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Federal Reserve Bank
of

Dallas

HELEN E.HOLCOMB
DALLAS, TEXAS

FIRST VICE PR ES ID EN T AND

7526 5-5906

CH IE F O PE R A TIN G OFFICER

December 8, 1998

Notice 98-114

TO: The Chief Operating Officer of each
financial institution and others concerned
in the Eleventh Federal Reserve District

SUBJECT
Notice and Request for
Public Comment on Proposed
Electronic Transfer Account Features
DETAILS
The Department of the Treasury, Financial Management Service, has issued a notice
and requested public comment on proposed Electronic Transfer Account (ETA) features. In­
cluded for comment are three additional features that are not part of the basic ETA. The Trea­
sury wants to determine whether to add the additional features to the ETA at the option of the
financial institution and at additional cost, if any, to the account holder.
Emphasizing the significance of this notice to individual account holders and finan­
cial institutions, the Treasury requests that the notice be reviewed carefully. All comments,
whether suggestions or clarifications, must be received by January 7, 1999. Please address
comments to Cynthia L. Johnson, Director, Cash Management Policy and Planning Division,
Financial Management Service, U.S. Department of the Treasury, Room 420, 401 14th Street,
S.W., Washington, DC 20227. Comments also may be submitted via the Internet at <http://
www.fms.treas/eft/eta>, or you may E-mail comments to eta.comments@fms.sprint.com.
ATTACHMENT
A copy of the Treasury Department’s notice as it appears on pages 64820-25, Vol.
63, No. 225 of the Federal Register dated November 23, 1998, is attached.

For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal
Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012;
Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

MORE INFORMATION
If you have any questions, please contact (at the Board) Sally Phillips, Senior Finan­
cial Program Specialist at (202) 874-7106, or Matthew Friend, Financial Program Specialist at
(202) 874-6754. For additional copies of this Bank’s notice, contact the Public Affairs Depart­
ment at (214) 922-5254.
Sincerely,

Monday
November 23, 1998

Part VI

Department of the
Treasury
Fiscal Service
Electronic Transfer Account; Notice

64820

Federal Register/Vol. 63, No. 225/Monday, November 23, 1998/Notices

DEPARTMENT OF THE TREASURY
Fiscal Service
RIN 1510-AA56
Electronic Transfer Account
AGENCY: Financial M anagement Service,
Fiscal Service, Treasury.
ACTION: Notice of proposed Electronic
Transfer A ccount features; request for
comment.

The Debt Collection
Improvem ent Act of 1996 (Act) amends
31 U.S.C. 3332 to provide that, subject
to the authority of the Secretary of the
Treasury to grant waivers, all Federal
paym ents, other than paym ents under
the Internal Revenue Code, m ust be
m ade by electronic funds transfer (EFT)
beginning January 2,1999. The
D epartm ent of the Treasury (Treasury)
published a final rule im plem enting this
mandate, 31 CFR part 208 (Part 208), on
September 25, 1998. 63 FR 51490. Part
208 provides that any individual who
receives a Federal benefit, wage, salary,
or retirem ent paym ent is eligible to
open an Electronic Transfer Account, or
“ETASM,” at any Federally-insured
financial institution that elects to offer
ETAsSM” . The pream ble to the final
rulem aking indicated that Treasury
w ould separately p ublish for com m ent a
notice of the proposed features of the
ETASM. This notice describes proposed
features of the ETASM and provides
further opportunity for public comment.
In addition, it requests com m ent on
three other features that are not part of
the basic ETASM to determ ine w hether
they should be added to the ETASM at
the option of the financial institution
and at additional cost, if any, to the
account holder. After evaluating the
com ments received, Treasury w ill
publish a notice in the Federal Register
setting forth the required features for
ETAsSM.
DATES: W ritten comments on the
proposed account features m ust be
received no later than January 7,1999.
ADDRESSES: Comments should be sent to
Cynthia L. Johnson, Director, Cash
M anagement Policy and Planning
Division, Financial Management
Service, U.S. D epartment of the
Treasury, Room 420, 401 14th Street,
S.W., W ashington, D.C., 20227.
Comments also m ay be subm itted
electronically via e-mail to
eta.comments@ fms.sprint.com or by
filling out the ETASM com m ent form
available on the EFT w ebsite at http://
w w w .fm s.treas.gov/eft/eta/. The final
rule for Part 208, the proposed rule for
Part 208 (208 NPRM), and comment

SUMMARY:

letters received in response to the 208
NPRM, including comm ents on the
ETASM and a sum m ary of comments
received in response to the specific
ETASM
-related questions raised in the
208 NPRM, are available on the
Financial M anagement Service’s EFT
website at http://w w w .fm s.treas.gov/
eft/. Comments received on this ETASM
notice w ill be available for public
inspection and dow nloading at the
website address show n above and for
public inspection and copying at the
D epartm ent of the Treasury Library,
Room 5030,1500 Pennsylvania Avenue,
N.W., W ashington, D.C. To make an
appointm ent to inspect comments,
please call (202) 622-0990.
FOR FURTHER INFORMATION CONTACT:

Sally Phillips, Senior Financial Program
Specialist, at (202) 874-7106; M atthew
Friend, Financial Program Specialist, at
(202) 874-6754; Natalie H. Diana at
(202) 874-6950; Cynthia L. Johnson,
Director, Cash M anagement Policy and
Planning Division, at (202) 874-6590; or
Margaret Marquette, Attorney-Advisor,
at (202) 874-6681.
SUPPLEMENTARY INFORMATION:

A. Background
Section 31001(x) of the Act provides
that, subject to the authority of the
Secretary of the Treasury to grant
waivers, all Federal payments, other
than paym ents under the Internal
Revenue Code, m ust be m ade by EFT
beginning January 2, 1999.
The Act authorizes the Secretary of
the Treasury to waive the requirem ent
to make Federal paym ents by EFT for
individuals or classes of individuals for
w hom com pliance imposes a hardship;
for classifications or types of checks; or
in other circum stances as may be
necessary. In addition, the Act requires
Treasury to ensure access to an account
at a financial institution for individuals
w ho are required to have an account
because of the EFT mandate. Treasury
m ust ensure that access is provided at
reasonable cost and w ith the same
consum er protections that are provided
to other account holders at the same
financial institution.
On September 25,1998, Treasury
issued as a final rule Part 208, w hich
im plem ents the m andatory EFT
requirem ent of the Act. 63 FR 51490.
Part 208 provides, in part, that paym ent
by EFT is not required w here an
individual determ ines, in his or her sole
discretion, th at paym ent by EFT w ould
impose a hardship due to a physical or
m ental disability or a geographic,
language, or literacy barrier, or w ould
impose a financial hardship. An
autom atic waiver is granted for all

individuals w ho do not have an account
at a financial institution and w ho are
eligible to open an ETASM u ntil the
ETASM becomes available.
In addition, Part 208 provides that
any individual w ho receives a Federal
benefit, wage, salary, or retirem ent
paym ent shall be eligible to open an
account called an ETASM at any
Federally-insured financial institution
that chooses to offer ETAsSM. The
ETASM w ill be made available to
m aximize opportunities for individuals
receiving Federal paym ents
electronically to have access to an
account at reasonable cost and w ith the
same consum er protections as other
account holders at the same financial
institution.
In the 208 NPRM published on
September 16, 1997, u n d er Section E of
the Section-by-Section Analysis,
“ 208.5—Access to Account Provided by
Treasury,” Treasury invited comment
on several questions related to the
ETASM and stated that it w ould publish
proposed terms, conditions, and
attributes of the account for further
comment. 62 FR 48714, 48721. Based on
the com m ents received, Treasury has
developed a listing of ETASM attributes,
w hich are the subject of this notice. This
notice is lim ited in scope to a
discussion of the ETASM; it does not
address other provisions of the 208
NPRM. Those provisions are discussed
in the final rulem aking for Part 208,
w hich was published in the Federal
Register on September 25, 1998.
Final Part 208 reflected a significant
change in Treasury’s approach to the
ETASM from w hat was proposed in the
208 NPRM. The 208 NPRM indicated
that it was Treasury’s intention to solicit
bids from organizations interested in
providing an account that w ould
include certain specific attributes
determ ined by Treasury. At the tim e the
208 NPRM was published, Treasury
proposed to obtain account services
through a com petitive process that
w ould select one or more entities to act
as Treasury’s financial agent w ithin
predefined geographic areas. After
evaluating the comments received and
conducting further research,1 however,
Treasury considered two alternative
approaches for offering the account.
These two approaches were the subject
of public meetings held on May 21,
1998, for the purpose of obtaining
comments from consum er and
1 Treasury contracted for a study related to
account features and distribution network options
for the ETASM A copy of the study is available at
.
the Financial Management Service’s EFT website at
http://www.fms.treas.gov/eft/eta/.

Federal Register/Vol. 63, No. 225/Monday, November 23, 1998/Notices
com m unity-based organizations and
from financial institutions.2
The first approach involved selecting
a small num ber of financial institutions
to act as Treasury’s financial agents in
providing ETAsSM. These financial
agents w ould then sign up local
financial institutions to m arket and
originate ETAsSM. The second approach
involved publishing standards for
providing the ETASM, including account
attributes, and allowing any Federallyinsured financial institution that
chooses to offer ETAs’ to act as
Treasury’s financial agent to provide the
ETASM in accordance w ith these
standards and subject to term s set forth
in an ETASM Financial Agency
Agreement betw een Treasury and the
financial institution. The agreement
w ould provide that ETAsSM offered by
the financial institution m ust m eet the
criteria described in the Federal
Register notice listing the required
ETASM features and w ould set forth the
circum stances in w hich a financial
institution m ay close an account for
fraud or other reasons.
As indicated in final Part 208, based
on the comments received on the 208
NPRM and at public meetings and on
geographic and economic data and
analysis, Treasury decided to pursue the
second approach to make the ETASM
available to paym ent recipients.
Representatives from both consum er
organizations and financial institutions
indicated that, w hile this approach does
not ensure com plete geographic
coverage because no financial
institution w ill be required to offer the
ETASM, it encourages participation by
financial institutions of all sizes. In
addition, of the two approaches, it
provides the greater opportunity for
market com petition. As a result, this
approach w ill likely encourage
competing financial institutions to offer
low er cost accounts than m ight
otherwise be offered. This approach also
may m inim ize the im pact of autom ated
teller m achine (ATM) surcharging by
allowing recipients greater choice in
selecting an ETASM at a conveniently
located financial institution that offers
the account. Moreover, research data
indicate that the majority of check
recipients are located in a relatively
small num ber of geographic locations.
Under the second approach, it is more
likely that more than one financial
institution will provide ETAsSM in those
areas w here check recipients are
geographically concentrated, thereby
2 A summary of comments provided at the
meetings held on May 21, 1998, is available at the
Financial Management Service’s EFT website at
http://www.fms.treas.gov/eft/eta/.

further increasing com petition among
financial institutions and increasing
choice among recipients living in those
areas.
In order to maxim ize the num ber of
financial institutions that choose to offer
ETAsSM, Treasury proposes to offer
financial institutions financial
com pensation to establish and market
the account. Treasury proposes to
reim burse each financial institution that
offers the ETASM a one-time fee per
account established to offset the costs of
setting up the account. Recent studies
show that these set-up costs, w hich
typically include costs to enroll and
w ork w ith custom ers and the cost of
issuing an on-line debit card, average
approxim ately $12.60 per account.3 As
an added incentive to financial
institutions and to offset im puted
marketing, training, and education
costs, Treasury is considering
com pensating participating financial
institutions an additional am ount for
each ETASM opened above designated
m inim um threshold numbers of
accounts.
Treasury seeks com ment on w hether,
for purposes of compensating financial
institutions, a distinction should be
m ade betw een ETAsSM opened by
individuals w ho already have an
account at a financial institution and
those w ho do not have an existing
account, i.e., should Treasury
com pensate financial institutions for
opening an ETASM for an individual
w ho already has an existing account? If
a distinction is made, how should the
basis for that distinction be determ ined?
In addition, Treasury seeks com ment
from financial institutions on the extent
to w hich the proposed com pensation
arrangements w ill increase the num ber
of financial institutions providing
ETAsSM and on the m ost appropriate
way to establish the m inim um
thresholds.
Treasury w ill m aintain and make
publicly available to recipients and
program agencies a list of participating
ETASM providers. In addition, financial
institutions offering ETAsSM w ill be
perm itted to display prom inently a logo
to be supplied by Treasury indicating
that the ETASM is available at that
financial institution.
B. Summary of ETASM Attributes
After considering the comm ents
received, Treasury proposes that the
ETASM account have the following
attributes, w hich w ould be set forth in
3 Cost estimates taken from Economic Waterfall
Analyses, Dove Associates, Inc., June 1998. A copy
of the analyses is available at the Financial
Management Service’s EFT website at http://
www.fms.treas.gov/eft/eta/.

64821

an ETASM Financial Agency Agreement
betw een Treasury and the financial
institution offering the account. Specific
attributes are explained in m ore detail
below. As proposed, the ETASM would:
• Be an individually ow ned account
at a Federally-insured financial
institution;
• Be available to any individual who
receives a Federal benefit, wage, salary,
or retirem ent payment;
• A ccept only electronic Federal
benefit, wage, salary, and retirem ent
payments;
• Be subject to a m axim um price of
$3.00 per month;
• Have a m inim um of four cash
w ithdraw als per m onth, to be included
in the m onthly fee, through a) the
financial institution’s proprietary (on­
us) ATMs, b) over-the-counter
transactions at the m ain office or a
branch of the financial institution, or c)
any com bination of on-us ATM access
and over-the-counter access at the
option of the financial institutio n ;4
• Provide the same consum er
protections that are available to other
account holders at the financial
institution, including, for accounts that
provide electronic access, Regulation E
protections regarding disclosure,
lim itations on liability, procedures for
reporting lost or stolen cards, and
procedures for error resolution;
• For financial institutions that are
members of point-of-sale (POS)
networks, allow POS purchases at no
additional charge by the financial
institution offering the ETASM, as well
as cash w ithdraw als and cash back w ith
purchases, consistent w ith current
commercial practice;
• Require no m inim um balance,
except as required by Federal or State
law; and
• Provide a m onthly statement.
Treasury welcomes comments on the
above attributes. Treasury also seeks
com ments on three other features that
are not part of the basic ETASM to
determ ine w hether any or all of the
features should be added to the ETASM
at the option of the financial institution
and at additional cost, if any, to the
account holder. These features—
paym ent of interest on balances;
allowing deposits of other electronic
funds; and providing pre-authorized
A utom ated Clearing House (ACH) debit
capability—are discussed in Section D
of this notice.
4 Financial institutions may provide additional
withdrawals at no charge or for a fee.

64822

Federal Register/Vol. 63, No. 225/M onday, November 23, 1998/Notices

C. Discussion of Proposed ETASM
Attributes
Individual A ccount/A vailability
The ETASM, as proposed, w ould be an
individually ow ned account established
at a Federally-insured financial
institution. A financial institution that
chooses to offer ETAsSM w ould be
required to make an ETASM available to
any recipient of a Federal benefit, wage,
salary, or retirem ent paym ent who
requests an ETASM, unless the
institution is prohibited by law from
m aintaining an account for the recipient
(for example, w here a recipient does not
m eet a credit u n io n ’s field of
m em bership requirements). As
m entioned above, financial institutions
that choose to offer ETAsSM w ould be
perm itted to close an ETASM in certain
circum stances to be delineated by
Treasury. However, financial
institutions w ould not be perm itted to
deny an ETASM to any eligible recipient.
By requiring that these accounts be
held at Federally-insured financial
institutions, Treasury can ensure that
ETASM holders’ funds are being
deposited into accounts that have
Federal deposit insurance. Federallyinsured financial institutions are subject
to com prehensive Federal regulation
and oversight through exam inations for
safety-and-soundness and com pliance
w ith consum er protection laws.
Deposits
Treasury is proposing to lim it the
types of funds that may be deposited to
an ETASM to electronic Federal benefit,
wage, salary, and retirem ent payments.
Perm itting financial institutions to
accept electronic deposits of other types
of paym ents in addition to Federal
benefit, wage, salary, and retirem ent
paym ents to the ETASM w ould have
im plications w ith respect to the
potential attachm ent of funds in the
account. As discussed more fully below,
a num ber of consum er and com munitybased organizations that com m ented on
the proposed rule pointed out that m any
individuals do not utilize accounts at
financial institutions because they fear
that funds deposited to such accounts
w ill become subject to attachm ent by
creditors.
Most Federal benefit payments,
including Social Security benefits,
Supplem ental Security Income benefits,
Veteran’s benefits, and Federal Railroad
Retirement benefits, are protected from
attachm ent and the claims of judgm ent
creditors by Federal law, subject to
certain lim ited exceptions.5 The U.S.
5 See 42 U.S.C. § 407(a); 42 U.S.C. §1383; 38
U.S.C. § 530; and 45 U.S.C. § 231m(a). The

Supreme Court has held that Federal
benefit paym ents rem ain exem pt from
attachm ent after they are deposited in a
bank account.6 W here all of the funds
deposited into an account are exem pt
Federal benefits, m ost courts have held
that the account itself is w holly exem pt
from attachm ent. If exem pt funds are
com m ingled w ith funds from other
sources in a bank account, the exempt
funds generally continue to be protected
from attachm ent. However, courts have
h eld that the burden of proving that
particular funds in an account are not
subject to attachm ent is on the
depositor. Courts in different
jurisdictions have used different
accounting m ethods to determ ine
w hether funds in an account are
considered to be exempt or nonexempt.
Limiting the types of funds that can
be deposited to an ETASM w ould
facilitate a recipient’s ability to defend
against im perm issible attachments.
Treasury expects that, although Federal
wage, salary, and retirem ent payments,
in addition to Federal benefit payments,
could be deposited to an ETASM, the
majority of ETAsSM w ould be utilized
for the receipt of Federal benefit
paym ents only. In those cases, ETAsSM
w ould not be subject to attachment,
w ith lim ited exceptions (e.g., for child
support obligations). If other types of
paym ents were allow ed to be deposited
to an ETASM, however, those paym ents
w ould be subject to attachm ent, and the
burden w ould be on the account holder
to defend against the attachment.
Some consum er and communitybased organizations pointed out that
statutes protecting Federal benefit
paym ents from attachm ent are not
necessarily construed to prohibit a
financial institution that m aintains an
account from setting off obligations of
the depositor against the account.
Specifically, several courts have held
that statutes prohibiting attachm ent do
not affect a b ank’s right to set off a
depositor’s obligations to the b a n k 7
against an account into w hich benefit
paym ents have been deposited, on the
grounds that a bank’s exercise of its
right of set off does not constitute
“ execution, levy, attachm ent or other

legal process.” 8 For this reason, some
com m enters urged Treasury to prohibit
financial institutions that establish
ETAsSM from exercising any right of set
off against an ETASM.
Treasury recognizes that it is not clear
u nder existing case law that Federal
statutes prohibiting the attachm ent of
Federal benefit paym ents w ould
prohibit a financial institution that
offers ETAsSM from debiting an ETASM,
w ithout the account holder’s consent,
for fees, loan paym ents, or other
obligations owed by the account holder
to the financial institution. Treasury
expects that financial institutions
offering ETAsSM w ill m arket other
products and services to recipients.
W hile Treasury encourages financial
institutions to offer recipients banking
products and services to further
Treasury’s goal of bringing persons
w ithout accounts into the financial
m ainstream , Treasury is concerned that
financial institutions m ight offset fees
and obligations related to such products
against ETAsSM. Many recipients
depend on their benefit paym ents to
m eet day-to-day living expenses. In light
of the special nature of paym ents
deposited to ETAsSM and the
vulnerability of benefit recipients to any
unexpected reduction in the funds
available in their account, Treasury
intends, through the ETASM Financial
Agency Agreement, to prohibit
institutions that elect to offer ETAsSM
from exercising any right of set off
against an ETASM, w ith the exception of
the m onthly account fee or charges for
additional w ithdraw als from the ETASM.

Cost to Recipient
Treasury proposes that financial
institutions that choose to offer ETAsSM
w ould be perm itted to charge a m onthly
fee not to exceed $3.00 per month.
Treasury w ill evaluate the
appropriateness of this pricing from
time to time, and w ill make adjustm ents
periodically as w arranted. All attributes
listed in the “Sum m ary” section of this
notice m ust be included w ithin the
m onthly fee to the recipient.
In general, consum er and communitybased organizations favored the
establishm ent of a m axim um m onthly
fee for the ETASM. In their comments on
the 208 NPRM, these organizations
expressed a concern that the price, if left
prohibition against attaching such funds is subject
to financial institutions, might be out of
to certain exceptions, including to satisfy child
support and alimony obligations. See, e.g., 42
reach for those recipients for w hom
U.S.C. §659.
traditional account fees are too high.
6Philpott v. Essex County Welfare Board, 409
These organizations indicated that cost
U.S. 413, 416 (1973).
7 A bank may exercise a right of set off against an is one of the m ain reasons some
account only for obligations owed by the depositor
to the bank itself, and not for obligations of the
depositor to third parties, such as child support or
general creditor claims.

8 See Frazier v. Marine Midland Bank, 702 F.
Supp. 1000 (W.D.N.Y. 1988)(citing In re Gillespie,
41 Bankr. 810 (Bankr. D. Colo. 1984)).

Federal Register/Vol. 63, No. 225/M onday, November 23, 1998/Notices
recipients choose not to open an
account at a financial institution.
In their comments, financial
institutions expressed support for an
approach in w hich the institutions
them selves w ould determ ine the
m onthly account fee. They stated that
only by allowing the institutions
offering the ETASM to determ ine fees
w ould they be able to develop accounts
at the lowest possible cost. They also
indicated that m ore financial
institutions w ould participate if fees
were unregulated.
Treasury research indicates that the
average m onthly cost of providing an
account w ith the attributes listed in this
notice, including a reasonable profit,
falls w ithin the $3.00 m axim um price.
Research data also indicate that, w hile
some recipients cash their checks for
free, recipients w ho pay to cash checks
pay anywhere from one percent to six
percent of the am ount of the check for
this service.9 Based on the average
Federal benefit paym ent, recipients
could pay anyw here from $6.50 to
$39.30 to cash a check.
Based on this information, Treasury
believes that the $3.00 m axim um
m onthly fee should provide incentives
both to financial institutions to offer the
account and to recipients to sign up for
the account. Treasury recognizes,
however, that not all financial
institutions may elect to offer the ETASM
account and not all recipients m ay find
the account attractive. Accordingly,
recipients may elect to continue to
receive a check if the ETASM is
unaffordable or the financial institutions
offering the account are not
conveniently located, or for another
reason, by relying on a financial,
geographical, or other hardship waiver
provided in Part 208.
A ccess to Funds a nd Balance
Inform ation
As proposed, access to funds and
balance inform ation m ay be provided by
ETASM providers through one of three
methods: (1) Electronically through
ATMs or other electronic means, (2)
over-the-counter at ETASM provider
m ain office or branch locations, or (3)
through a com bination of electronic and
over-the-counter transactions. Any
m ethod may be used at the option of the
financial institution as long as a
m inim um of four cash w ithdraw als are
provided w ith in the $3.00 m onthly fee.
A financial institution m ay offer
additional w ithdraw als at no cost or at
an additional fee to the account owner.
9 Percentages taken from the Survey of
Commercial Check Cashing Rates, Chaddsford
Planning Associates, June 12,1997.

It is expected that over-the-counter
cash w ithdraw als either autom atically
include an account balance or w ill
include an account balance if requested
by the recipient. Treasury further
assum es that on-us ATM cash
withdraw als generally w ill produce a
transaction receipt that includes the
balance of the account. Balance
inform ation w ill be available on the
required m onthly statement, discussed
below. Balance inform ation also may be
included as part of a financial
in stitution’s custom er service program,
to be offered to the ETASM account
holder at the ETASM provider’s
discretion.
In their com ments on the 208 NPRM,
consum er and community-based
organizations stated that some
recipients may not be able to use ATMs
because of m ental, language, literacy, or
other barriers and may be forced to rely
on hardship waivers. These
organizations explained that these
recipients, who may otherwise have
been interested in a basic low-cost
ETASM, effectively w ill be denied an
opportunity to transition into the
financial services m ainstream because
of this inability to use ATMs. As an
alternative to ATMs, these organizations
suggested that ETASM providers offer
over-the-counter access to funds, such
as through a teller. A large association
representing older Americans
com m ented that its constituency, in
some cases, w ill have difficulty using an
ATM. This com m enter also called for an
option for over-the-counter transactions.
A credit union association
com m ented that m any sm aller credit
unions do not have ATMs and if
ETAsSM were to be accessed solely by
electronic m eans these credit unions
w ould be precluded from offering
ETAsSM. The association argued that
these credit unions are otherwise in a
good position to provide the accounts
because of their locations in smaller
com m unities and because they already
offer low-cost accounts. A consum er
organization com m ented that many
smaller com m unity banks also do not
have ATMs.
It is Treasury’s objective to provide
recipients w ith as many options for
accessing funds as can be provided
w ithin the constraints of a low m onthly
fee. Allowing over-the-counter
transactions w ould give financial
institutions added flexibility in
designing an account based on their
capabilities and their custom ers’ needs.
Treasury expects that allowing over-thecounter transactions w ill increase the
num ber of financial institutions that
elect to offer ETAsSM and the num ber of
recipients w ho sign up for an ETASM

64823

and thereby bring more recipients into
the financial services mainstream.
In determ ining the num ber of cash
w ithdraw als to include in the m onthly
account fee, Treasury w eighed the
advantages of providing m ultiple cash
w ithdraw als against their cost,
recognizing that the m ore transactions
provided, the higher the m onthly cost.
Treasury used cost data developed for it
by an outside contractor (see footnote 1)
in reaching its determination.
The reference in the list of attributes
to a “m in im u m ” num ber of cash
w ithdraw als is intended to perm it a
financial institution, w ithin the ETASM
structure, to offer additional cash
w ithdraw als as long as the first four
w ithdraw als are included w ithin the
$3.00 m axim um price. A dditional
w ithdraw als may be subject to fees that
are the responsibility of the recipient.
A dditionally, if the account is accessed
through a netw ork ATM ow ned by
another institution, the account holder
w ill be responsible for any charges
assessed by the ATM owner.
For accounts that offer electronic
access, such electronic access is
proposed to be on-line electronic access
only. Providing off-line electronic
access alm ost certainly w ould raise the
cost of an account to a paym ent
recipient. Furtherm ore, as pointed out
by some consum er organizations,
lim iting access to on-line electronic
access only w ill reduce the possibility
of overdrafts and associated fees.
In addition, financial institutions
offering ETAsSM w ould be prohibited
under the ETASM Financial Agency
Agreement from entering into
arrangements w ith non-financial
institutions to provide access to
ETAsSM, other than access through a
national or regional ATM/POS network.
Treasury is concerned that such
arrangements may be confusing or
m isleading to recipients and, therefore,
w ill n ot perm it financial institutions to
enter into such arrangements w ith
respect to the offering of the ETASM.
Treasury continues to explore ways to
expand access to the ETASM in areas
underserved by financial institutions.
These efforts include working w ith
other public entities to expand ATM
access.
Consumer Protections
ETAsSM w ill be subject to those
consum er protections available to other
account holders at the same financial
institution. This requirem ent is in
accordance w ith the A ct’s statutory
m andate to ensure that recipients “are
given the same consum er protections
w ith respect to the [ETASM] as other
account holders at the same financial

64824

Federal Register/Vol. 63, No. 225/Monday, November 23, 1998/Notices

institution.” This means, for example,
that an ETASM w ill be subject to the
Truth in Savings Act disclosures found
in Regulation DD (12 CFR Part 230).
Also, an ETASM that provides electronic
access w ill be subject to Regulation E
(12 CFR Part 205), i.e., the ETASM
holder w ill be provided w ith disclosure
of term s and conditions of the account,
lim itations on the hold er’s liability for
unauthorized transfers, and procedures
for reporting lost or stolen cards and for
error resolution.
POS
For those accounts that provide
electronic access, the proposed ETASM
w ould allow for POS w ithdraw als and
purchases that are consistent w ith
current commercial practice. Studies
show that more and m ore m erchants are
offering on-line POS purchases w ith
cash back. This m eans a recipient can
w ithdraw funds at the same tim e he or
she is making a purchase using a debit
card at a POS terminal. Some m erchants
offer cash w ithdraw als w ith no
purchase required. However, ETASM
holders should be aware that POS
w ithdraw als, in some cases, may be
subject to fees by m erchants offering
POS transactions. The recipient is
responsible for any fees im posed by the
m erchant; however, u nder the proposed
ETASM, there w ould be no additional
fees for these transactions im posed by
the financial institution providing the
E T A sm .

M inim um Balance
Except in lim ited circum stances
discussed below, the ETASM w ould have
no m inim um balance requirem ent. The
average m onthly dollar am ount for
Federal benefit payments is
approxim ately $650, and a majority of
recipients w ithdraw most of their funds
w ithin the first five days of deposit.
Requiring a m inim um balance w ould
effectively reduce the am ount of the
benefits available to the recipient to pay
bills and make other subsistence
purchases. The only exception to this
required attribute is w here a m inim um
balance is m andated by Federal or State
law. For example, in the case of credit
unions, u nder 12 U.S.C. 1759, a Federal
credit u nion m em ber m ust subscribe to
at least one share of stock.
M onthly Statem ent
The ETASM, as proposed, w ould have
a m onthly statement. Treasury is aware
that u nder Regulation E, w hen
governm ent benefits are delivered
electronically to a recipient, a periodic
account statem ent may n ot be required
if the recipient has access to account
inform ation through other specified

means. See 12 CFR 205.15. Treasury
also is aware that the cost of providing
a m onthly statem ent necessarily w ill be
included in the m onthly account charge
to recipients. Treasury believes,
however, that it is im portant to provide
recipients w ith a m onthly statement,
particularly since the ETASM allows for
POS w ithdraw als and purchases, and
account balances are often not provided
in connection w ith such transactions. In
addition, providing a m onthly statem ent
w ould provide account balances that
may not be available to a recipient if the
ETASM provider does not offer daily 24hour telephone custom er service for
account balance inquiries.
D. Discussion of Other Features
Treasury is requesting specific
comm ent on three additional features
that are not included in the list of basic
ETASM attributes. Treasury is interested
in obtaining feedback to determ ine
w hether any or all of these other
features should be added at the option
of the financial institution and at
additional cost, if any, to the recipient.
These features are (1) paying interest on
account balances, (2) allowing for
additional electronic deposits, and (3)
providing for third-party ACH
payments.
Each of the additional features offers
potential benefits to some portion of
eligible Federal paym ent recipients.
Therefore, perm itting these features may
encourage more recipients to sign up for
an ETASM, potentially resulting in
increased long-term savings to the
Government. These additional features
also may help to create a useful
interm ediate step for those w ithout
accounts at financial institutions in
their transition to the financial services
m ainstream . For these reasons, if these
features are perm itted to be offered by
financial institutions as part of the
ETASM, Treasury w ould consider
w hether to reim burse a financial
institution an additional set fee per
ETASM providing for such features.
There may be, however, potential
disadvantages and costs associated w ith
these additional features. Many
financial institutions com m ented that
the ETASM should be designed as a basic
account that could be easily offered by
any financial institution and easily
understood by recipients. Variation in
ETASM features may be confusing to
recipients and more difficult to market
as a standard product. Additionally,
variation in the features of the ETASM
may make it harder to protect the
ETASM mark and ensure that the mark
is used only by those financial
institutions that have entered into an
ETASM Financial Agency Agreement.

A dding features, even as options, poses
the risk that financial institutions will
not be w illing to participate, or that
recipients w ho already have an account
at a financial institution m ay sw itch to
a low-cost ETASM.
Treasury seeks specific com m ent as to
w hether the potential advantages of
each of the three features outweigh the
potential disadvantages. Treasury w ill
consider carefully the comments
received, but m ay decide not to add any
of the features if it determ ines that the
potential disadvantages make the
features unsuitable for the ETASM or the
associated cost is determ ined to be too
high. Further, if a decision is made to
allow additional features, any financial
institution that offers an ETASM w ith the
additional features m ust also make
available to recipients an ETASM
w ithout the additional features.
Regardless of w hether any of these
other features is added to the ETASM,
financial institutions are encouraged to
offer recipients other non-ETASM
accounts that m eet recipients’ needs,
including accounts that offer features
beyond those contained in the ETASM,
such as checking accounts. However,
w hile such accounts may be used for the
receipt of Federal paym ents by EFT,
these accounts are not considered to be
ETAsSM and may not be advertised as
such.
Interest on A cco un t Balance
Treasury believes that the paym ent of
interest on ETAsSM could encourage
more individuals to sign up for ETAsSM
and could encourage and facilitate
savings by low incom e recipients. In
addition, financial institutions could
potentially benefit from the higher daily
balances that could result from
perm itting this feature.
However, Treasury research indicates
that account balances w ill likely be
draw n dow n very quickly after deposit
and, therefore, interest earnings by
recipients could be very small.
A dditionally, interest accum ulated in
such accounts may be attachable.
Finally, including a savings feature may
m odestly increase the costs to the
financial institution of providing the
account. These costs could include
interest paym ents and costs for Truth in
Savings Act disclosures and 1099 tax
reporting.
A dditional Deposits
Permitting financial institutions to
accept electronic deposits of other types
of paym ents in addition to Federal
benefit, wage, salary, and retirem ent
payments to the ETASM w ould enable
broader use of the ETASM for deposits
and paym ents from other sources,

Federal Register/Vol. 63, No. 225/Monday, November 23, 1998/Notices
including m atching funds under
individual developm ent account
programs. This w ould help to meet
Treasury’s overall goal of bringing
recipients into the financial mainstream.
In addition, this could assist financial
institutions that might find it difficult to
refuse custom er requests to deposit
other funds into their accounts.
However, as discussed previously in
Section C of this notice u n d er the
subheading “Deposits,” perm itting other
types of paym ents to be deposited to the
ETASM w ould have im plications w ith
respect to the potential attachm ent of
funds in the account, and could add
com plexity and expense to the account.
If financial institutions w ere perm itted
to allow additional paym ents into the
ETASM, Treasury w ould w ant to assure
that recipients were given appropriate
disclosures regarding the possible
attachm ent of funds and w ould
encourage Federal paym ent agencies to
issue clear resolution rules to help
recipients and financial institutions

determ ine w hich funds cannot be
attached.
Third-Party AC H Dehit
Treasury recognizes that the ability
for recipients to initiate preauthorized
third-party debit transactions w ould be
a convenient and cost-saving means for
recipients to pay recurring bills such as
rent, utilities, and cable television. Such
a feature could reduce recipients’
reliance on m oney orders and cash,
thereby enabling recipients to avoid the
cost of m oney orders, save tim e
expended in traveling to pay bills in
cash, and reduce the potential losses
and thefts associated w ith carrying cash
to pay bills. Thus, because of the
convenience of this feature, more
recipients might sign up for ETAsSM and
more individuals might be brought into
the financial services mainstream.
However, because of differences in
clearance m echanism s betw een ACH
debits and ATM w ithdraw als,
perm itting ACH debits m ight result in
overdrafts to ETAsSM or rejected
transactions, w hich w ould result in

64825

higher costs both to financial
institutions and recipients. Moreover,
Treasury is concerned that recipients
inadvertently could authorize ACH
debit entries to pay for goods and
services that are not delivered or are not
as represented, thereby incurring
unexpected losses. Treasury is aware of
some incidents of ACH debit fraud, as
well as the difficulties that consum ers
sometimes encounter in dealing w ith
legitimate m erchants, including
difficulties in revoking preauthorized
debit authorizations. In addition,
Treasury believes that the costs of
adm inistering the ETASM could increase
as a result of the additional customer
service b urden that w ould be imposed
on financial institutions in dealing w ith
recipient inquiries related to such
transactions.
Dated: N o v e m b e r 18, 1998 .

Richard L. Gregg,

Commissioner.
[FR D oc. 9 8 - 3 1 2 4 4 F ile d 1 1 - 1 9 - 9 8 ; 8:45 am]
BILLING CODE 4810—
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Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102