Letter to Treasury re: RFI on Payments Modernization

Dear Mr. Curtis:

The American Bankers Association (ABA) thanks you for the opportunity to respond to the Request for Information (RFI) regarding modernizing payments to and from the United States government. We strongly support the effort to increase the efficiency of the payment system while at the same time improving its security and providing an enhanced service to the public. Removing the paper check from the payment system will result in a cheaper, faster, and more secure payment system.

The ABA and its member banks look forward to working with the Department of the Treasury to reach this goal. We believe there are a few principles that will help to achieve this goal:

1. Increase the number of consumers and businesses with bank accounts capable of receiving electronic payments;
2. Increase the number of consumers and businesses with bank accounts to migrate to faster, safer, and cheaper electronic payments instead of paper checks; and
3. Concentrate initial efforts on the payment flows with the largest volume of paper checks.

The initial barrier preventing many payees from receiving electronic payments is the lack of a bank account and removing this obstacle is critical. ABA would like to partner with Treasury in this effort and, to that end:

ABA supports the Bank On initiative led by the Cities for Financial Empowerment. Bank On accounts are safe low-cost accounts that enable individuals to enter the financial system to get paid more efficiently and to make use of conventional products such as debit cards. This allows these consumers to avoid the fees charged by check cashers and other money service businesses. Bank On accounts must meet a set of standards to be approved for the designation. These include a required minimum opening deposit of no more than $25, a monthly fee of no more than $5, and no overdraft fees.

ABA recommends that the Department of the Treasury integrate Bank On-certified accounts into the process when any new individual registers to receive federal benefits if that person does not have a bank account. Individuals without bank accounts would be able to review the list of nearly 500 available Bank On account providers with the knowledge that the accounts are certified to be safe and low-cost. The Department of the Treasury would benefit from making an electronic payment to that account.

ABA recommends that the Department of the Treasury promote Bank On and help enroll individuals into accounts for the current recipients of paper check payments to ensure they have an account that can receive electronic payments.

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