Electronic Transfer Accounts (ETAs)

An ETA is an account with certain characteristics designed to enable lower-income individuals to have a basic, inexpensive, no-frills account at a financial institution in order to receive federal payments electronically. It is a product of the Debt Collection Improvement Act of 1996. This law provided that all federal payments, other than payments under the Internal Revenue Code, must be made by electronic funds transfers after January 1, 1999. [31 USC 3332(a)(1) and (f)(1)] The law authorized the Treasury Department to grant waivers from this requirement [31 USC 3332(f)(2)(A)] and to issue implementing regulations. [31 USC 3332(f)(2)(A)]

The Treasury Department issued implementing regulations on September 25, 1998. [Federal Register for September 25, 1998, at page 51489] These regulations restated the basic rule that all federal payments other than those under the Internal Revenue Code must be made by electronic funds transfers. [31 CFR 208.1 and .3] The regulations also established a number of “waivers,” (i.e., situations where federal payments could be made in ways other than electronic funds transfers). For example, if the individual receiving the payment claims that receiving the payment by electronic funds transfers would cause certain hardships, that individual can receive payments in other ways. [31 CFR 208.4(a)] Other waivers are: (1) where the payment is going to a foreign country lacking the capability of receiving electronic funds transfers, (2) where the payment is going to a declared disaster area, (3) where the payment is to be made during time of war or similar circumstances, (4) where the national security is threatened or an individual’s safety is endangered or a law enforcement action would be compromised, (5) where the payment is nonrecurring, and (6) where the agency making the payment is purchasing goods or services and circumstances dictate payment by some other means. [31 CFR 208.4(b) – (g)]

One more waiver exists, and this is where ETAs come in. The Treasury recognizes that many people who receive federal payments are unable to receive their payments electronically because they do not have an account at a financial institution. One reason why people don’t have accounts is that accounts allowing low balances are sometimes expensive because of maintenance fees, per-check charges, and the like. So, the regulation gives people with no accounts a waiver but also tries to encourage them to open an account. The encouragement takes two forms: First, the Treasury induces financial institutions to offer ETAs, which, as we pointed out earlier, are accounts with certain characteristics designed to enable lower-income individuals to have a basic, inexpensive, no-frills account at a financial institution. Second, the Treasury puts a time limit on the waiver—the waiver expires when the Treasury determines that an ETA is “available” to the person receiving the federal payment. [31 CFR 208.4(a)] An ETA is “available” when the federal agency making the payment notifies the individual of a local financial institution that offers ETAs. [31 CFR 208, Appendix A]

The September 1998 regulations do not list the characteristics of an ETA. The Treasury issued the characteristics in a Notice released in July of 1999. They are:
  • The account is individually owned at a federally insured financial institution.
  • The account is available to any individual who receives a federal benefit, wage, salary, or retirement payment.
  • The account will accept federal benefit, wage, salary, or retirement payments and any other deposits allowed by the financial institution.
  • The account is available for a maximum price of $3 per month.
  • The account allows a minimum of four cash withdrawals per month and four balance inquiries per month through (a) the institution’s proprietary (on-us) ATMs, (b) over-the-counter transactions at the institution’s main or branch offices, or (c) any combination of such ATM transactions and over-the-counter transactions.
  • The account provides the same consumer protections that holders of other accounts enjoy.
  • If the institution is a member of an on-line point-of-sale (POS) network, the account allows on-line POS purchases, cash withdrawals, and cash back with purchases at no additional charge by the financial institution offering the ETA.
  • The account requires no minimum balance, except as required by federal or state law.
  • The account is either interest bearing or noninterest bearing, at the option of the financial institution.
  • The institution provides a monthly statement.

(See the Federal Register for July 16, 1999, at page 38511. The July 1999 Notice provides a lot of detail about each of these characteristics. We would encourage you read the Notice if you are thinking about offering ETAs.)

A financial institution has the option to offer or not offer ETAs. [31 CFR 208.5] In order to offer such accounts, the institution must enter into an agreement with the Treasury Department and be designated the Treasury’s financial agent. [31 CFR 208.5] The Treasury reimburses financial institutions that offer ETAs at a rate of $12.60 per account. [See the Federal Register for July 16, 1999, at page 38510.] Furthermore, providing ETAs qualifies as a community development service under the Community Reinvestment Act. [See FFIEC Interagency Questions and Answers, Sec. __.12(j)-3, located in the Federal Register for April 28, 2000, at page 25096.] Offering an ETA, however, requires that you provide a disclosure concerning attachment of funds in the account and a disclosure concerning your right to require at least seven days’ written notice prior to a withdrawal from the ETA if it is interest bearing. [See the Federal Register for July 16, 1999, at pages 38513 and 38515.] Your right of setoff is also limited. [See the Federal Register for July 16, 1999, at page 38513.]