Mandatory budget cuts, known as the sequester, are scheduled to go into effect later today. While this is dominating the news, another issue of importance to EFTA members also goes into effect. Beginning today ALL federal benefit payments will be made electronically, as the government will cease to make benefit payments by check.
In December 2010, Treasury adopted a final rule to gradually end the practice of issuing paper checks for federal benefit payments. In May 2011, all people newly applying for benefits had to opt for either direct deposit or Treasury’s recommended prepaid card (DirectExpress®). Benefit programs at issue here are: Social Security, Supplemental Security Income, Veterans Affairs, Railroad Retirement, Office of Personnel Management and Department of Labor (Black Lung).
Other important federal benefit programs are not affected directly by the Treasury mandate but have already made great strides in eliminating the issuance of paper checks. These are Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps (Agriculture Department), Temporary Assistance for Needy Families (TANF) (Health and Human Services) and Unemployment Insurance (Labor).
Treasury has established a website that includes more information on the March 1 deadline.
Returning the issue of sequestration, its impact on the financial services industry and EFTA members ought to be minimal. The Federal Reserve, FDIC and OCC are all exempt from budget cuts. Thus, bank examinations and most rule-making should not be impeded.
Although the Consumer Financial Protection Bureau (CFPB) receives its funding from the Federal Reserve, according to a February 22 article in The Hill newspaper, the CFPB will face cuts of $34M from its $448M budget. On the program front, SNAP and TANF are exempted from automatic cuts but not the Women, Infant & Children (WIC) program.
Sequestration issues could be addressed in March when Congress addresses the continuing resolution to fund the government through the end of the fiscal year (September 30, 2013). Never a dull moment in our nation’s Capitol.