Treasury's Taxt Time Pilot

[Community Development Banking List]

Original message from: mkoide@cfsinnovation.com

Folks,

I wanted to offer a few words about Treasury’s recent announcement to pilot prepaids cards at tax time. Many of us have been thinking for a long time about how to use the tax time moment to provide consumer friendly products to lower income families. Many in the VITA community have been making this happen by providing bank and credit union accounts, U.S. Savings Bonds, and more recently prepaid cards at their VITA sites. This has been fantastic for tax filers who’ve been able to access those products.

What we haven’t been able to address yet however is how to connect tax filers at large to these products in a simple and scalable way. The answer, we believe, is to embed the product in the Federal income tax form so that the access to and opening of the product is seamless and accessible for lower income tax filers, nationwide.

As many of you saw last week, the U.S. Treasury Department announced it has embarked on the first stage of a Federal effort to get a safe and affordable transaction and savings products to millions of low and moderate-income tax filers. Over the coming couple of months Treasury will send letters to over 600,000 tax filers, informing them about the option to deposit their tax refunds into MyAccountCards, a FDIC insured prepaid cards issued by Bonneville Bank and provided and managed by the Green Dot Corporation.

This is an exciting and promising development and it’s a critical step towards the goal of leveraging the tax time moment and the billions of dollars that flow each year via paper checks to deliver a transaction and savings product, literally on the Federal income tax form.

In this pilot, Treasury will learn critical information for how to design a nationwide roll out. They’ll learn about tax filers’ preferences for various product functions. They’ll get information about savings, including how compelling a savings option is and what messages resonate best to encourage savings. They’ll learn how tax filers use the products over time and what prompts filers to continue to use the product and reload their prepaid products in subsequent years. They’ll learn about effective messaging and communication strategies increase uptake of the product. Lastly, they’ll have a bird’s-eye view into what socio-economic factors and dynamics affect financial behavior.

Treasury will be able to assess these questions because in the pilot different cohorts will be presented with different product features (with and without a savings account, for example), different prices, and different messaging. And in a related pilot effort, they will test strategies to encourage direct deposit usage, a proven factor in driving ongoing use of accounts. All of this information will help to inform and shape a successful nationwide rollout, from what the product’s features and functionality should entail, to the underlying economics of delivering the products, to how to structure the administration of a nationwide rollout.

The pilot has gotten positive attention and support, including from consumer advocates and at least one Congressional member. The prepaid product offered in this pilot has been recognized by NCLC, Consumer’s Union, and the Consumer Federation of America as being a better alternative to high cost bank products. It’s designed with Reg E protection and FDIC coverage for cardholders. Taxpayers can access their funds at no cost via a vast network of over 15,000 ATMs and by asking for cash back at point-of-sale terminals. As tax filers continue to use the cards throughout the year, they can add money via direct deposit, through money transfers from other accounts, and via 50,000 retail stores using the Green Dot Money Pack. The savings account is a no fee, no minimum balance account, which the tax filer can transfer money into and out of at no charge. And the bill payment capabilities enable tax filers to use the product to pay bills online at no cost. Finally, with an eye towards a nationwide rollout, the pilot will test an account with a monthly fee of $0 and $4.95. Treasury will learn how this price affects tax filers’ demand and ongoing use of the product, thus informing them as to how to design a tax time product that is sustainable over the long term. In many ways it serves an example of what a good prepaid product looks like.

To hear more about this the pilot, please tune in to a Webinar that my organization will host on February 8, from 2pm-3pm, Eastern, 1pm-2pm, Central. Josh Wright, the Director of Financial Access at the U.S. Treasury Department will provide an overview of the pilot and take questions from participants. Here is a link to the website to learn more and register for the event: http://cfsinnovation.com/events/article/440694

Melissa