WASHINGTON - Under pressure from Vice President Gore, the Federal Reserve Board on Friday postponed action on a plan that would extend consumer protection rules to people who use ATM and debit cards to receive government benefits.
The Fed had been expected to approve the plan despite protests from government agencies that want to deliver welfare payments, food stamps, and similar benefits through automated teller machines and point of sale terminals.
The vice president interceded with a letter to Fed chairman Alan Greenspan last week, asking that the matter be tabled for 30 days. He had reportedly been
lobbied by other government officials to press the Fed on the issue.
Cost Concern
The proposal would make government agencies subject to the same consumer protection rules that banks are, including liability for fraud and theft losses and various disclosure requirements. Some administration officials have argued that the compliance costs would be too costly, stifling the electronics delivery of benefits.
The last-minute action by the vice president caught the Fed off guard. Their proposal has been out for public comment since February, and Fed officials have met with administration officials in recent weeks about the plan.
"I think it's dragged on long enough," said advocate Michelle Meier, a lobbyist for Consumers Union. "I'm hopeful we just have another 30 days before we finally get these basic consumer protections for welfare participants."
Consumer Activist Support
The Fed won the support of consumer activists in January when it proposed bringing electronic benefit transfer under the same rules that banks using ATM machines face.
Fed Governor Lawrence B. Lindsey spearheaded the effort, arguing that an exemption from the rules for government agencies would set up separate standards for rich and poor users of ATMs and electronic transfers.
For example, a customer with a bank-issued ATM card faces limited liability if the card is stolen or fraudulently used.
No Guarantee
But without the Fed action, Mr. Lindsey argued, a welfare recipient whose card were fraudulently used would not be guaranteed the same protection.
"I would think the vice president would support the concept of equal rights for rich and poor on this issues," Mr. Lindsey said Friday.
Mr. Gore's office did not return calls seeking comment.
In his plan to "reinvent government" earlier this year, Vice President Gore recommended that electronic benefit transfer initiatives be encouraged to cut costs involved in issuing welfare payments.
But at least some administration officials agree with the Fed that electronic benefit transfer development should not come at the expense of consumer protections.
Both Treasury Under Secretary Frank E. Newman and Comptroller of the Currency Eugene Ludwig have said they support the Fed's approach. Ms. Meier said.
"What we will have to do is educate the vice president's office," Ms. Meier said. "I feel confident because I do think this administration cares about poor people and the rights of poor people."
