The end of SS, SSI, VA checks is NOT yet a done deal!


We support reforms to the financial marketplace that protect consumers from unscrupulous banks and lenders.

By Consumers Union on Wednesday, July 14th, 2010

The Department of Treasury has proposed to end federal payments by check beginning March 2011 for new recipients and March 2013 for existing beneficiaries–substituting direct deposit or deposit onto prepaid cards.

Treasury provided this announcement in a press release on April 19, which led to some press that it’s pretty much a done deal.

That has created some confusion since the end of checks is not yet set in stone. Treasury recently published proposed regulations to make these changes, with public comments due August 16. So, if you have a comment to Treasury, your time is now.

While the Direct Express card, currently administered by Comerica Bank has fairly low fees, recipients will no longer have the option of going with what they believe is most convenient or most cost effective for them.

To go to the ATM more than once a deposit to withdraw funds will cost $0.90 each visit. Direct Express users won’t get a paper statement in the mail unless they pay $0.75/month. A paper statement matters if the recipient doesn’t have online access or simply don’t feel comfortable accessing financial information online to check transactions for accuracy, or fraud. To limit liability in the event of a mixup or fraud, consumers must report the problem within 90 days.

The other alternative may be to allow recipients to use other prepaid cards available in the marketplace to obtain their federal benefits, if the cards meet certain qualifications. But we believe such a system will not provide adequate protections for consumers against loss to fees, fraud or mixups. We have repeatedly spoken out about incredible prepaid card fees and other consumer protection shortcomings.

Treasury admits that they have tried to enroll people in direct deposit or the Direct Express prepaid card and haven’t been too successful. Treasury’s own polling found that of the 10 million eligible SS and SSI recipients, only 1 million have signed up in the past 1 ½ years of the Direct Express program. So now,Treasury is forcing recipients into electronic payment methods they may not want.

If you want your voice heard on this proposal to require people to accept direct deposit or a prepaid card, Treasury is currently collecting comments on these proposed rules.

To read consumer advocacy groups’ comments on the Department of Treasury’s proposed rule to change the types of accounts into which federal payments can be directly deposited, click here.

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