1. The Assets and Transaction Account A Federal Policy Proposal NCTC Conference October 2, 2007 New America Foundation Melissa Koide

2. ATA: Why It Is Needed Macro factors Macro factors Savings levels Savings levels Debt Debt Subprime Subprime Two-tiered financial services sector Two-tiered financial services sector Lack of reasonably priced financial products that meet lower- income households transaction and savings needs Lack of reasonably priced financial products that meet lower- income households transaction and savings needs Consumers – even those with bank accounts – are turning to costly alternative providers to meet their transaction needs Consumers – even those with bank accounts – are turning to costly alternative providers to meet their transaction needs Limited savings and asset building policies and products target lower-income for savings and asset building Limited savings and asset building policies and products target lower-income for savings and asset building Lack of financial knowledge and financial management tools Lack of financial knowledge and financial management tools

3. Elements Driving the ATA Design Simple and easy to use Simple and easy to use Reasonably priced Reasonably priced Regulatory protections Regulatory protections Short-term emergency savings and long-term assets Short-term emergency savings and long-term assets Mindless features Mindless features Accessibility and addresses financial services needs Accessibility and addresses financial services needs Education and outreach Education and outreach Ubiquitous Ubiquitous

4. ATA: Nuts and Bolts An account, with transaction and savings functions, delivered at tax time and used throughout the year An account, with transaction and savings functions, delivered at tax time and used throughout the year The ATA would be loaded annually with tax refund dollars The ATA would be loaded annually with tax refund dollars The ATA would be reloadable throughout the year, with wages and salary in particular The ATA would be reloadable throughout the year, with wages and salary in particular 5% of the refund would be automatically deposited into an interest-bearing savings 5% of the refund would be automatically deposited into an interest-bearing savings Matched for certain asset purchases for individuals with incomes up to 80% of AMI Matched for certain asset purchases for individuals with incomes up to 80% of AMI

5. The Account A pre-paid product: pre-funded account accessible via a card and capable of a range of transaction and savings functions A pre-paid product: pre-funded account accessible via a card and capable of a range of transaction and savings functions Provides the convenience of a debit card attached to a checking account or a credit card, but without the risk of overdrafts, hurdles of ChexSystems or credit checks Provides the convenience of a debit card attached to a checking account or a credit card, but without the risk of overdrafts, hurdles of ChexSystems or credit checks

6. Feature/FunctionATACheckingAccount Savings Account Cash Withdrawal (ATM) XXX Point of Sale (PIN or Signature) XX On-line bill pay XX Online purchase XX Check Writing X Direct Deposit XXX Money Orders (built in feature) XX Remittances (built in feature) XX FDIC Insured XXX Reg E (statements) XXX Reg DD (disclosure) XXX Safety: Safer than Cash XXX Overdraft Avoidance XX Build Savings XX Potential Match for Asset Savings X

7. Tax Return Forms Option for direct deposit or ATA (or opt out) Specifies 5% default to savings Specifies means for accessing savings Timing: when ATA card will arrive and when funds will be available Identifies the financial firm that will hold the account Lists the Fees associated with the ATA IRS Verifies taxfilers data Verifies tax refund amount Relays taxfiler data to FI (CIP) Electronically transmits refund amount to financial firm, specifying how much to transaction and how much to savings Treasury TAX REFUND to be deposited into the ATA Financial Firm Generates ATA Card Mails ATA Card to individual taxfiler Includes: - Account number - specifications regarding card activation - details regarding cards functions and fees - customer service information/number POS ATM Online Purchase Online Bill Pay 1 1 ATA-1 WAGES DEPOSITS Savings Match Money Orders/ Remits

8. Why Tax Time? $80 billion annually in tax refunds to tax filers with AGIs of $30K or less $80 billion annually in tax refunds to tax filers with AGIs of $30K or less Annual point when lower-income HHs receive a significant lump sum payment Annual point when lower-income HHs receive a significant lump sum payment Research finds tax filers use their refunds as a budgeting tool for the year Research finds tax filers use their refunds as a budgeting tool for the year The tax return process presents a unique opportunity to authenticate the individual for an account, satisfy the Know Your Customer requirements of the PATRIOT Act and the Bank Secrecy Act The tax return process presents a unique opportunity to authenticate the individual for an account, satisfy the Know Your Customer requirements of the PATRIOT Act and the Bank Secrecy Act

9. Appeal: Financial Service Providers Scale, to generate volume Scale, to generate volume Volume to generate systems change Volume to generate systems change Product uniformity, efficiencies, staff competencies, transferability Product uniformity, efficiencies, staff competencies, transferability Ongoing revenue generation Ongoing revenue generation Safe approach to underbanked market Safe approach to underbanked market

10. Appeal: Employers Cost savings to employers Cost savings to employers A useful tool for Employees A useful tool for Employees Provides safety and ease for employees to access wages Provides safety and ease for employees to access wages Particularly useful for ERs who have unbanked employees Particularly useful for ERs who have unbanked employees Benefits to ERs that provide benefits to EEs Benefits to ERs that provide benefits to EEs Employee benefits help lower absenteeism and improve retention Employee benefits help lower absenteeism and improve retention Increase recruitment potential Increase recruitment potential Improve workplace productivity Improve workplace productivity

11. Appeal: Federal Government Cost savings to the federal government Cost savings to the federal government $29 million to distribute checks to 54.5% who did not direct deposit this year, compared to $3 million, had those tax filers direct deposited $29 million to distribute checks to 54.5% who did not direct deposit this year, compared to $3 million, had those tax filers direct deposited Facilitates more people on the grid Facilitates more people on the grid Provides operational efficiencies for the IRS Provides operational efficiencies for the IRS Positive PR for the IRS Positive PR for the IRS

12. Precedents and Satisfaction Levels for Existing Prepaid Accounts Federal Government Federal Government Social Security Entitlement Payments, Direct Express Social Security Entitlement Payments, Direct Express States States Food Stamps Food Stamps Heating Assistance Heating Assistance Child support payments, etc. Child support payments, etc. City City Opportunity NYC Savings Accounts Opportunity NYC Savings Accounts 8 financial institutions providing savings accounts or prepaid cards for families participating in the Opportunity NYC Family Rewards program 8 financial institutions providing savings accounts or prepaid cards for families participating in the Opportunity NYC Family Rewards program Private Sector Private Sector

13. ATA: Areas for Further Attention Sufficient awareness and education about the ATA Sufficient awareness and education about the ATA Employer participation Employer participation ATA interaction with other benefits card products ATA interaction with other benefits card products Incorporating financial education into the product Incorporating financial education into the product Ensuring tax filers migrate to other financial products (CDs, money market accounts, mortgages) Ensuring tax filers migrate to other financial products (CDs, money market accounts, mortgages)

14. ATA: Necessary Steps Policy Policy Administration level Administration level Decision to pursue the accounts and establish account specifications, contract w/FIs, procedures for implementationDecision to pursue the accounts and establish account specifications, contract w/FIs, procedures for implementation Regulatory level Regulatory level Clarify/extend consumer protections to the accounts (Reg DD; E: FDIC)Clarify/extend consumer protections to the accounts (Reg DD; E: FDIC) Clarify Reg D - Reserve requirements on transaction and savingsClarify Reg D - Reserve requirements on transaction and savings Legislative level Legislative level Funding for large scale asset incentivesFunding for large scale asset incentives Laws regarding exclusions re asset tests for benefits and garnishmentLaws regarding exclusions re asset tests for benefits and garnishment Extensive outreach and education effort Extensive outreach and education effort Outreach through trusted organizations and entitiesOutreach through trusted organizations and entities VITAs; ERs; nonprofits; unions; workers centers; national organizations VITAs; ERs; nonprofits; unions; workers centers; national organizations Culturally sensitive, language accessibleCulturally sensitive, language accessible Mini-marketing effortsMini-marketing efforts Public-Private Commission Public-Private Commission To assess and advise regarding the ATA product to ensure it continues to meet tax filers needs while evolving with the changing financial services industryTo assess and advise regarding the ATA product to ensure it continues to meet tax filers needs while evolving with the changing financial services industry

15. Federal Policies to Provide Accounts at Tax Time New Savers Act, Senators Clinton & Smith New Savers Act, Senators Clinton & Smith Opening of Accounts on Tax Returns to Facilitate Savings. Opening of Accounts on Tax Returns to Facilitate Savings. Purchase of United States Savings Bonds on Tax Returns. Taxpayers will have the option of purchasing U.S. savings bonds, beginning Dec 31, 2008. Purchase of United States Savings Bonds on Tax Returns. Taxpayers will have the option of purchasing U.S. savings bonds, beginning Dec 31, 2008. $25 Million for VITAs $25 Million for VITAs $25 Million for Low-Income Taxpayers Clinics. $25 Million for Low-Income Taxpayers Clinics. Low-Income Taxpayer Protection Act, Senator Bingaman Low-Income Taxpayer Protection Act, Senator Bingaman Demonstration project grants to provide tax preparation services assistance in connection with accounts for individuals that currently do not have one. Demonstration project grants to provide tax preparation services assistance in connection with accounts for individuals that currently do not have one. $10 million for VITAs $10 million for VITAs Representative Becerra is preparing to introduce House version, but with wider scope for accounts at tax time. Representative Becerra is preparing to introduce House version, but with wider scope for accounts at tax time.

16. Workshop Discussion Questions Reactions to the ATA Proposal? Reactions to the ATA Proposal? How would this fit into the services you provide at your site?How would this fit into the services you provide at your site? Aspects to the proposal that you would find helpful? problematic?Aspects to the proposal that you would find helpful? problematic? How would this appeal to your tax clients?How would this appeal to your tax clients? Ideal account features/functions? Ideal account features/functions? Reactions to 5% deposit into harder to access savings? Reactions to 5% deposit into harder to access savings? Reaction to direct deposit or ATA as the only options (no checks)? Reaction to direct deposit or ATA as the only options (no checks)? Opportunities and Limitations to delivering financial products and services at tax time? Opportunities and Limitations to delivering financial products and services at tax time? Is tax time the right time to provide financial services?Is tax time the right time to provide financial services? What strategies to promote fin services have worked and why?What strategies to promote fin services have worked and why? What fin products have worked and why?What fin products have worked and why?

17. Workshop Discussion Questions What questions would your clients ask if presented with an ATA? What questions would your clients ask if presented with an ATA? Which clients of yours are more likely to embrace an ATA product? Who is unlikely to appreciate it? Tax filers who are more likely to be ready for savings? Which clients of yours are more likely to embrace an ATA product? Who is unlikely to appreciate it? Tax filers who are more likely to be ready for savings? What do you think is the strongest marketing angle to promoting an ATA? What do you think is the strongest marketing angle to promoting an ATA? What are the essential capabilities a tax assistance site should have to provide financial services? What are the essential capabilities a tax assistance site should have to provide financial services? Operational needs to implement? Operational needs to implement? Software modifications Software modifications Others? Others? What is the potential of nonprofits & VITAs to provide ongoing financial guidance and education? Are you moving in that direction? What is the potential of nonprofits & VITAs to provide ongoing financial guidance and education? Are you moving in that direction? Other considerations when pursuing large-scale asset building at tax time? Other considerations when pursuing large-scale asset building at tax time?

18. The Assets and Transaction Account A Federal Policy Proposal Melissa Koide New America Foundation 202.986.2700koide@newamerica.net