Financial institutions want to know how they will get paid if they participate in the Treasury Department's program to send benefits electronically to people without bank accounts.

"We are very concerned of the potential for significant shifting of cost and risk from the government to financial institutions," Marcia Z. Sullivan, government relations director for the Consumer Bankers Association, wrote in a comment letter filed with Treasury.

"Financial institutions must be adequately compensated for the increased costs they will be asked to bear."

The government should "provide a revenue stream, either from the U.S. Treasury or the benefit recipient, to the financial agent to offset operating costs," wrote Thomas J. Sheehan, president of Grafton State Bank, Grafton, Wis., for the Independent Bankers Association of America.

A 1996 law requires the federal government to deliver all government payments and benefits, except tax refunds, electronically by Jan. 1, 1999.

A full proposal is expected by early August on how Treasury will contract with financial institutions to provide accounts to the 10 million federal benefits recipients who don't use banks. Treasury officials have said banks should provide the accounts at a "reasonable" cost.

A related proposal made by Treasury in May-to clarify the agency's legal authority to establish electronic benefits transfer (EBT) accounts at financial institutions for "unbanked" recipients-gave the banking industry and consumer groups a chance to sound off early.

Although the May proposal listed the basic duties of an institution providing EBT accounts-such as issuing debit cards to recipients instead of checks-the banking industry wants more details on how institutions will be selected and what fees they will be allowed to charge.

Consumer groups recommended no monthly account charges and at least four free withdrawals at automated teller machines. They also requested services excluded from Treasury's proposal such as checking and use of EBT accounts for other deposits.

Maude Hurd, president of the Association of Community Organizations for Reform Now, said banks can afford to provide more services to the poor, noting that a Citibank pilot program in Texas has shown that electronic benefits transfer programs are "tremendous money-makers."

"Customer service duties should be included in the proposed regulation," said Texas Banking Commissioner Catherine A. Ghiglieri, who noted that the Citibank pilot did not warn consumers of heavy fees.

A coalition of money transmitters including Thomas Cook Inc. and Western Union Financial Services Inc., objected to Treasury's plan to exclude them from offering EBT accounts.

"Nothing in the statute requires that participants in the provision of this service be limited to banks," wrote Rosemary H. McEnery, a partner with the law firm Howrey & Simon in Washington.

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