Banks are expected to make less than 19 cents a month from the float on accounts held by federal benefits recipients, according to a Treasury Department study. That's far short of the $6 to $10 per account per month banks need to recoup their costs, said Marcia Z. Sullivan, government relations director at the Consumer Bankers Association. "You are not going to make money if you rely on the float," agreed Nessa E. Feddis, a senior federal counsel at the American Bankers Association. "You are not going to break even." Banks will have to charge fees or press for a government subsidy in order to afford accounts for the "unbanked," industry lobbyists said. The Treasury Department study was prompted by Senate Banking Committee Chairman Alfonse M. D'Amato, who in May questioned whether financial institutions would reap a windfall from a government mandate to make all federal payments except tax refunds electronically by 1999. Using data from a Citibank pilot program of nearly 22,000 recipients in Texas, the Treasury Department found the average daily balance per account was $46. More than half the payments were withdrawn on the day of deposit during three months in late 1996. "It just comes in and goes," said Stephen M. Vajs, a senior operations analyst at the Treasury who did the study. Mr. Vajs warned the findings were on the basis of on a short period of data, rely on a conservative interest rate estimate, and have other drawbacks. The Treasury Department is scheduled to release a proposal the week of Aug. 11 that will explain how the agency plans to contract with financial institutions to serve the unbanked, which types of institutions may participate, and which recipients may get exemptions. Consumer groups hope that institutions will find alternatives to burdensome fees. Selling other banking services to these new customers and saving money on check processing will offset electronic benefits transfer account costs, said Margot F. Saunders, managing attorney for the National Consumer Law Center. The government may have to reconsider its opposition to subsidies in order to get mainstream institutions to offer the accounts, Ms. Saunders added. A demographic study of federal check payment recipients by the firms Booz-Allen & Hamilton and Shugoll Research found that 18% of 1,000 recipients interviewed by telephone lack bank accounts. On average, they are 62 years old and make $14,500 a year. According to the study, 47% of the people said they do not have an account at a bank because they don't have enough money; 21% see no need for an account; and 6% consider bank fees too high. Retirement and disability check recipients were more opposed to the idea of a debit card account than were the unbanked. u

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