Labor and community advocates last week criticized the Treasury Department's electronic benefits transfer proposal as failing to protect low-income people from high fees.
Under the proposal, out for comment until Dec. 16, the government would design a model account and contract with banks to provide it in various regions to benefits recipients who do not use a financial institution.
Benefits recipients could still open accounts at other banks, but those banks could charge unlimited fees, a coalition of 18 groups including the AFL-CIO and the Urban League wrote Treasury Secretary Robert Rubin.
The Treasury should "revise the regulations to require all accounts established for the purpose of receiving federal payments electronically be required to be accessible through financial institutions at a reasonable cost," their Nov. 19 letter said.
Banks hired by the goverment would not be able to provide electronic delivery through check cashers. But labor and community groups want the Treasury to bar check cashers from serving any of these accounts.
"People who are outside the financial mainstream will be vulnerable to the abusive practices of fringe bankers who may enter into partnerships with the banks to build up a captive customer base," the letter said.