U.S. Treasury Electronic-Benefit Campaign Gears up As Checks Dwindle

Nearly nine months after introducing a rule requiring recipients of Social Security and certain other benefits to switch from checks to electronic deposit, the U.S. Treasury Department says the number of check recipients has dipped below 9 million for the first time in decades. The agency is now in the midst of interpreting a national survey of benefits recipients and planning new outreach campaigns to convert more recipients to electronic alternatives.

At the same time, the popular Direct Express prepaid card, which Treasury introduced in 2008 for recipients without bank accounts, now claims 2.2 million enrollees, up from 1.5 million in December. Indeed, the card program is growing at the rate of 100,000 new enrollments each month, according to Walt Henderson, director of the EFT strategy division at Treasury. “It’s going strong,” he tells Digital Transactions News.

A prime reason for the rapid decline in checks and the runup in card enrollees is Treasury’s new rule, which the agency issued in December. The rule requires persons receiving Social Security, Supplemental Security Income, Veterans Affairs, Railroad Retirement Board, and Office of Personnel Management benefits and other non-tax payments to give up checks by March 1, 2013. They can elect direct deposit or the Direct Express card, which is issued by Dallas-based Comerica Bank under a 5-year contract. Persons who have become eligible for benefits since May 1 have not had a check alternative.

Henderson says Treasury is interpreting results of a nationwide survey to craft new marketing pitches for direct deposit and the prepaid card alternatives. In the Midwest region, for example, almost 1.78 million recipients still take their Social Security payments by check, even though 88% of recipients have converted to direct deposit or the Direct Express program, up from 85% at the start of the year. In a news release issued on Wednesday, the agency says it will be “doubling down” on efforts over the next couple of months to convert more of these recipients to the electronic methods. Pitches already include inserts sent with checks showing the ease with which recipients can enroll in direct deposit and radio interviews in the region with Treasury officials like Henderson.

The goal now is to focus on those who remain resistant to electronic deposit and get them to convert well before the March 1, 2013 deadline, Henderson says. New research Treasury is working on now will include surveys of these persons to find out why they cling to checks. In the current survey, those who have converted cite the security and reliability of electronic payment, compared to checks. “We realize the remaining group is a tougher sell,” Henderson says. “Does a ‘safe, secure, reliable’ [message] work? We’re testing.”

Some of these persons will take up the Direct Express card. While Henderson says Treasury “prefers” that recipients with bank accounts sign up for direct deposit, he projects the prepaid card program will grow to between 3 million and 3.5 million enrollees over the next 12 months, given current trends. In December, the agency said some 4 million recipients still receiving checks were unbanked, a figure that has not been updated since. Recipients who use Direct Express may load only federal benefits on the card.

Meanwhile, an interim Treasury rule that took effect in January restricts recipients’ ability to load benefits onto prepaid cards other than Direct Express. The rule was prompted by concerns that recipients might load funds onto cards that don’t include the protections of the Direct Express program. Direct Express cards, for example, are protected by Regulation E provisions governing unauthorized transactions, coverage not offered by all reloadable prepaid cards. Under the rule, the card issuer must offer the protections that apply to payroll cards under Reg E, and the account must not allow loan-repayment features that trigger payments when benefits are deposited. The account must also carry deposit insurance.