Sen. Alfonse M. D'Amato is up in arms over the government's plan to deliver benefits electronically by 1999, claiming it allows banks to charge consumers too many fees.
"Under the administration's plan, senior citizens, veterans, and needy individuals who receive government benefits would be subject to paying several fees each and every time they needed to withdraw money," the New York Republican said on Sunday.
"For the federal government to allow billion-dollar banks to bilk the most vulnerable in our society is unconscionable."
The Senate Banking Committee chairman said he would hold a hearing Thursday on the matter, with Treasury Under Secretary John D. Hawke Jr. expected to testify.
A 1996 law requires the federal government to deliver all government payments and benefits, minus tax refunds, electronically by 1999. The Treasury Department is writing rules to cover a variety of questions raised by the law, including what to do about the 10 million people who do not have bank accounts.
While refusing Monday to comment directly on Sen. D'Amato's criticisms, Treasury spokesman Paul Elliott said the proposed regulations are still being drafted. "We have not made any official decisions regarding this issue," he said.
Treasury is not expected to release its proposal for public comment until late May or early June, but Sen. D'Amato said department officials described their plans to his staff last week.
The administration proposal would permit banks to create "electronic- access only" accounts, Sen. D'Amato said during a press conference Sunday in front of a Citibank branch at 45th Street and 6th Avenue in Manhattan.
Appearing with representatives from four local senior citizens groups, Sen. D'Amato added, "They won't be able to go to the teller for service. That's treating these seniors like second-class citizens. That's wrong."
Payments to people without bank accounts will be deposited at institutions chosen by the government, Sen. D'Amato said. The bank will establish an account and issue a debit card so the person can withdraw funds, he said.
Sen. D'Amato said banks will get interest-free use of the $7 billion to $8 billion a month sent to eight million Social Security recipients.
"It is an outrage that ... banks will not have to pay any interest or provide regular customer services on these accounts, but they will be permitted to charge multiple fees each time a senior citizen uses an ATM to access his or her benefits," he said.
Treasury's plan, according to Sen. D'Amato, would permit banks to charge fees after the first free withdrawal.
But Edward L. Yingling, executive director of government relations at the American Bankers Association, called Sen. D'Amato's criticisms "premature and misdirected."
Treasury will propose a model, but fees will be set by the market, he said.
"I don't think there is a feeling in the banking industry that this is a great profit center," Mr. Yingling said. "The truth is most of this money comes in and goes right back out."
Mr. Yingling also noted that the banking industry did not lobby for the 1996 law. Congress enacted the Debt Collection Improvement Act without much fanfare as a way to reduce fraud and cut the cost of administering government benefit programs.