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Community Developments Investments

Fall 2004

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Electronic transfer accounts: a great way to reach unbanked federal benefit recipients

The federal government writes more than $141 billion every month in checks to civilian and military employees, veterans, Social Security beneficiaries, and other recipients, millions of whom do not have checking accounts. There is a clear need to replace the cost and inconvenience of paper checks with a safe, secure and convenient way for unbanked recipients to receive and access their funds through low-cost direct-deposit accounts. Six years ago we developed the Electronic Transfer Account (ETA) to meet that need.

ETA Basics

• Any person who receives a federal benefit, wage, salary, or retirement benefit is eligible for an ETA.

• The account must offer the same protections as other account holders at the financial institution.

• The ETA holder:

- Must be entitled to at least 4 cash withdrawals and 4 balance inquiries per month.

- Must have access to the bank’s point-of-sale network.

- Cannot be charged more than $3 per month for these services which do not include check writing.

• Treasury pays participating institutions a one-time fee of $12.60 for each new ETA.

Thus far nearly 100,000 previously unbanked recipients of federal checks have opened ETAs, and participating federally insured financial institutions are opening 2,000 to 2,500 new ETAs every month. Many banks have embraced the program and are using it to build strong relationships with previously unbanked persons. We want to encourage more banks to participate as certified ETA providers and to actively promote these attractive accounts, which can be a gateway to participation in debit cards and other mainstream banking services.

The basic ground rules are straightforward. Any person who receives a federal benefit, wage, salary or retirement benefit is eligible for an ETA. The account must offer the same consumer protections that are available to other account holders at the financial institution. The ETA holder must be entitled to at least four cash withdrawals and four balance inquiries per month; must have access to the bank’s online point-of-sale (POS) network; and cannot be charged more than $3 a month for these services, which do not include check-writing. Treasury pays participating institutions a one-time fee of $12.60 for each new ETA.

The Federal Reserve Bank of Dallas certifies financial institutions seeking to participate in the program. Contact Federal Reserve Bank of Dallas at 1-888-ETA-3725 to learn more about becoming a certified ETA provider.

Tips for success

A few pointers will help your financial institution manage a successful ETA program and increase the volume of direct deposit payments received:

• Cross-sell ETAs to customers and non-customers who deposit or cash their federal checks in your lobbies. Make them aware of the increased safety, security, and convenience of direct deposit. Explain the benefits of having a basic, low-cost account with access to ATMs and with no minimum balance requirements (except as required by federal or state law).

• Train all your new-accounts personnel and customer service representatives to be fully aware of the availability and features of your institution’s ETA program. The toll-free ETA Call Center (1-888-382-3311) frequently hears from prospective ETA customers who were turned away because representatives of a participating provider were not aware that their institution offers the ETA, or for other reasons. Make sure your employees understand that all federal payment recipients are eligible to open an ETA regardless of past banking history (unless the individual has engaged in fraud with another ETA or has misused an ETA at that same institution).

“ETA’s are an excellent way for banks to attract customers who have no experience with traditional banking accounts.”

• Attract federal recipients to your ETA products through “warm transfers.” When federal payment recipients are directed to call the ETA Call Center for program assistance, the operator can transfer those phone calls to a selected provider’s customer service number to begin the process of opening an ETA. So prospective ETA customers can get their questions answered and begin opening an account with one phone call. You can request “warm transfers” from the ETA Call Center to your customer service number by contacting Federal Reserve Bank of Dallas at 1-888-ETA-3725.

• Promote your ETA product on your Web site. If you do, the Dallas Federal Reserve can provide a link to your site from the ETA Web site (www.eta-find.gov). This site, recently redesigned, currently receives hundreds of visits daily from federal payment recipients seeking information on the ETA program and other information such as providers’ branch locations — so it’s another good way to attract new business. Once at your site, Internet users can access information about your other services as well as your ETA product.

ETAs are an excellent way for banks to attract customers who have no experience with traditional banking accounts. Treasury’s Financial Management Service and Federal Reserve Bank of Dallas stand ready to help you offer this important, efficient, and productive public service.

For more information, contact Eleanor Kelly at (202) 874-6838 or Eleanor.Kelly@fms.treas.gov