed and still
believe that this would impose undue hardship on many
recipients. Congress made a decision to go ahead with EFT,
however. Since it did, we were pleased that a hardship
exemption and other provisions were included in the act in
response to concerns raised by AARP and others.
We want to work with this committee and the administration
to ensure that the transition to this paperless system is as
smooth and painless as possible. But this system must be
designed to work for Federal payment recipients, not for the
convenience or profit of financial institutions.
Today, I want to talk about who is affected by mandatory
electronic funds transfer and summarize a few of the major
points that are discussed in our full statement. We have
elaborated on these points in comments submitted to the
Department of the Treasury.
First, who will EFT affect? The Treasury Department
estimates that over 10 million recipients of Federal payments
are unbanked; that is, they do not have bank accounts. Some 80
percent of these persons are recipients of Social Security,
veterans' benefits, or other Federal retirement pensions or
payments. According to the latest survey of consumer finances,
some 9 percent of families headed by persons over age 60, about
2.5 million families, have neither a checking or savings
account.
What do we know about these families? The survey tells us
that the incidence of older families age 60 and older without
checking accounts is heavily concentrated among those with
incomes below $10,060 and those headed by older women and
minorities.
The survey also notes that families without bank accounts
tend to have lower educational levels. Another source found
that households with deposit accounts average 12\1/2\ years of
education, compared to only 10 years for households without
deposit accounts. Literacy and familiarity with banking
technology will become critical factors as large numbers of
persons are required to use ATMs and point-of-sale [POS]
terminals for the first time to access their benefits.
Among those age 65 to 74 without checking accounts,
difficulties in managing and balancing accounts are one of the
chief reasons for not having one.
About 33 percent of Social Security recipients and 68
percent of Supplemental Security Income recipients do not
receive benefits via direct deposit. The State of California,
Mr. Chairman, is one of several where Social Security
recipients who receive their benefits by checks are heavily
clustered. Given the vulnerability of so many of the unbanked,
AARP has encouraged the Treasury Department to take the
following actions.
First, define ``authorized payment agent,'' preferably
through a separate rulemaking. The definition should provide
for accountability and assure the safety of recipient funds.
Recipients in areas lacking banks are often forced to use
alternative check-cashing outlets or other options that may
charge up to 25 percent or more of the check's face value.
Personal safety can also be a concern with such operations.
Businesses that lack adequate consumer protections and promote
predatory lending practices should not qualify to participate
in EFT.
Second, limit the use of transaction and account fees
related to EFT. Banks and businesses cite as a major concern
the cost of EFT systems implementation. While AARP recognizes
that some investment will be necessary to adapt services to the
unbanked population, we are concerned that these costs not be
simply passed on to new customers who will be forced to use EFT
under the Treasury regulation. Many of these persons cannot
manage any additional charges.
According to the Treasury, Federal payments must be made by
electronic transfer by January 1, 1999. That will amount to
more than $240 billion annually. Given the advantage of the
float and paperless deposits, financial institutions must not
be allowed to impose unreasonable fees for receiving Federal
EFTs.
Third, requires financial institutions to offer minimal
banking accounts with specific consumer protections. Such
accounts should address the needs of persons currently without
bank accounts. Further, these accounts should not label or
stigmatize the account or account holder as a less desirable
part of the mainstream banking system, which AARP believes may
be the effect of Treasury's recent proposed rulemaking
regarding EBT.
Many seniors, veterans and Federal retirees correctly
equate EBT with State-administered public assistance, which the
Congress expressly excluded from the Regulation E banking
protections. Mandatory EFT accounts, however, will have
Regulation E coverage. Given that Congress has spoken on EBT,
it is incumbent on Treasury to ask Congress for authority to
reclassify mandatory EFT accounts as EBT and prevent any undue
recipient and regulatory confusion.
Fourth, ensure hardship waivers especially where current
service needs are not met. Waivers should not be reserved only
for the most extreme cases, but should apply to anyone who
truly will suffer a hardship according to their individual
situation and condition.
Finally, provide adequate public education and notice about
the impending change. Each Federal payment recipient must be
notified repeatedly well before January 1, 1999, in mailings
containing benefit payments and other forms of communication
that future payments will be made by electronic funds transfer.
The notice must explain in plain, simple-to-understand
language, including a Spanish translation, what electronic
funds transfer and related terminology means, since many
recipients will be unfamiliar with these terms.
In conclusion, AARP believes it is critical that basic
consumer protections be in place well before January 1, 1999.
This is particularly important for those recipients of Federal
payments who do not currently have bank accounts. Federal
payments may be the primary or sole source of income for these
unbanked consumers. Therefore, Congress and relevant Federal
agencies must ensure that these individuals are protected from
unfair, deceptive, or abusive practices as well as from a
reasonable hardship.
AARP stands ready to work with you in this critical
endeavor.
Mr. Horn. We thank you for that very detailed and thorough
statement.
[The prepared statement of Ms. Creque follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Horn. Since our family is a member of AARP, I should
say that on the record this next statement does not represent
that membership. It's just a thank you, because your staff
worked very closely with our committee staff in developing the
consumer protection report language that we had. And we look
forward to working with you and other senior citizen groups,
there's a number of them, in terms of protecting all our
citizens from unreasonable fees. So we share that concern.
I think electronic transfer will save thousands of senior
citizens from being robbed every month of their benefit
payments. And they--this is the way you protect them. And----
Ms. Creque. Except----
Mr. Horn. We don't want unintended consequences to go, but
I think, frankly, hundreds of millions of dollars will go to
senior citizens, not crooks, after this is done.
Ms. Creque. Agreed. But we do have some concerns currently
about the locations of ATMs. Some are in isolated lobbies. Many
are right out on the sidewalk. Finally, we have to also take
into consideration some of the problems that we have as we grow
older; our eyesight, arthritic fingers. So we do have some
concerns about safety.
Mr. Horn. As a senior citizen, I understand that.
Are you concerned that the banks will have a monopoly on
the 10 million new clients represented by those individuals
without bank accounts? What's your feeling on that? Have you
looked at that as to how many people actually have bank
accounts that are in your membership?
Ms. Creque. We did look at the number of people in our
membership that had direct deposit and what their experience
had been with direct deposit. And some of their experiences
involved errors in transmission and a long period of time it
took to resolve those errors. When your income is based solely
on that payment, you cannot afford a lengthy period of time to
resolve those errors. So that is one area that we have looked
at.
Mr. Horn. This was an error in the amount of deposit that
had come through electronically?
Ms. Creque. The amount of deposit that either came through
or the account to which it was deposited, because, you know,
transposition of one number can create quite an error.
And the other thing that occurs with seniors is trying to
resolve that type situation. They encounter another piece of
electronic equipment called voice mail, which they literally--
--
Mr. Horn. It frustrates me every day, and I didn't have to
hit 66 to be frustrated. I was frustrated by that years ago.
Ms. Creque. That's another point of frustration in trying
to resolve the errors, because sometimes they get caught in a
catch-22. The bank says, our records show this. You go back to
the originator. So there is some difficulty.
But one of our concerns pertaining to the banking industry,
if people are mandated to accept EFT transfers. We don't want
them to be stigmatized; and that can be done in many ways. It
can be subtle. For example, people could be assigned to use a
specific ATM machine, or they could use different colors of ATM
cards, and we do not want to subject any of our senior citizens
or any citizen to that type of indignity.
Mr. Horn. Well, I think you're right. And I think, frankly,
a bank that is aggressive and wants to serve its clientele will
do what you're talking about and make sure there's security
there and 20 cameras focusing on various angles of that ATM, so
if anybody does make mischief, there's a fairly good record of
them. And I think that would assure a lot of senior citizens
about the security. I think, let's face it, senior citizens,
correctly in many cities, are worried about going out at night.
Ms. Creque. That is true.
Mr. Horn. And it isn't just senior citizens; 25-year-old
people are worried about going out at night in an ATM, as you
suggested, in a dark area. And this is where people have to
call--that's a good thing local AARP people can do, because a
lot of them are looking for things to do. They can go sit down
with the bank president, say, look, this doesn't make any
sense. What can we do to get this thing in a place where you
serve people and they don't have to fear for their life?
Ms. Creque. We agree. And that could be done under what we
call our connections project. Under Connections, we know that
seniors want to remain independent, so we provide services like
the banking service, writing checks to help them remain
independent.
Mr. Horn. What are your organization's plans to conduct an
education campaign regarding direct deposit? What are you
planning to do on that?
Ms. Creque. First, we would work with the committee to set
up the instruction campaign. Then we have various outlets
available. We currently have a couple of programs addressing
financing and telling people how to write checks and how to
manage their finances. It would be undertaken like any other
program that AARP would undertake. We would train people to go
out and speak before senior centers. We would have meetings.
And through our many publications, we would alert seniors to
what is coming up. And then we have the one-on-one volunteer
services that would be available.
Mr. Horn. Yes. I would think Modern Maturity has about 33
million people, or is it more than that now that it goes to?
Ms. Creque. The membership of the association is about 32
million.
Mr. Horn. Thirty-two. They all get a copy of Modern
Maturity, right?
Ms. Creque. Right. Plus the bulletin.
Mr. Horn. Yes. A couple of full pages there on direct
deposit, maybe the cover, direct deposit. You can't miss it.
You at least look at the front cover or the back cover. And I
think that would be a great service to everybody in terms of
educating them. At least it's a start.
Would you like to respond to any of the issues that you
heard from the three Government witnesses?
Ms. Creque. I was interested in the Treasury Department--in
negotiating these accounts with the bank, and our concern about
the possibility that you could have ATMs in nursing homes and
assisted living facilities. Our concerns are from the
standpoint there is no protection for the consumer. An employee
could abscond with the money, or a concern go bankrupt. So we
are concerned that these agencies be both federally regulated
and federally insured. Because if your total income is coming
from the Government, you cannot afford to become a party to a
bankruptcy action, for example, and wait for your money.
Mr. Horn. Regarding your advice concerning check-cashing
firms and their role as a possible payment agent, would that be
true if those check-cashing firms offered a more reasonable or
cheaper and more convenient service to its customers?
Ms. Creque. Again, we would be concerned about protection
of the consumer and the transmittal of the money to the check-
cashing agencies. By the way, with this EFT-99 service as it's
proposed, with the debit card of the ATM, seniors would incur
not only ATM expense after the first debit card withdrawal, but
in taking care of their living expenses. They cannot pay in
cash in some instances. So they're going to have to go
somewhere, whether it's back into the bank or to a check-
cashing agency, to get money orders or checks, because their
account as it's currently set up does not give them check-
writing privileges.
Mr. Horn. In our looking at the welfare problems around the
country, we found billions of dollars that were being misspent,
and some of it was related to checks, being able to go to a
bar, for example, and the bartender cash the check, and
obviously the person bought quite a bit of alcohol before
leaving the bar, so they didn't have much left on the rest of
the monthly benefit payment.
And so you raise legitimate questions here on some of the
circumstances of these firms and where they're located and why
that might be disturbing to a senior citizen or anybody that
doesn't want to get into a lot of trouble just by going through
that door, because that's the only place you can cash a check.
So how do you suggest we deal with that problem?
Ms. Creque. Again, we're looking for institutions that will
be regulated. And there has to be some criteria set up and
really a good look at all of the participating institutions.
There will be a lot of people, like when welfare reform
occurred, that want to hop on the bandwagon because they see an
opportunity to make some money for their businesses.
Mr. Horn. Yes.
Ms. Creque. But our No. 1 concern, is that for many people,
90 percent of their household income is a Federal payment, like
Social Security. They're living from hand to mouth. They cannot
afford a loss of their money.
And the other thing, Mr. Chairman, to be realistic, there
are group of senior citizens and some younger people that will
never accept electronic funds transfer. You have some seniors
who are a carryover from the Depression when banks failed, and
they don't trust banks. You also have the language barrier
problem. Somehow, people want the money in their hand; they
want to count it. Another aspect is we still have a group of
people that go and pay bills in person. They need to see that
transaction. They need to have that piece of paper in the hand
that says this has been done. So I think we need to be mindful
of that.
Mr. Horn. Well, I grew up in a household that had exactly
those views, and I'm well aware that you're right when you talk
about people who have lived through the Depression and had
mortgage foreclosures and everything else. They're not going to
take any chances. But I think also when the chips are down,
electronic deposit is a safer way to make sure their money is
deposited than the way it is now for the average system.
Ms. Creque. Agreed.
Mr. Horn. And that's how we want to educate them.
Ms. Creque. With some training, as you know, because many
seniors do not readily accept something just because it's new.
Mr. Horn. Yes.
Ms. Creque. You have to prove to them what the benefits are
when accepting it.
Mr. Horn. And that's where the AARP can be most helpful.
Well, we thank you for your testimony. It has been very
helpful, and we wish you well on the trip.
Now the full Committee on Government Reform and Oversight
has scheduled a meeting this morning, and under the rules of
the House, the subcommittee cannot conduct its hearing once the
full committee has come together. So we're going to recess
until 2:30 p.m., here in this room, I believe. Hopefully the
full committee will have quit by that time.
And so the three other witnesses we have, Elliott McEntee,
the chief executive officer for the National Automated
Clearinghouse Association; Dina Nichelson, president of the
American League of Financial Institutions; and Margot Saunders,
managing attorney, National Consumer Law Center, we will start
precisely at 2:30. And we're sorry we can't finish everything
in the morning, which I think we might have, but the rules of
the House are the rules of the House. So we're in recess until
2:30.
[Whereupon, at 11 a.m., the subcommittee recessed to be
reconvened at 2:30 p.m. the same day.]
Mr. Horn. May I ask our witnesses to rise and raise your
right hands.
[Witnesses sworn.]
Mr. Horn. All right. Recess is over. It is approximately
2:49, and the Subcommittee on Government Management,
Information, and Technology will come to order.
We are delighted to have here the witnesses in both panels
two and three, and one is Ms. Nichelson, the president of the
American League of Financial Institutions, and another is
Elliott McEntee, chief executive officer, National Automated
Clearing House Association and Margot Saunders, the managing
attorney for the National Consumer Law Center.
Why don't we just go down the line in alphabetical order,
Mr. McEntee. Welcome. Please give us your testimony.
STATEMENTS OF ELLIOTT McENTEE, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, NATIONAL AUTOMATED CLEARING HOUSE ASSOCIATION; DINA
NICHELSON, PRESIDENT, AMERICAN LEAGUE OF FINANCIAL
INSTITUTIONS; AND MARGOT SAUNDERS, MANAGING ATTORNEY, NATIONAL
CONSUMER LAW CENTER
Mr. McEntee. Thank you, Mr. Chairman, and it is a pleasure
for me to be here testifying on behalf of the National
Automated Clearing House Association on the Federal
Government's EFT mandate.
Last year, the Congress approved legislation that would
achieve three major objectives: Significantly improve services
that the Government provides to its citizens; substantially
reduce the cost of sending payments to individuals and
businesses; and set the stage for improving the competitiveness
of the United States in the world marketplace. During the next
5 minutes, I will explain why the EFT mandate will achieve
these objectives.
Requiring the Federal Government to send payments to
individuals by direct deposit will result in substantial
benefits to consumers. Direct deposit is the safest and most
convenient way to receive funds. With direct deposit, payments
are not lost or stolen. In the 20 years the Social Security
Administration has offered this service, not a single direct
deposit payment has ever been lost or stolen. In contrast,
thousands of payments made by check are lost, stolen, and
forged every month.
With direct deposit, consumers have access to their funds
at the opening of business on the payment date, and interest
begins to accrue immediately, if the money goes into an
interest bearing account. Because of these benefits, over 80
percent of all new Social Security recipients are voluntarily
signing up for direct deposit.
How will consumers that do not have a bank account react to
receiving Government payments electronically? To answer this
question let's look at the recipients of food stamps and
welfare payments in those States that provide those benefits by
electronic funds transfer. Several surveys have shown that over
80 percent of the consumers participating in EFT programs
prefer this method of payment compared to receiving paper
coupons and paper checks.
Up to 500,060 companies that sell goods and services to the
Federal Government will be required to receive their payments
electronically. In addition to the benefits I just described
for consumers, companies will be able to receive the remittance
information that is needed to reconcile a payment in electronic
form. This will enable companies to substantially reduce the
cost of reconciling the payment.
The Federal Government will also benefit from the EFT
mandate. The cost to send payments will decrease by over 90
percent, according to the Treasury Department. The expense of
researching lost and stolen payments will be eliminated. For
every dollar that the Federal Government saves in this manner,
we move one step closer to balancing the Federal budget,
without reducing services to the public.
The United States is a recognized world leader in using
electronic technology for thousands of applications.
Unfortunately, sending and receiving payments is not one of
those applications. Almost 80 percent of the noncash payments
made in this country are made by check. In contrast, in many of
the countries that we compete with, electronic payments are
used far more frequently than checks. If electronic payments
usage in the United States was the same as in those countries,
we could save up to $50 billion a year. If the Federal
Government takes the lead in phasing out checks, then you can
be assured that the private sector will follow that lead and
those potential cost savings would start to materialize.
Because of the benefits I just discussed, the National
Automated Clearing House Association urges the Congress not to
modify the law that created the EFT mandate. We would like to
bring a related matter to the attention of the subcommittee.
The Treasury Department has announced that it would not proceed
with implementing the next group of businesses required to
deposit Federal employment taxes through EFTPS, thus reducing
the ultimate number of depositors by over 4 million taxpayers.
The Treasury plans to take this action because of concerns
expressed by the small business community. Rather than
exempting small businesses from paying taxes electronically, we
would urge the Treasury Department and the Congress to deal
head on with the real concern businesses have with paying
Federal taxes electronically.
Under current law, if the payment is late, the IRS can
impose penalties, up to 10 percent of the taxes due. This law
should be changed. The IRS should be permitted to charge only
for the interest income lost because the payment was late.
Under this proposal, the IRS could only impose higher penalties
to chronic late payers or when fraud is involved. By making
this change, the Treasury would not have to exempt the 4
million businesses from paying taxes electronically, thus,
saving both businesses and the Federal Government a substantial
amount of money. Attached to the written testimony, we provided
some details on that proposal.
That concludes my remarks and I will be glad to try and
answer any questions you may have.
Mr. Horn. That is an excellent statement you have submitted
and I appreciate your precise summary. We are going to go down
with the other two witnesses and perhaps we can have a dialog
between the three of you and the committee.
[The prepared statement of Mr. McEntee follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Horn. Ms. Nichelson.
Ms. Nichelson. Good afternoon, Mr. Chairman. It is my
pleasure to testify before you this afternoon and offer the
views of the American League of Financial Institutions, also
known as ALFI.
ALFI is a national trade association chartered in 1948 to
represent the legislative interests of minorities on savings
banks and savings and loan associations. ALFI was first formed
by a group of seven, then building and loan executives. They
determined that they needed a voice to express their concerns
among banking regulators and Members of Congress in Washington.
They formed what was then known as the American Savings and
Loan League, and at the time there were seven building and loan
institutions and that grew to 72 savings and loan associations
in 1978. They kept unique office hours because many of the
depositors were domestic laborers who only had Thursday off. As
a result, they were only open on Thursday evenings.
In 1989, the American Savings and Loan League amended its
bylaws and renamed the organization the American League of
Financial Institutions. There are currently 41 minority savings
banks and savings and loan associations, representing $5
billion in assets, with 109 branches and approximately 1,200
employees. They are located throughout the United States in
urban and emerging communities, and they rank in asset sizes
from our largest minority-owned institution, which happens to
be the largest minority-owned institution in the country,
Carver Federal Savings Bank in New York, with assets totaling
$360 million, to the smallest, Ideal Federal Savings Bank in
Baltimore, which has assets of $7 million.
We are delighted to have this opportunity to share our
views with you and the subcommittee regarding the electronic
benefits transfer funds program. We understand the need to
streamline the process of disbursing Government benefits to
those deserving Americans. Many recipients of these benefits
are located in the same urban communities as our member
institutions. Minority savings institutions are all unique in
their business strategies for growth and are all unique in
their individual goals toward more products and services to
their customers. Electronic banking can only enhance their
ability to reach a broader market and increase their
competitive advantages within their communities.
We feel it is important that Treasury encourage recipients
of Government payments to voluntarily agree to transfer those
payments to financial institutions under the current electronic
direct deposit program and that Treasury encourage banks to
create electronic-only accounts, known as Direct Deposit Two.
Inasmuch as the electronic benefits transfer, EBT, option is
not available through most depository institutions, we urge
that be the option of last resort on Treasury's plans to
convert paper payments to electronic funds transfers.
Mr. Chairman, I would like to share a few strategies of
some of the members of ALFI with you which represent a variety
of the approaches to the future of electronic banking. For
instance, a members' institution in your home State of
California recently announced a unique alliance. Broadway
Federal Bank, located in Los Angeles has assets totaling $114
million. Broadway has three branches, one appraisal center,
plans to open another branch in July, and has 51 employees.
Although subject to OTS approval, Broadway Federal and the Nix
Check Cashing Facility in south central Los Angeles have formed
a proposed alliance. This pilot relationship is the result of
what Broadway saw as an opportunity to expand its banking
services to whom some call the unbanked. Because this proposed
legislation will mean the end to what traditionally recipients
have known as a physical check in the mail, Broadway would be
one of many minority financial institutions well-suited to
disburse these funds.
It further represents the opportunity for recipients of
electronic funds transfer to begin the process of assimilating
into basic cultural management their financial life-styles to
the extent that these recipients would now be positioned to
establish checking accounts, credit cards, and use ATM cards.
Another ALFI member, Carver Federal Savings Bank in New
York is exploring the possibility of opening its own check
cashing company under its holding company. Carver's plan will
include providing other products and services such as money
orders and bill payment services. Carver is also exploring the
possibility of offering check cashing services to noncustomers
through a software vendor. Although these plans are in their
infancy, they further validate Carver's commitment to reach all
consumers in their communities.
We think it is important that certain protections for the
consumer be included in this proposed legislation as well. The
fees associated with managing these electronic benefits should
be regulated by Treasury so that the consumers are not unfairly
charged by a single vendor. It is our recommendation that
Treasury be authorized to promulgate regulations that protect
EBT fund recipients and require all financial institutions to
report the EBT funds by volume, by community, and that the fees
they receive in connection with the transfers be reported on a
quarterly basis.
There should be significant training requirements for all
custodians of EBTs, which includes sensitivity training and the
requirement to work with churches and community groups.
Education will play a vital role in Treasury's EBT program.
Why? Because as a local retailer likes to say, an informed
consumer is our best customer.
Consumers who have managed their entire lives on a cash
basis will need to learn how to live electronically. Treasury
should look to minority savings institutions to help in this
process by jointly sponsoring educational seminars in local
community centers, churches, and in some instances the minority
institutions themselves.
Many minority institutions have bilingual tellers,
brochures in several languages, and regularly attend community
events where English is a second language. It should be noted
that all minority savings institutions have many services in
place, such as direct deposit, Social Security, and retirement
direct deposit. Many of these institutions also have automatic
teller machines, located in branches and in shopping centers in
their communities; therefore, minority institutions have
already established an infrastructure that could facilitate the
electronic transfer of funds to the appropriate recipient.
The new generation of consumers, as a result of welfare
reform, will understand the value of their benefits and the
need to ultimately move beyond Government assistance. It is
important to the membership of ALFI that this new generation
understand they can have the same availability of financial
services as traditional banking customers.
In conclusion, Mr. Chairman, we believe that the electronic
funds transfer program has value. We want Treasury to remember
the importance of encouraging recipients of the funds to
voluntarily agree to transfer their benefits to a financial
institution. Further, it is our hope that Treasury will
encourage financial institutions to create electronic-only
accounts through this program. These programs represent a great
opportunity for consumers who were previously unbanked to
become traditional bank customers, thereby availing themselves
of an array of banking services. These programs ultimately
provide a new customer base for financial institutions.
I thank you for this opportunity to comment and I await
your questions.
Mr. Horn. Well, thank you very much. We appreciate that
statement.
[The prepared statement of Ms. Nichelson follows:]
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Mr. Horn. Ms. Saunders.
Ms. Saunders. Thank you, Mr. Chairman. We very much
appreciate the opportunity to testify today as EFT-99 holds the
potential for great benefit and also for great trouble to our
low-income clients and their communities. I offer my testimony
today not only on behalf of the low-income clients of the
National Consumer Law Center, but also on behalf of the
Consumer Federation of America, the National Community
Reinvestment Coalition, and the Organization for New Equality,
three other organizations that represent low-income people and
consumers.
There are numerous issues which will affect the unbanked
recipients of Federal benefits. One is the extent to which
Treasury forces the unbanked to use accounts which cost them
too much. Another extremely important issue is which kind of
institution, regulated and insured, or unregulated, Treasury
authorizes to be the providers of the Federal payments to
payees. This issue is important, not only because of the fees
which could be charged, but also because of the other services
that these alternative providers would try to force upon the
Federal payees.
A third issue, which I won't address further in my
testimony today, but one which is also very important, is the
extent of hardship exemptions that are allowed under the
statute--excuse me, under the regulations that are promulgated.
Treasury is saying that they need to allow check cashers and
finance companies to partner with banks in order for the
delivery of Federal payments to be made. And they are proposing
that this could be done in one of two ways. One, individuals
could choose alternative providers as authorized agents--there
is no way, Mr. Chairman, I will be able to read all my
testimony, so I will be paraphrasing--one is as authorized
agents, and, two, if they fail to make a choice and the bank
becomes a default bank, the bank would offer to provide the
services through the alternative providers, such as check
cashers or finance companies. This is what we are particularly
concerned about, either one of these choices.
We believe the statute used the words ``alternative
authorized agent'' as a synonym for only those words like
guardian, alternative payee, or other words which are used in
current benefit statutes, such as Social Security and veteran's
benefits, all of which have a fiduciary duty to the individual.
We are very concerned that Treasury would allow check cashers
or finance companies to advertise to the low-income population,
allow us to be your conduit for the Federal payments, come pick
up your payments every month.
Well, that might work for month after month, until one day
the individual goes to the finance company and says, well, I
think I do need some money to pay my utility bill and gets a 36
percent or 40 percent interest rate loan because the loans from
the financial providers are very often unregulated and even
where they are regulated, the interests and the terms are very,
very high. If they fail to make those payments or they have
problems making the payments, they still have to go back, month
after month, unless they change their authorized payment agent,
and that is the scary part to us. There is no prohibition in
the Social Security law against set off; there would be nothing
that would stop that finance company from taking the entire
Social Security payment to be put toward the payment of a
finance--of a high cost loan. And that shouldn't be the way
Treasury delivers its Federal payments.
On the other hand, other than the banks that Miss Nichelson
represents, most banks are saying, not all of them, but many
banks are saying, we are not sure that we can find that it is
financially feasible, despite the float that will be available,
to provide services. So Treasury's response is, well, we may
need to allow banks to partner with check cashers and finance
companies to provide the services in low-income communities
where there are no other banks, where there are no financial
institutions. And that, to us, is also a tremendous concern.
I represent low-income people all over the country who have
been the victims of abusive practices of check cashers,
pawnbrokers, and finance companies. I have in my testimony in
the appendix, just a few stories of the abusive practices that
low-income people are subject to.
We don't think anybody but federally regulated and
federally insured providers should be the conduits of Federal
payments, one way or the other. The use of check cashers as one
method to access the funds is fine. We don't want to prohibit a
bank from, say, establishing a default account for a number of
individuals and providing access at the bank, at the grocery
stores, and at check cashers. That would be fine. It is the
exclusive use of the check casher, of the alternative provider,
that scares us so much. I have, today, a letter that was
signed, that was sent out, just today, to Secretary Rubin----
Mr. Horn. Excuse me. I am going to have to recess. We have
a vote downstairs and I have to respond to it. You will be able
to finish as soon as I vote.
[Brief Recess.]
Mr. Horn. This hearing will resume. We will have a few of
these in and outs. I apologize to you. It happens frequently
here, and it is hard on the witnesses, and so I sympathize with
you. Let me start--you were going to finish your final remarks
there. Go ahead.
Ms. Saunders. I was just going to tell you that we have a
letter that was sent just today to Secretary Rubin of the
Treasury, signed by 15 organizations, representing low-income
people, disabled people, low-income communities, unions, asking
the Treasury to clearly draw the line at regulated and insured
depository institutions as being the conduits, and I would be
glad to provide a copy of that letter.
Mr. Horn. Please, without objection it will be added to the
record at this point.
Ms. Saunders. Thank you. I would be happy to answer any
questions.
[The prepared statement of Ms. Saunders follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Horn. I have some questions for all of you and some for
two of you. Let's start with Ms. Nichelson, and I am sure you
heard Margot Saunders' testimony advocating excluding from the
definition of ``authorized agent,'' the category or term she
calls ``alternative financial providers,'' such as check
cashing firms.
Do you have any comments on that suggestion?
Ms. Nichelson. Well, I do believe since check cashing
facilities are not regulated, that they shouldn't be involved
in the process of being the recipients of these funds. I think
financial institutions, especially those located in those urban
areas, are best suited to help disburse those funds. And so in
that respect I do agree with her comments. I do have concerns
about facilities such as check cashing companies.
Mr. Horn. Anything else you want to add to that, Ms.
Saunders?
Ms. Saunders. Yes, I want to clarify, we don't have a
problem with a bank, as Ms. Nichelson is proposing, a bank
setting up an office in the check cashers outlet and using
their brick and mortar as a method of getting banking services
to low-income people; we think that is a terrific idea. I know
there were some concerns that we would disagree, but I think
the more we talk, the more we find we are agreeing. We want to
see the unbanked get into banks, and whether it is through
check cashers or not, it is fine. It is the exclusive use of
check cashers or the alternative providers that concerns us.
Mr. Horn. I am delighted to hear you say that, Ms.
Saunders. If I took you downstairs with me, there is a room
where they have been talking all day and they aren't agreeing
yet; namely, the full committee.
Mr. McEntee, any thoughts on this question?
Mr. McEntee. Just one brief thought on this question. We
believe that the Treasury Department only has the legal
authority to place the funds in a financial institution. I
think the basic question that surrounds the relationship
between the consumer, the third party, and the financial
institution, is should the consumer be permitted to set up an
account, which would not be an insured account, but should they
be permitted to set up an account at a third party. I think
there is an area of debate surrounding that issue, and I think
financial institutions, check cashers, and consumer groups will
be sorting that issue out for the next few months. I am not so
sure we have a clear-cut answer right now as to how that is
going to play out, other than we firmly believe the Treasury
needs to get the funds initially into the financial institution
and the arrangement between the third parties, the financial
institutions, and consumers would have to be determined and,
again, I don't have a specific answer as to how that should
work right now.
Mr. Horn. Ms. Nichelson, are you engaged in any sort of
education campaign with your membership to inform them about
the new law?
Ms. Nichelson. Yes, sir, we are. We hold an annual
conference in October and November. However, we have already
begun the process of sending information to the member
institutions on the various proposals before Treasury, and this
issue in particular has really sparked a great amount of
interest.
My oral testimony didn't expand into the numerous comments
that I have received from the 40-member institutions who have
real concerns about some of the provisions. They do prefer
educating the consumer before this process takes place in 1999.
They do understand the fact that there will be persons who
would like to remain unbanked, who don't want a relationship
with the bank, but they do believe that because of the new
welfare reform and the new generation of people who are
currently receiving public assistance, and those peoples'
ultimate goal to become more of a contributing entity to
society and not so reliant on Government, that those will be
the people who ultimately will establish a working relationship
with the bank. And the banks further have begun the process of
going to communities, going to churches, and offering free
seminars on credit counseling and on just educating the
consumer to how it can work. Banking can be very intimidating
if you don't understand it, but if you can streamline the
process and let people know that you don't sign your life away
because you apply for a checking account, or even with ATM
cards, it is just another way of you beginning the process of
managing your financial life-style.
Mr. Horn. That is very helpful.
Mr. McEntee, what sort of educational campaign or
conferences does your organization schedule for banks and other
financial institutions?
Mr. McEntee. We have been focusing on delivering
educational message to financial institutions, businesses, and
consumers that are going to be affected by this legislation. We
have worked very closely with the Treasury Department and have
mailed out--actually, the Treasury Department mailed out 50,060
letters to financial institutions all around the country
informing them of the requirements of the mandate. We have
gotten responses back from about 3,500 of those financial
institutions.
We have regional associations around the country. They have
been putting on seminars and conferences on the EFT mandate.
The American Bankers Association has been doing the same thing.
We have been working very closely with several trade
associations that represent the interest of the business
community and they have been putting on educational programs as
well.
We are also working with the Treasury Department to develop
public service announcements and video news releases, and some
of those would be released at the end of this year and early
next year. The purpose of those messages is to communicate
directly to consumers, so we are working very closely with the
financial institutions, the business community, and the
Treasury Department, to get the word out on the EFT mandate
requirements.
Mr. Horn. Well, that is helpful.
Ms. Saunders, do you want to add anything to the discussion
on education and how to go about it?
Ms. Saunders. No, sir.
Mr. Horn. OK.
Mr. McEntee, your testimony noted that the biggest
challenge in vendor payment comes from attaching payment
information with payments, so-called financial electronic data
interchange or financial EDI. How many banks are currently able
to take advantage of financial EDI?
Mr. McEntee. In our estimate, there is about 9,060
commercial banks that provide services to vendors, that provide
services to the Treasury Department and other government
agencies. There are a little less than 2,060 financial
institutions or commercial banks today that have that
capability. There have been a lot of developments in the
marketplace over the past year to develop inexpensive software
packages where small banks can install these software packages
on PCs that process information electronically and pass that
information electronically or through the mail or through a fax
system to the vendor depending on what the vendor is looking
for.
I would like to say we are in place today, that the banking
industry is ready today, but I cannot do that. We are fairly
optimistic that sometime before January 1, 1999 the vast
majority of commercial banks will be in the position to provide
that remittance service information to the business community.
Mr. Horn. Can you give us an idea of the cost of the
software and how does it vary? Does it vary by the number of
transactions or do you just get a basic system, whether it is a
small bank, medium sized bank or a large bank?
Mr. McEntee. Software companies have been producing
services for the large banks for several years now so the
problem is not with the larger financial institutions, it is
basically with the small community banks.
We have worked very closely with a couple vendors to
develop a service called Rapid EDI and Rapid EDI can be
purchased for as low as $10 a month, where the financial
institution basically signs up for the subscription service and
the third party that we have under contract basically goes into
the personal computer that the financial institution has,
extracts the remittance information, and then transmits the
remittance information directly to the business customer. If
the financial institution is interested in doing more of the
processing on their own, they could lease the software package
for $50 a month and that way they can provide a number of
different options to the business customer, delivering the
remittance information by mail, by fax, or electronically. So
the software packages that have been developed for small
financial institutions are relatively inexpensive.
The problem right now is that a lot of those institutions
are not interested in purchasing or leasing the software
packages because there is no demand for that service. The
demand will be there, however, when this EFT mandate goes into
place.
Mr. Horn. Any other thoughts on software and need for any
of the people you relate to?
Ms. Nichelson. I would just suggest, Mr. Chairman, that
although you are talking software within the banks, I hope that
once a lot of this written information is sent to the consumer
that you consider that a lot of people use English as a second
language and you should consider some bilingual brochures and
bilingual options when you are attempting to really reach these
people in hopes that they will become part of the process prior
to 1999.
Mr. Horn. One of the problems is the urban area I come
from, and I suspect you come from, there are 70 languages
spoken in the schools. There is no way you can communicate in
70 languages.
Ms. Nichelson. I agree with you, Mr. Chairman. However, I
suggest if you start with Spanish and with some of the Chinese
speaking languages, you would reach a large segment of those
people.
Mr. Horn. You wouldn't in my community. You better start in
Khmer. It is the largest community of Cambodians outside of
Cambodia.
Ms. Nichelson. I think it is interesting, Broadway Federal
Bank in south central Los Angeles, they have now over half
their staff is bilingual. They speak Spanish and they speak
some Chinese and some other dialects, and Paul Hudson, the
president of the bank, would probably share with you that that
has really helped him to broaden his outreach to the people
directly within his community.
Mr. McEntee. Mr. Chairman, let me try to respond to that
question. We have produced some of the public service
announcements in Spanish, geared directly to a lot of the urban
communities, so we are sensitive to the need to try to
communicate in more than English, but I agree with you it would
be impossible to produce this information in 70 different
languages.
Mr. Horn. Mr. McEntee, the Federal Government will save,
presumably, their estimate was $130 million per year under this
new law. Beneficiaries are expected to save $1.6 billion per
year and you note that $1 will be saved by banks per electronic
transaction in reduced teller cost. How much does that result
in reduced cost to the banking industry each year as a result
of this law? Has anybody ever worked the numbers on that?
Mr. McEntee. As you were talking, I was trying to work out
the numbers, but my mind is not working fast enough. If I
recall, I think there is about 300 million transactions that
the Government will be making to consumers by direct deposit,
assuming all government recipients get paid by direct deposit
on January 1, 1999, so that would work out to precisely $300
million a year in cost savings. There still should be some cost
savings for vendor payments as well, so I think you are talking
about a cost savings of roughly $325 to $350 million a year.
Mr. Horn. So if we add that to the Government's $500
million over 5 years, and this is $300 million a year, you are
saying, basically, annually. You would be doing pretty well,
almost get us up to $1 billion at that rate.
Let me ask Ms. Saunders, you used the term ``alternative
financial providers'' in your testimony. I assume this refers
to check cashing outlets among other institutions, and Ms.
Nichelson described a partnering arrangement between a bank and
check cashing outlet. As I understand it, you don't mind a bank
going into any place if it is going to render service to the
community.
Ms. Saunders. That is right.
Mr. Horn. And sort of an outreach approach, which I think
is an intriguing idea.
Do you have any other thoughts on banks and where they
ought to go and spend some of their time with the customers?
Ms. Saunders. The consumers and community advocates feel
strongly--we are very much hopeful that EFT-99 will be the--
finally be a true opportunity to get the unbanked people and
banks together. We think that if Treasury takes the initiative
and holds the line and, in fact, uses this opportunity, the
unbanked will have the use of banks for several new ways. One,
they will be able to develop savings accounts, and we have
already seen--there is a trial, EFT trial in Texas that
Treasury has been going through for several years. And even
though the people in that trial have been traditionally
unbanked and living month to month, they have seen the
development of many savings accounts little bits saved month to
month, whereas before there were no savings accounts, so the
development of savings accounts is a very important
opportunity.
Second, the possibility the individuals will begin to see
the banks as their financial institution, so they turn to the
banks, rather than the alternative providers, for other
services, is very important.
And, third, by using the banks, they will be able to use
the electronic payment system more readily. We are just at the
beginning of the electronic payment system. Some of us now use
modems to pay our bills. But low-income people pay cash or by
money orders. If they use banks to--if they see banks as their
financial provider, they may also begin to participate in the
electronic banking process.
Mr. Horn. Let me quote, Ms. Saunders, from your prepared
statement. ``If alternative providers of financial services are
permitted to be conduits of Federal payments, that would
constitute the Federal Government's blessing of grossly abusive
practices against low-income people.''
Let me lay out a scenario for you, an alternative financial
service provider charges the same or less than a bank for an
ATM card and is more convenient to the customer's house. Do you
have any reaction to that?
Ms. Saunders. The question is to whom--with whom does the
individual have the account. If the individual has the account
at the bank and chooses to use the ATM, the bank's ATM, or the
network's ATM machine at the check casher, that is just fine,
but it is not only the fees charged for the access to the
Federal money, it is all of these other issues as well. So,
yes, my and the other group's answer is unequivocally, we still
would go with the bank's and only the bank's.
Mr. Horn. Ms. Saunders, your concerns seem to be focused on
individuals also without bank accounts, and is that a fair
characterization? Do you have any comments on those with bank
accounts who do not use direct deposit currently?
Ms. Saunders. I think that those people who have bank
accounts and do not use direct deposit will find that their
Social Security check or their other Federal payment will be
automatically deposited in their bank account. I cannot imagine
that Treasury would force them to use a default system that
does not use their already existing bank account.
Mr. Horn. Mr. McEntee, I note you are part of a public
education partnership with Treasury's Financial Management
Service, which has high praise from us, the Social Security
Administration, a well-organized group, and the Department of
Veteran's Affairs. Can you describe that effort, what is
happening with it?
Mr. McEntee. Yes, we have a multifaceted effort under way
to provide education to financial institutions and their
customers and the unbanked as well. As I mentioned before, the
focus is to get banks educated through conferences, seminars,
and we are actually running a major nationwide seminar here in
Washington, DC, in September where all the major trade
associations representing the banking industry are cosponsoring
that effort, and there are several Federal Government agencies
that will be speaking at that conference.
As I mentioned before as well, we think the key to
communicating to consumers will be partially met through public
service announcements and video news releases, and we are
working with those Government agencies to produce those right
now.
Mr. Horn. Very good.
Do any of you have questions of each other, after listening
to the testimony, anything you want to add? Anything I should
have asked if I knew what I was talking about?
Ms. Saunders. You clearly know what you are talking about.
Ms. Nichelson. Clearly.
Mr. McEntee. I think you are asking all the right
questions.
Mr. Horn. Without objection, I guess, I have got here the
American Bankers Association, the National Association of Check
Cashers have sent statements into the subcommittee for
inclusion into the record. I am sorry our witnesses haven't had
a chance to see them, but without objection, we will put them
in the record at this point.
[The information referred to follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Horn. So if there are no other questions, what I would
like to have is the staff list of who has helped on this
hearing. J Russell George, the staff director and chief counsel
in back of me here; Mr. Mark Brasher, professional staff member
that prepared for this hearing; Andrea Miller, the faithful
clerk to our majority staff; And Grant Newman, the intern. We
have to have an intern category, folks, this is summer almost.
So Mr. Newman, we appreciate your help, and if the teacher
doesn't think so, tell him to read the hearing record. OK;
David McMillen, professional staff member for the minority, he
is downstairs, Jean Gosa, clerk for the minority, and our three
court reporters that have been in and out today, Katrina
Wright, Vicky Stallsworth, and Tracy Petty.
I thank the three of you again for the excellent statements
you submitted and the summary of your testimony and your
response to our questions. Thank you very much for coming.
With that, we are adjourned.
[Whereupon, at 3:50 p.m., the subcommittee was adjourned.]
[Additional information submitted for the hearing record
follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
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