After months of delay, the Treasury Department on Thursday proposed a low-cost account banks may offer recipients of federal benefits delivered electronically.

The proposed account-which any federally insured financial institution could offer under a contract with the government-is aimed at the roughly 10 million Americans who get Social Security or other government checks but lack a personal account.

The proposal is to be published Monday in the Federal Register, and comments will be due in early January. It is one of the final steps in the government's EFT '99 initiative-the congressional mandate to convert most government payments to direct deposit.

Congress two years ago ordered a switch to less-costly electronic payments by Jan. 1, 1999, in order to cut government expenses by $500 million over five years. But many of the same lawmakers and consumer groups later forced the Treasury to make the program voluntary for recipients so as not to inconvenience the poor and elderly.

Under a watered-down rule issued in late September, recipients with bank accounts may switch to electronic payment if they request the change. Those who lack bank accounts may accept electronic payments once details of the government-designed accounts are completed next year.

Under the proposal, banks and thrifts could charge a maximum monthly service fee of $3 per account and would have to allow four free monthly withdrawals. Only federal payments could be deposited in the account, to keep it from competing with other banking products.

Treasury officials succumbed to industry demands for a subsidy and agreed to a one-time, setup payment of $12.60 per account. The plan also would ban banks from partnerships with liquor stores, check cashers, or other third parties to offer these accounts.

The government seeks comments on whether it should permit interest payments, additional deposits, or automatic deductions for bill payments.

Reaction in the banking industry and on Capitol Hill was mixed.

Industry representatives disagreed whether the accounts would be profitable-which has been the industry's No. 1 concern for the past two years.

"My sense is, it is market-based," said William H. Phillips, director of policy development for the American Bankers Association. "Looking at it, it would seem there are no significant problems with what they are proposing." He predicted participation from many big and small banks because they make money on similar accounts for monthly fees of less than $3, even without a subsidy.

But Marcia Z. Sullivan, government relations director for the Consumer Bankers Association, disagreed. "I think it is going to be very difficult for a bank to offer it and not lose money," she said.

Community banks like the proposal because the accounts are voluntary and narrow in scope so as not to undercut other business, said Paul C. McGuire, payment systems representative for the Independent Bankers Association of America.

Republicans on the House Banking Committee are concerned that the subsidy would increase the government's costs, an aide to the panel said. Savings also would be lost because many people will keep getting paper checks, the aide said.

Donald V. Hammond, the Treasury's assistant fiscal secretary, responded that the government would still realize savings but declined to estimate how much. He said the department would recoup the cost of its $12.60 subsidy within two and a half years.

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