The Treasury Department on Thursday proposed delaying part of its nationwide electronic benefits transfer program for up to a year to give banks more time to prepare.
Under the proposal, the department would ignore its 1999 deadline and continue sending Social Security and veterans' benefit checks to consumers without bank accounts.
This would give the government and banks more time to develop accounts for the unbanked that would be profitable to the industry but inexpensive to consumers.
"The more we deal with the complexities of that process ... the more we begin to have concerns about whether it is going to be feasible to get (it) on-line by Jan. 1, 1999," said John D. Hawke Jr., the Treasury's under secretary for domestic finance.
The delay does not affect benefit recipients with bank accounts, who still are subject to the 1999 deadline mandated by Congress.
Reaction was mixed. Marcia Z. Sullivan, government relations director for the Consumer Bankers Association, applauded the move. "We need the extra time," she said.
But some bankers and activists said Treasury should have released a proposal explaining how much banks could charge for serving the unbanked and how these new, so-called electronic transfer accounts will work.
"Bankers want to know whether Treasury is going to introduce some price controls on these accounts," said Viveca Y. Ware, director of payment systems for the Independent Bankers Association of America. "We believe costs should be market driven."
Bernard B. Fulton, legislative representative for the Association of Community Organizations for Reform Now, said the government is making it harder for activists to protect consumers because it won't release any details of how the accounts will work.
The full proposal is scheduled to be published Sept. 16 in the Federal Register.
For recipients who do not voluntarily open bank accounts, Treasury would establish electronic transfer accounts that would be accessible only by automated teller machine or debit card.
The agency said it wanted to wait to review comment letters due Dec. 16 before proposing account specifications.
Once the government sets account details, the Treasury Department will solicit bids for financial institutions to provide the service exclusively statewide or regionally, Mr. Hawke said.
The proposal includes "relatively liberal waivers" for consumers who wanted to continue receiving paper checks, Mr. Hawke said.
Recipients without bank accounts would be allowed to keep receiving their benefits by check if they have a financial hardship or a physical disability or are far from banking services. Recipients with bank accounts who received checks before July 26, 1996, would also be granted waivers if they are disabled or geographically remote.
