Senators grill Treasury official about debit card program

Payments increased for contractor, poor hit with fees

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Democrats on the Senate Special Committee for Aging pummeled a Treasury official Wednesday with questions about the effort to replace paper checks with electronic payments to mostly poor and elderly beneficiaries of government programs.

Questioning Treasury Fiscal Assistant Secretary Richard Gregg, Sen. Elizabeth Warren of Massachusetts repeatedly expressed her concern about the decision to pay an additional $30 million to Comerica Bank that was not in its original contract.

Comerica issues a taxpayer-subsidized debit card that the government is pressuring beneficiaries to use if they haven't already signed up for direct deposit.

Unsatisfied with Gregg's response that the nature of the deal changed between 2008, when Comerica offered to perform the service for free, and 2010, when the Treasury Department agreed to the additional millions, Warren repeatedly interrupted his answers.

“Mr. Secretary, let me stop you there,” she said at one point. “My question is about the contract … and that we agreed to give Comerica — we, the U.S. government, through Treasury — an additional $30 million without knowing if they were already making substantial profits on this contract or not.”

Still, Warren, Florida Sen. Bill Nelson, who chairs the committee and Richard Blumenthal of Connecticut, conceded that the program had achieved its main goal: Saving money for the government by getting people to switch to plastic debit cards and direct deposit for benefits.

At the hearing, Gregg appeared to be inflating the cost savings of the program by using some seemingly contradictory math. Gregg said it costs $1.25 to mail a check — a 19 percent jump from the $1.05 he cited nine months earlier, when he last testified on the subject.

The cost of sending a payment electronically, meanwhile, didn't budge from 9 cents.

As a result, the purported savings for making a payment electronically instead of mailing a check leapt to $1.16 from 96 cents. Multiply that 20-cent difference by the millions of people who receive at least one payment each month on a check, and it adds up to millions in extra savings, at least on paper.

Based on the new math, Gregg claimed, Treasury saved $885 million in the fiscal year ended September 2012 — the same month Gregg testified that the old, less favorable figures were correct.

Asked to explain the discrepancy, Treasury Department officials said that the cost per check has increased as Treasury sends out fewer of them. The officials refused to speak for attribution because they were not authorized to do so.

The biggest group affected by Treasury's e-payments policy is people who collect benefits from the Social Security Administration for old age, or because they are both poor and disabled. But the rules affect all benefits from the Veterans Administration, as well as less-known programs that support retired railroad workers and coal miners who developed black lung disease.

Comerica won the government contract by offering to issue the cards at no cost to taxpayers. After the bank said it was having trouble profiting from the program, Treasury agreed to sweeten the deal with tens of millions of taxpayer dollars. Treasury's inspector general is probing the contract between Treasury and Comerica, The Center of Public Integrity reported early Wednesday.