FROM THE OFFICE OF PUBLIC AFFAIRS

The Treasury Department announced Thursday the proposed attributes for an Electronic Transfer Account (ETA) that is intended to provide all Federal payment recipients access to a low-cost account at a Federally-insured financial institution for the purpose of receiving payments by electronic Direct Deposit.

Once the ETA attributes are finalized, recipients of Federal payments will have the option to sign up for an ETA, receive Direct Deposit through another commercially available account of their choice, or elect to continue receiving a paper check.

"Working with consumer groups and financial institutions and conducting independent market research has been essential to developing an ETA program that will be broadly supported," said Treasury Fiscal Assistant Secretary Donald Hammond. "Working together, we can create access to Direct Deposit for up to 10 million Americans who do not have accounts today"

The ETA will only be available through Federally-insured financial institutions, including banks, thrifts and credit unions. Treasury will encourage, but not require, financial institutions to offer the ETA and is proposing to reimburse the institutions for the one-time cost of setting up an ETA in the amount of $12.60 per account. Financial institutions choosing to offer the ETA will enter into a contractual agreement (ETA Financial Agency Agreement) with the Treasury Department. Under the voluntary agreement, Treasury would require that the ETA:

• be an individually owned account at a Federally-insured financial institution;

• be available to any individual who receives a Federal benefit, wage, salary, or retirement payment;

• accept only electronic Federal payments;

• be subject to a maximum price of $3 per month;

• have a minimum of four cash withdrawals per month, to be included in the monthly fee through any combination of proprietary ATM and/or over-the-counter transactions;

• provide the same consumer protections that are available to other account holders at the financial institution;

• allow access to point-of-sale (POS) networks, if available;

• require no minimum balance, except as required by Federal or State law; and

• provide a monthly statement.

Additionally, Treasury seeks comments on three other features that are not currently part of the basic ETA proposal. These features are: 1) paying interest on account balances; 2) allowing for additional deposits; and 3) providing for third-party debit transactions or electronic bill payment. Treasury will determine whether participating financial institutions, at their own discretion, should be permitted to incorporate any of the above features into the ETA.

The ETA is the next step in implementing provisions of the Debt Collection Improvement Act (DCIA) of 1996, which calls for the Treasury Department to assure that Federal payment recipients have access to a reasonably priced account in order to receive electronic payments.

Treasury published the final rule governing Electronic Funds Transfer (EFT) on Sept. 25, 1998. The final rule provides for the ETA and details the conditions under which recipients can continue to receive paper checks if electronic deposit would cause hardship. The final rule emphasizes recipient choice and the importance of ensuring that recipients are not disadvantaged or forced into making a choice that is not right for their circumstances.

In order to encourage financial institutions to offer ETAs, Treasury is taking several steps, including working with bank regulators to clarify how banks can receive credit under the Community Reinvestment Act for offering ETAs. On October 26, Treasury's Community Development Financial Institutions (CDFI) Fund issued a Notice of Funds Availability for its 1999 Core Program under which CDFIs offering deposit services such as ETAs could be eligible for funding. Additionally, the CDFI Fund plans to issue guidance concerning how banks may apply for Bank Enterprise Awards for offering deposit services, including ETAs.

The Treasury Department will receive public comment on the proposed ETA account for 45 days. After the comment period ends, the Treasury Department will review and take into consideration those comments when finalizing the ETA Financial Agency Agreement with financial institutions.