Banking:

Government Check-Cashing Issues

GGD-89-12: Published: Oct 7, 1988. Publicly Released: Oct 7, 1988.

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Pursuant to a legislative requirement, GAO studied the difficulties recipients have in cashing government checks, focusing on: (1) banks' check-cashing policies; (2) nondepositors' options for cashing government checks; (3) characteristics of recipients who do not have bank accounts; and (4) government responses to check-cashing issues.

GAO found that: (1) nondepositors cashed government checks at banks, check-cashing centers, grocery and other stores, and through friends or relatives; (2) check-cashing fees varied considerably and were generally unregulated; (3) urban area banks were less likely than rural area banks to cash nondepositors' checks, citing unreimbursed expenses, crowded lobbies, and potential fraud; (4) low-income individuals without bank accounts were most likely to experience check-cashing problems; (5) 75 percent, 50 percent, and 14 percent of families receiving government checks for Aid to Families with Dependent Children, Supplemental Security Income (SSI), and Social Security, respectively, did not have bank accounts; (6) these families cited high service charges, minimum balance requirements, mistrust of banks, and inconvenient hours and locations for not having bank accounts; and (7) federal, state, and local government efforts to facilitate government check cashing include use of electronic technology transfer, direct deposit of checks into bank accounts, and use of automatic teller machines.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: Treasury has established the Electronic Benefits Transfers (EBT) project to explore electronic card benefit payment approaches. Program testing began in November 1989. The goal for full implementation is 1995, with estimated savings of $26 million a year. The food stamp payment pilot program using magnetic cards was activated. FMS is holding discussions with SSA to develop an approach to implement EBT payments for SSA recipients nationwide.

    Matter: If Congress determines that recipients of certain government checks should not bear costs associated with the cashing of government checks or should be assured of a low-cost option, Congress may wish to consider encouraging methods that utilize plastic cards and electronic funds transfer technology.

  2. Status: Closed - Implemented

    Comments: Treasury has established the EBT project to explore electronic card benefit payment approaches. Program testing began in November 1989. The goal for full implementation is 1995, with estimated savings of $26 million a year. The food stamp payment pilot program using magnetic cards was activated. FMS is holding discussions with SSA to develop an approach to implement EBT payments for SSA recipients nationwide.

    Matter: Congress may wish to consider requiring the Department of Agriculture, the Department of Health and Human Services, and the Department of the Treasury, in consultation with state and local governments and banking and consumer groups, to assess the present delivery methods for all government benefits and to seek to develop coordinated delivery systems that would better meet the needs of recipients as well as reduce governmental delivery costs.

 

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