FROM THE OFFICE OF PUBLIC AFFAIRS

The Treasury Department is concerned about recent reports indicating that some banks are offering or are planning to offer direct deposit services that involve prearranged linkages with retail outlets, including liquor stores. Customers who sign up for such services, including recipients of government payments, would access their accounts through the nonbank outlet and may be exposed to substantial fees in order to receive their payments.

We are concerned that government payment recipients may be misled into signing up for such payment access services prematurely and on the basis of misinformation or misapprehension about their rights. The Department recently requested that all federal bank regulators take steps to ensure that banks involved in any such arrangements make full and fair disclosure of the costs and fees involved in such arrangements. In addition, the Department recently obtained the agreement of a nonbank service provider that was distributing erroneous information to distribute a corrective notice to all affected customers and to inform customers that any fees paid may be recovered. The Department is also considering whether to issue a proposed regulation with respect to such arrangements.

Congress has directed that starting in January 1999 most recipients of federal payments should receive their payments by electronic direct deposit. New Treasury regulations that will be released in the very near future, many terms of which are being announced today, however, will make clear that waivers from this requirement will be liberally available at the recipient's choice, and that no checks will be held up or delayed.

In addition, Treasury will be making arrangements for banks to offer a low-cost Electronic Transfer Account (ETA) that will be available to all recipients of federal payments. It is expected that the ETA will become available in the latter part of 1999. Recipients who currently receive checks need not take any action to convert to direct deposit before the ETA becomes available. They may, of course, sign up for direct deposit at any financial institution, but no recipient need take any action at this time.