The U. S. Treasury (UST) has just announced a new pilot program that starts next tax season for unbanked tax filers. Their refunds will be deposited into an account they can access by debit card.
The UST announcement stated the program will be targeted to low and moderate income individuals who will sign up at tax time to receive their refunds through direct deposit to the card account. The card will test offering accounts to be used year-round for deposit of other income, store money safely, retail purchases, pay bills, withdraw cash and accumulate savings.
Michael S. Barr, Assistant Treasury Secretary for Financial Institutions, stated, “Far too often, unbanked and underbanked Americans are forced to turn to high-cost alternative financial products – such as check-cashing and other services – that take a big bite out of the savings of those who can least afford it. For many individuals, a tax refund is the single largest payment they will receive each year. That’s the reason tax season provides a great opportunity to deliver safe, low-cost financial products to the unbanked and underbanked that will help those Americans build stronger foundations for their financial futures.”
UST will launch the program during the 2011 filing season using direct mail to individuals who in the past have received paper checks for refunds, and by payroll outreach in the private sector with inserts in paychecks and paystubs.
The Federal Deposit Insurance Corporation (FIDC) estimates there are nine million households without bank accounts. There are another twenty-one million households considered to be underbanked, meaning they have a banking relationship, but the accounts do not fully meet their banking needs. The unbanked are often in the category of low to moderate income individuals. Many of these people still rely on high-cost check-cashing and financial services.