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Released: September 02, 2010

US Treasury to offer low-cost bank accounts

Source: Darrell Hughes, Dow Jones Newswire

Some U.S. taxpayers will soon be able to have their tax refunds directly deposited into a low-cost bank account, under a new pilot program the Treasury Department announced Thursday. The initiative is one of several attempts by Treasury to provide low-to-moderate income taxpayers with tools to avoid using high-interest payday and refund anticipation loans.

Treasury’s Assistant Secretary for Financial Institutions, Michael Barr, said the effort will help low-to-moderate households obtain financial stability. “Far too often, unbanked and underbanked Americans are forced to turn to high-cost alternative financial products—such as check-cashing and other services—that take a big bite out of the savings of those who can least afford it,” Barr said, noting that tax refunds are the single largest income stream for many individuals.

The pilot accounts, created through the Federal Deposit Insurance Corp’s “Model Safe Accounts Pilot” program, can be used year-round by taxpayers to pay bills, withdraw cash and make purchases. The accounts are essentially electronic because there will be no checks issued or linked to the accounts—only a debit card.

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