EFT-99: Information for Educators

Michael Rupured


The federal government’s ongoing initiative to switch from paper checks to Direct Deposit for most federal payments provides a wealth of opportunities for consumer educators. Even though the switch to Direct Deposit is no longer mandated, many recipients of federal payments who currently do not have accounts with financial institutions may be interested in opening accounts. They will need to know how to choose and use accounts wisely in order to avoid high fees. The Treasury’s grassroots EFT-99 Outreach Campaign provides consumer educators with opportunities to provide this information and opportunities to form new partnerships to reach new audiences with other educational programs.

The Debt Collection Improvement Act of 1996 includes a provision that all federal payments (with the exception of tax refunds) be made by electronic funds transfer (EFT). The federal government estimates a potential savings of $100 million per year by shifting from paper checks sent through the mail to Direct Deposit (Press Release: September 11, 1997). EFT-99 is the federal government’s ongoing initiative to convert most payments to Direct Deposit by January 1999. While EFT-99 was originally presented as a mandate for Direct Deposit, Treasury has now softened the language considerably. Rather than the original mandate, Direct Deposit of federal payments is now strongly encouraged.

Details About EFT-99

Payments covered under the EFT-99 provisions include Social Security benefits, Supplemental Security Income payments, Veterans’ payments, Railroad Retirement Board payments, Military Retirement payments, federal employee salary and travel reimbursement payments, payments to vendors, and Civil Service Retirement payments. EFT-99 applies only to payments disbursed by federal agencies, and does not include federal payments disbursed at the state level, such as welfare payments and food stamps. Many states have implemented Electronic Benefits Transfer (EBT) programs for electronic disbursement of these latter types of payments.

Direct Deposit is perceived as safer and more convenient for federal payment recipients than paper checks. While this may well be true for recipients with accounts at financial institutions, it may not be the case for those who do not have accounts. Analysis of the 1995 Survey of Consumer Finances suggests that twelve million households do not maintain deposit accounts with a financial institution (Hogarth & O’Donnell 1997). About half of these households receive federal benefits (Booz-Allen and Hamilton & Shugoll Research 1997). Households without accounts at financial institutions are disproportionately African American or Hispanic, female, younger, less educated, lower income, unemployed, unmarried, and rural (Hogarth & O’Donnell 1997).

Treasury published a proposed EFT regulation in September 1997 and received comments from a wide variety of individuals and organizations. Consumer groups expressed concern about the availability of waivers from EFT requirements and the potential hardship Direct Deposit could entail for recipients of federal payments without accounts at financial institutions. Educators worried that a lack of skills and knowledge to successfully choose and use accounts at financial institutions would impose additional and potentially high costs on some recipients. Moreover, many alternative providers, such as check-cashing outlets and wire services, launched aggressive advertising campaigns full of misinformation encouraging recipients to use their services to meet EFT requirements. Services offered by these providers are usually more expensive than options available through traditional providers such as banks, credit unions, and savings and loans.

The final regulation for EFT-99 was published on September 25, 1998 — a year after the proposed regulation was published. This delay has contributed to confusion about EFT-99 and a proliferation of misinformation. To clear up consumer confusion, a June 1998 press release previewed the final regulation. The U.S. Treasury’s Under-Secretary for Domestic Finance announced that individuals wanting to continue receiving a paper check through the mail could do so. Waivers from EFT requirements would be widely available. Moreover, anyone for whom EFT would pose a financial hardship, individuals with mental or physical disabilities, and those with geographic, language or literacy barriers can receive waivers (Press Release: June 25, 1998).

Individuals who currently do not have accounts with a financial institution are granted an automatic waiver until a special Electronic Transfer AccountSM (ETASM) is available. The ETASM is a new, special account designed specifically for Direct Deposit of federal payments. A notice defining the proposed characteristics of these accounts is scheduled for publication later this year, and will be followed by a 30-day comment period.

The critical message now is that federal benefit recipients are not required to switch from paper checks to Direct Deposit. Social Security and Supplemental Security Income recipients can continue to receive checks unless and until they notify the Social Security Administration that they wish to switch to Direct Deposit. Other agencies may, however, require that a waiver request be submitted in order for the recipient to continue to receive paper checks.

Treasury’s Education Campaign for EFT-99

A national education campaign, coordinated by five regional headquarters, has been launched to increase awareness of EFT-99 and Direct Deposit. A wide variety of community-based organizations are involved. The education campaign, as outlined by Treasury, focuses primarily on informing recipients of federal payments about Direct Deposit.

Treasury has been quite successful in involving community-based organizations in the campaign. A network of regional coordinators provides an excellent opportunity for family and consumer educators to enter into new partnerships to reach new audiences. Cooperative Extension, for example, has been well represented at five regional meetings that occurred in late July and early August. Exposure at these meetings has helped to forge new partnerships for reaching hard-to-reach audiences.

At the national level, the Financial Services Education Coalition, consisting of 17 government agencies, nonprofit organizations and trade associations (including Treasury), was formed in January 1998 to develop materials to help educators teach consumers about choosing and using accounts at financial institutions. Helping People in Your Community Understand Basic Financial Services includes a variety of fact sheets related to choosing and using financial institutions and a guide for educators. This free publication is available from the U.S. Treasury Financial Management Service. Call (202) 874-6540 for ordering information.

A second round of regional meetings was conducted in mid- to late-September 1998 to continue discussion of plans for the overall campaign. In the Midwest region (IL, IN, MI, MN, OH, WI) and Southern region (AL, FL, GA, KY, MS, NC, SC, TN), state meetings were conducted prior to the regional meetings. The week of October 12, 1998, was designated as “Direct Deposit Week,” with a National Sign-Up Day on October 14th. A massive media campaign is already underway. Local-level programming focused on increasing awareness of EFT-99 and financial literacy in connection with choosing and using a financial institution is already underway and will continue throughout 1999.

Implications for Educators

The EFT-99 education campaign will certainly increase awareness of Direct Deposit. Many recipients without accounts may elect to take advantage of the safety and convenience this option provides. EFT-99 also provides an opportunity to move individuals without accounts at financial institutions into the financial services mainstream. Rather than relying upon often costly services provided by check-cashing outlets and wire transfer services, many of these consumers may open accounts at traditional financial institutions. The still-in-the-planning-stages ETASM may make this a more practical option for low-income households than existing accounts. Certainly consumers will benefit from educational programs providing information and skills to choose accounts wisely.

The nature of EFT-99 has changed dramatically in the last twelve months. A year ago recipients correctly believed that by January 1999 they had to switch to Direct Deposit. Now recipients may choose Direct Deposit, or not. This change has effectively taken the wind out of the sails of any education campaign designed to move consumers without accounts at financial institutions into the mainstream financial services sector. At the same time, it has yanked the rug out from under alternative providers who planned to cash in on this opportunity to take advantage of the misinformed. The sense of urgency is gone. Whether or not recipients will express an interest in Direct Deposit and accounts at financial institutions in this new atmosphere remains to be seen.




Hogarth, J.M. & O’Donnell, K.H. (1997). Being accountable: A descriptive study of unbanked households in the U.S. Phoenix, AZ: Proceedings of the Association for Financial Planning and Counseling Education.

Booz-Allen and Hamilton & Shugoll Research (1997). Mandatory EFT demographic study (OMB 1510-00-68). Washington, DC.

Press Release, September 11, 1997. Treasury proposal would implement 1996 law requiring electronic payment for federal salaries, Social Security, Veterans and other benefits. (www.fms.treas.gov/eft/regs/208press.html).

Press Release, June 25, 1998. Final rule for electronic government payments will balance recipient needs with benefits of electronic payment. (www.treas.gov/press/releases/pr2560.htm).

Press Release, September 25, 1998. Treasury finalizes electronic payment rule as enrollment numbers continue to rise. (http://www.treas.gov/press/releases/pr2710.htm).


Michael Rupured, Family Economics National Program Leader, Cooperative State Research, Education & Extension Service, USDA, Washington, D.C.
(In January 1999, Mr. Rupured begins a new position as Extension Specialist, Department of Housing and Consumer Economics, College of Family and Consumer Sciences, University of Georgia.)

Cite this article:

Rupured, Michael. “EFT-99: Information for Educators.” The Forum for Family and Consumer Issues 3.3 (1998): 14 pars. 29 December 1998.


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