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Treasury Adopts IFR for Federal Benefit Recipients

Adam Rust's picture

Posted January 20, 2011

The Department of the Treasury has issued an interim final rule that will govern standards for cards that receive federal payments. The new rule goes into effect on Friday. It implements policies designed by NACHA (the Electronic Payments Association) that govern the federal use of the ACH system.

The new rule may leverage the scale of transactions made by the federal government into creating a higher

standard for all prepaid cards. A healthy portion of non-banked households get some kind of federal payment (social security, disability, VA) already.

As this is an interim final rule, Treasury is still going to take comments on the proposal until February 11th.

Card users will benefit several ways from this rule:

  • It will require that all cards that can accept federal payments must provide their users with pass-through FDIC deposit insurance.
  • No card can have a line of credit attached to it, or any feature that allows another party to attach an automatic re-payment mechanism.
  • The card must provide cardholders with all of the Regulation E consumer protections.

This is a very promising development. While some cards already meet these standards, regardless of whether or not they accept a federal payment, there have been other instances when some cards fell short.