WASHINGTON — The Treasury Department’s two-year-old program to deliver Social Security and other payments electronically to millions of people without bank accounts has steadily grown, but consumer activists complain that the good news is only half the story.

Users of electronic transfer accounts — low-cost, government-designed accounts available at banks to take direct deposits from Uncle Sam — more than quadrupled during the 12 months that ended April 30, to 10,913.

The special accounts help the government implement the 1996 Debt Collection Improvement Act, which took full effect in 1999 and encourages electronic delivery of Social Security and other federal payments, except tax refunds.

The goal was to save the government $500 million over five years and to provide a safer payment method for elderly and low-income recipients, who may still receive paper checks if they request them.

However, Margot Saunders, managing attorney of the National Consumer Law Center, said there are still nearly 10 million federal funds recipients without special accounts.

“This means that only one-tenth of 1% of the population for whom the ETA account was designed is currently using it. Something is wrong,” Ms. Saunders testified Wednesday before the House Financial Services oversight subcommittee, which was looking into the accounts.

Critics have said the Treasury has been too slow to encourage bankers to offer the accounts.

Fiscal Assistant Treasury Secretary Donald V. Hammond, who heads the program, counters that it has taken time to recruit bankers to operate the accounts and to persuade those without bank accounts to use them. But in an interview Thursday he was ready to declare victory in the first half of the battle: finding banks to offer the accounts.

“We’ve enrolled a lot of institutions giving us good geographic coverage,” he said. “That part has been a success. The net piece is what you get for enrollments — how many institutions enroll people and did you get accounts in the areas where you want.”

He told Congress on Wednesday that he expects the number of bank branches with the accounts this year will rise nearly 78% from last year, to 16,000. He said he expects even more growth in 2002, as more large banks start offering the accounts and coverage increases across the country, particularly in the 10 states with the most federal workers and beneficiaries.

The largest of the 600 institutions offering the accounts are Wells Fargo & Co., FleetBoston Financial Corp., Banco Popular de Puerto Rico, and Fifth Third Bancorp, Mr. Hammond said. Bank of America Corp. and Bank One Corp. will start offering the accounts in October, he said.

To the Treasury and the banking industry, the program’s success is measured not only in how many people open the low-cost accounts, but also in how many come in from the cold and open traditional bank accounts instead.

“We consider the ETA to be an important potential stepping-stone to full-service banking relationships while providing a safe, reliable, and low-cost alternative to recipients who receive federal benefits,” Mr. Hammond testified. “Treasury’s major objective is to increase [electronic funds transfer] payments and to reduce the number of paper checks issued, and this objective is being achieved. The ETA is a means to achieve this end.”

William Phillips, director of policy development at the American Bankers Association, declared the accounts a success so far, but he said the real proof will be in how many people they will sweep into the financial mainstream.

“My time period is five years before you can tell how the program works,” said Mr. Phillips, who has been tracking the accounts and helping Treasury promote them to banks since the concept was proposed in the mid-1990s. “In many ways the accounts are a transition. A lot of people who don’t have accounts can go to the bank to open an ETA and then find that they can get a free or very low-cost full-fledged bank account that offers so much more.”

The special accounts can only accept electronic direct deposits, which can only be withdrawn for cash. The bank must decide whether to accept nongovernmental deposits. Customers cannot use the accounts to write or deposit paper checks.

Though there are no statistics that would indicate with some precision how well the program done, Mr. Hammond and Mr. Phillips both cited anecdotal feedback from bankers who offer the accounts that a number of people who are eligible to open them are opening traditional accounts instead.

At the hearing, panel chairwoman Sue Kelly emphasized her commitment to the program. However, she said it has not reached its full potential, and she called for a congressional inquiry into “who is not using this service and why.”

“Because the EFT program can offer significant cost savings and increased efficiency to the federal government, we are concerned about how the degree of participation and extent of promotional efforts have impacted the success of the program,” the New York Republican wrote in a letter to the General Accounting Office, the investigative arm of Congress.

Mr. Hammond said the government, which pays the banks $12.60 to set up each account, has spent $24 million to develop and advertise the program. However, it will save $5 per account each year by sending payments electronically rather than through the mail.

Since 1995 the Treasury has shifted 140 million payments — the bulk of which go to government workers and beneficiaries with traditional bank accounts — from paper to electronic checks. This has saved the government almost $250 million and prevented $41 million of check fraud so far, and it will save Uncle Sam about $70 million this year, Mr. Hammond testified.

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