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.
