Treasury Under Secretary John D. Hawke Jr. on Thursday defended electronic delivery of government benefits, saying banks will not be allowed to charge the poor or elderly multiple fees.
Senate Banking Committee Chairman Alfonse M. D'Amato charged this week that banks will impose exorbitant fees on consumers dependent on Social Security and veterans benefits. For instance, a married couple receiving Social Security benefits could pay $305 a year in fees, he said.
"This is absolutely incredible, and it is wrong," the New York Republican said at a hearing he called to discuss implementation of the 1996 law requiring electronic payment of most government benefits.
Mr. Hawke said the Treasury is still writing rules to implement the law and has not established a fee schedule for banks offering accounts to benefit recipients. But he vowed to protect consumers.
"I share your concern that the price of the government making its payments electronically not be the imposition of unreasonable costs on the recipients of payments," Mr. Hawke said. "The statute requires that this program be available at reasonable cost, and we will accomplish that goal."
In fact, Mr. Hawke argued the law requiring electronic delivery by 1999 will be a boon to consumers and taxpayers.
Paying bills electronically saves the government money, Mr. Hawke said. It costs 43 cents to process and mail a check but only 2 cents to send money electronically. The law "will save taxpayers approximately $500 million over five years in postage and check production costs alone," he said.
Electronic benefit payments also are safer, he said. Banks lose $70 million annually from forged Treasury checks. That number will be reduced substantially once electronic payments begin, he said.
Consumers also benefit. They no longer must worry about having checks stolen when they go on vacation or are hospitalized. Benefit recipients are 20 times more likely to have a problem with a paper check than with an electronic payment, he noted.
Mr. Hawke received support from Larry Kurmel, executive director of the California Bankers Association. "The Treasury's program attempts to accommodate recipients by blending a concern for cost and convenience," he said in a prepared statement. "Sen. D'Amato does a disservice to all involved by alleging a rip-off unsupported by any facts."
Mr. Hawke said proposed rules will be issued in early July for 90 days of public comment.