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Debit cards now a choice for trust beneficiaries

WASHINGTON – Issuing a debit card was the federal government’s answer last year as a safer way for many tribal members to get trust fund payments – safer than carrying around thousands of dollars from a cashed check if they had no bank account.

Now 1,800 beneficiaries cash their disbursements with a prepaid debit card that is good wherever MasterCard is honored.

The U.S. Department of the Interior’s Office of the Special Trustee for American Indians is hoping more of the remaining 75,000 trust beneficiaries sign up to use the debit card instead of receiving money by paper checks. Another 16,000 use direct deposit into a bank account.

After a nine-month trial run ending in September 2008, 78 percent of the debit card users who responded to a survey said they would recommend the program to others. However, only one-seventh of those initial 800 users had taken part in the survey. OST has added several improvements in user-friendliness since the first cards were issued in January 2008.

“The debit card was decided upon because we have people who didn’t have any banking association,” OST spokesperson Debby Pafel said.

“We want to get away from checks, but we think that if one has an account with a financial institution already, in most cases, direct deposit would serve them better. But now we have two options, direct deposit or debit card.” – Rien Heymering, Office of the Special Trustee trust reform specialist

One occurrence really pushed the program to begin – a phone call that came to the desk of former Special Trustee Ross Swimmer. A check-cashing firm called him and said they had a check and wanted to know if it was good to cash. The check was for $18,000.

“He was sitting there thinking, ‘this person is going to spend X number of dollars, whatever amount they take as their portion to cash the check, and also, that person was going to be walking around with all that money in their pocket,’” Pafel said.

OST manages the trust funds that are collected as income from the lease or sale of lands or resources held in trust by the U.S. for individual American Indians and for tribes.

There are an estimated 200,000 Individual Indian Money accounts. Some are for minors, but about 95,000 of the accounts are “unrestricted accounts” for individuals, “who are entitled to the money whenever they want it,” outlined Rien Heymering, trust reform specialist in the OST’s Albuquerque, N.M. office. “Typically, the money is only here for a day, and it’s passed on to them.

“The overwhelming majority of these folks receive the money by check, and checks are not the fastest or safest or most convenient way to get money to people these days. They can be lost in the mail or even lifted by somebody, and you have to take it to the bank or take it someplace to cash.”

The federal government benefits in not having to send out checks. “It’s a pretty expensive way to get money to people; it costs us something over $2 to issue a check.”

The prepaid debit card program is operated by JPMorgan Chase & Co. for the U.S. Dept. of Treasury’s Financial Management Service.

Beneficiaries can enroll in the debit card program at OST field office locations through fiduciary trust officers, or through OST’s Trust Beneficiary Call Center at (888) 678-6836.

“With our debit card you don’t need to have an account with a financial institution to start; we will provide that for you. You don’t have to pay monthly checking account maintenance fees,” Heymering outlined.

Some fees do apply to use the cards, however.

The charge for a balance inquiry at an ATM is 45 cents. Chase offers one free ATM withdrawal in their network per deposit. After that, withdrawals cost $1.50 each.

Those fees have been lowered since the pilot program ended. Another improvement is utility bills now can be paid online using the card, Heymering said. That transaction carries a 75-cent fee.

Heymering said the debit cards “aren’t for everybody. We want to get away from checks, but we think that if one has an account with a financial institution already, in most cases, direct deposit would serve them better. But now we have two options, direct deposit or debit card.”

Over the past 10 years, acceptance of direct deposit was slower than OST had hoped. “We only had gotten 16,000 out of 95,000 to do so. We supposed that some of the resistance was because a portion of our population was either unbanked or underserved – it wasn’t convenient or even possible to have a financial account to receive a direct deposit,” Heymering said. “A debit card was a way for them to receive an electronic payment.”

As for the others who still would rather get their money by check, “those folks are used to how it works, and there’s a bit of inertia at work, I think,” surmised Heymering, who said the OST is “currently reviewing our strategy for getting the word out and going to be making an effort this year to enroll as many people as possible” in the debit card program.