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On Thursday, June 11, 2020, from 12:00 p.m. (ET)
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Witnesses for this one-panel hearing will be:
• Mehrsa Baradaran, Professor of Law, University of California, Irvine School of Law
• The Honorable Chris Giancarlo, Senior Counsel, Willkie Farr & Gallagher and former
Chairman, U.S. Commodity Futures Trading Commission
• Jodie Kelley, CEO, Electronic Transactions Association
• Morgan Ricks, Professor of Law, Vanderbilt University Law School
Purpose and Background
The novel coronavirus 2019 (“COVID-19”) pandemic has had a significant public health and economic impact in the United States. Congress has enacted several pieces of legislation to respond to the crisis, including the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CARES Act, which was signed into law on March 27, 2020, provides “recovery rebates” to individuals based on income and were distributed by the Internal Revenue Service (“IRS”) in conjunction with the Treasury Department’s Bureau of the Fiscal Service. These recovery rebates have been referred to as economic impact payments (“EIPs”), direct payments, or stimulus payments.
While many of these payments were made by direct deposit, nearly 35 million individuals have been receiving EIPs through a paper check. Further, there are still 30-35 million payments that have yet to be issued. This hearing will provide the Task Force the opportunity to explore low or no cost public banking options, like FedAccounts,to utilize technology and digital methods to deliver stimulus payments from the government more efficiently in a time of crisis, especially to underbanked and unbanked populations.
Distribution Methods and Processes for Recovery Rebates The CARES Act recovery rebates equal $1,200 per eligible individual ($2,400 for married taxpayers filing a joint tax return) and $500 per eligible child and the amounts phase out at a rate of 5% of adjusted gross income (“AGI”) above $75,000 ($112,500 for head of household filers and $150,000 for married joint returns). Initially, if a taxpayer did not agree to receive a tax refund or other federal payment (Direct Express Debit Cards) electronically on or after January 1, 2018, a paper check would be sent to the last known address of the individual.
Days after issuing the first round of direct deposit payments on April 11, 2020, the IRS launched the “Get My Payment” website that permitted individuals to add direct deposit information and update mailing addresses until May 13, 2020.5 Shortly after the “Get My Payment” tool website expired, the IRS introduced an additional prepaid card, the “EIP Prepaid Card.” The EIP Prepaid cards were issued free of charge through MetaBank and Visa to 4 million individuals who had not received economic income payments because they did not have any bank account or federal payment information on file with the IRS. To speed up the recovery rebate delivery for individuals without bank accounts, some fintech companies allowed individuals to create free bank accounts.
Populations at Risk of Being Left Out of Recovery Rebates
Even with several distribution methods for recovery rebates, members of vulnerable populations were expected to experience severe delays in receiving recovery rebates or to receive no recovery rebate at all. In 2018, 64 million individuals (41 percent of all filers) filed taxes without bank account information.
There are several reasons individuals did not provide the IRS their bank account information, including the fact that millions of Americans remain unbanked or underbanked. According to the Federal Deposit Insurance Corporation, there are approximately 8.4 million households (6.5 percent of all households) that are “unbanked,” meaning they do not have a bank account, as well as roughly 24.2 million households (18.7 percent) that are “underbanked,” meaning they may have a checking or savings account, but utilize financial products outside of the banking system, like a payday loan. Furthermore, there are also challenges for persons experiencing homelessness who do not have a mailing address to receive a check.
According to the U.S. Department of Housing and Urban Development (HUD), there are about 550,000 individuals experiencing homelessness in this country, with 40 percent of those being African-American or black, and 22 percent being Hispanic or Latino.
Furthermore, some recipients of the EIP Prepaid card may be unfamiliar with how prepaid cards work. Reports demonstrate that card recipients thought the card was fraudulent or had never used a prepaid card before…
Hearing page: https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=406617