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IRS tries a pilot to make banking better
Tuesday - 9/14/2010, 9:30am EDT
Senior Internet Editor
Suppose for a moment you could take two of the most successful programs in government and combine them. That's exactly what the Department of the Treasury is doing with a new pilot program.
Filing tax returns electronically has been increasingly popular and Social Security and Supplemental Security Income benefit recipients are signing up for the Direct Express® electronic payment program in droves.
So Treasury is now trying to find a way to provide access to safe, low-cost financial accounts to the estimated 30 million American households that either don't have bank accounts, or who don't have access to the financial services they need.
This pilot, explained Michael Barr, Assistant Treasury Secretary for Financial Institutions will deliver targeted offers to certain low and moderate income individuals to sign up for new accounts with debit card access at tax time in order to receive their refunds through direct deposit.
"What we're trying to do," Barr told Federal News Radio, "is test out a new idea to reach these families with a basic debit card financial account - an account that would provide them access to their tax refund, but would also be able to be used all year long to direct deposit their other income, to pay bills, to save for the future."
Barr said many banks currently don't offer the kinds of accounts that would be useful to low and moderate income households.
We're designing the pilot so we can test out what features are attractive to people, what's the best way of reaching people who would want these accounts, what's the most efficient way of signing them up, (and) what product features best meet their financial services needs and then linking up people with those accounts.
Barr said Treasury will reach out to eligible taxpayers two ways:
- Direct mail, reaching out directly to homes that have received paper check refunds in prior years.
- Through a payroll provider. Offers to enroll in the pilot will be inserted into the paychecks and paystubs of select individuals who are not currently using direct deposit to receive their tax refunds.
The only way the program is going to work in the long run, said Barr, is if it's "sustainable" to the bank and for low and moderate income households to use "so we really need to experiment to find the best mix of product features, pricing and so on that is attractive to both customers and financial institutions."
Once a slate of options can be determined, said Barr, "some of the lessons learned from the pilot would be useful to the private sector in developing those kinds of offerings" to young investors "precisely because they're low risk for a young person, a student, to try out to get used to the idea of saving without facing the risk of overdraft or insufficient fund fees on their account."