Report

Report to the Congress on Government-Administered, General-Use Prepaid Cards, July 2011

Abstract: Section 1075 of the Dodd-Frank Act, which amends the Electronic Fund Transfer Act (EFTA), directs the Board to report annually on the prevalence of use of general-use prepaid cards in federal, state, and local government-administered payment programs and the interchange transaction fees and cardholder fees charged with respect to the use of such general-use prepaid cards. The act requires the Board to begin submitting these annual reports 12 months after the date of enactment. General-use prepaid card programs are used as a method for disbursing funds to individuals and allowing government agencies to make payment in the administration of government benefit, assistance, and other miscellaneous programs. In most instances, general-use prepaid cards replace the issuance of checks or vouchers when funds are not or cannot be disbursed directly to beneficiary accounts at financial institutions. The cards can be used to provide payments such as Social Security benefits, veterans’ benefits, disability benefits, pensions, unemployment benefits, worker’s compensation, emergency disaster relief, and child support disbursements. Examples of federal, state, and local government-funded programs that use general-use prepaid cards include Social Security; Temporary Assistance for Needy Families (TANF); Women, Infants, and Children (WIC); state unemployment; and court-ordered payments. Government-administered, general-use prepaid card programs can involve (1) federal funds that are disbursed by the U.S. Treasury on behalf of federal agencies to the cardholders or (2) federal funds that are directed to state agencies, which, in turn disburse funds to cardholders under state- or locally operated card programs. In other instances, state or local agencies provide the funding, and state, county, or city governments manage the disbursement of funds through their card programs. In March 2011, the Board surveyed 15 depository institutions believed to issue government-administered, general-use prepaid cards; 50 state treasurers and treasurers from the District of Columbia and Puerto Rico; and the Department of Treasury’s Financial Management Service (FMS). The depository institution response rate was high, with 75 percent of those actively engaged in the issuance of government-administered, general-use prepaid cards responding. The state government response rate was much lower, with only 29 percent responding. FMS also provided a response to the survey request. The data provided by survey respondents are not inclusive of all federal, state, and local government-administered card programs; rather, the data provide a sample of government-administered, general-use cards. This report discusses the prevalence of use in terms of the number of general-use prepaid cards used in federal, state, and local government-administered payment programs as of year-end 2010, and in terms of the volume and value of transactions made using those cards during 2010. Based on the low survey response rate and limited data provided by those that did respond to the state government survey, we are not able to calculate the prevalence of use of general use prepaid cards as a proportion of total payments disbursed through related government-administered programs. Also, because of the low response rate to the state government survey, the summary statistics provided in this report are based on the survey responses received from the depository institutions.

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Reports and Studies

Publication Date: 2011