[House Hearing, 107 Congress]
[From the U.S. Government Printing Office]




                   IMPLEMENTATION OF EFT REQUIREMENTS

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                      OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 20, 2001

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 107-27

                   U.S. GOVERNMENT PRINTING OFFICE
73-596                     WASHINGTON : 2001

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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa                 JOHN J. LaFALCE, New York
MARGE ROUKEMA, New Jersey, Vice      BARNEY FRANK, Massachusetts
    Chair                            PAUL E. KANJORSKI, Pennsylvania
DOUG BEREUTER, Nebraska              MAXINE WATERS, California
RICHARD H. BAKER, Louisiana          CAROLYN B. MALONEY, New York
SPENCER BACHUS, Alabama              LUIS V. GUTIERREZ, Illinois
MICHAEL N. CASTLE, Delaware          NYDIA M. VELAZQUEZ, New York
PETER T. KING, New York              MELVIN L. WATT, North Carolina
EDWARD R. ROYCE, California          GARY L. ACKERMAN, New York
FRANK D. LUCAS, Oklahoma             KEN BENTSEN, Texas
ROBERT W. NEY, Texas                 JAMES H. MALONEY, Connecticut
BOB BARR, Georgia                    DARLENE HOOLEY, Oregon
SUE W. KELLY, New York               JULIA CARSON, Indiana
RON PAUL, Texas                      BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio                MAX SANDLIN, Texas
CHRISTOPHER COX, California          GREGORY W. MEEKS, New York
DAVE WELDON, Florida                 BARBARA LEE, California
JIM RYUN, Kansas                     FRANK MASCARA, Pennsylvania
BOB RILEY, Alabama                   JAY INSLEE, Washington
STEVEN C. LaTOURETTE, Ohio           JANICE D. SCHAKOWSKY, Illinois
DONALD A. MANZULLO, Illinois         DENNIS MOORE, Kansas
WALTER B. JONES, North Carolina      CHARLES A. GONZALEZ, Texas
DOUG OSE, California                 STEPHANIE TUBBS JONES, Ohio
JUDY BIGGERT, Illinois               MICHAEL E. CAPUANO, Massachusetts
MARK GREEN, Wisconsin                HAROLD E. FORD Jr., Tennessee
PATRICK J. TOOMEY, Pennsylvania      RUBEN HINOJOSA, Texas
CHRISTOPHER SHAYS, Connecticut       KEN LUCAS, Kentucky
JOHN B. SHADEGG, Arizona             RONNIE SHOWS, Mississippi
VITO FOSSELLA, New York              JOSEPH CROWLEY, New York
GARY G. MILLER, California           WILLIAM LACY CLAY, Missouri
ERIC CANTOR, Virginia                STEVE ISRAEL, New York
FELIX J. GRUCCI, Jr., New York       MIKE ROSS, Arizona
MELISSA A. HART, Pennsylvania         
SHELLEY MOORE CAPITO, West Virginia  BERNARD SANDERS, Vermont
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
PATRICK J. TIBERI, Ohio

             Terry Haines, Chief Counsel and Staff Director

              Subcommittee on Oversight and Investigations

                     SUE W. KELLY, New York, Chair

RON PAUL, Ohio, Vice Chairman        LUIS V. GUTIERREZ, Illinois
PETER T. KING, New York              JAY INSLEE, Washington
ROBERT W. NEY, Texas                 JANICE D. SCHAKOWSKY, Illinois
CHRISTOPHER COX, California          DENNIS MOORE, Kansas
DAVE WELDON, Florida                 STEPHANIE TUBBS JONES, Ohio
WALTER B. JONES, North Carolina      MICHAEL E. CAPUANO, Massachusetts
JOHN B. SHADEGG, Arizona             RONNIE SHOWS, Mississippi
VITO FOSSELLA, New York              JOSEPH CROWLEY, New York
ERIC CANTOR, Virginia                WILLIAM LACY CLAY, Missouri
PATRICK J. TIBERI, Ohio


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 20, 2001................................................     1
Appendix:
    June 20, 2001................................................    21

                               WITNESSES
                        Wednesday, June 20, 2001

Carrion, Richard L., Chairman of the Board, President and CEO, 
  Popular, Inc., and Banco Popular de Puerto Rico................    13
Hammond, Donald V., Fiscal Assistant Secretary, U.S. Department 
  of the Treasury................................................     4
Saunders, Margot, Managing Attorney, National Consumer Law Center    15

                                APPENDIX

Prepared statements:
    Kelly, Hon. Sue W............................................    22
    Oxley, Hon. Michael G........................................    29
    Carrion, Richard L...........................................    47
    Hammond, Donald V............................................    31
    Saunders, Margot.............................................    52

              Additional Material Submitted for the Record

Kelly, Hon. Sue W.:
    Letter to the General Accounting Office, June 20, 2001.......    23
Hammond, Donald V.:
    Written responses to questions from the subcommittee.........    42
Saunders, Margot:
    Comments to the Treasury on ANPRM, National Consumer Law 
      Center.....................................................    60

 
                   IMPLEMENTATION OF EFT REQUIREMENTS

                              ----------                              


                        WEDNESDAY, JUNE 20, 2001

             U.S. House of Representatives,
      Subcommittee on Oversight and Investigations,
                           Committee on Financial Services,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 3:00 p.m., in 
room 2220, Rayburn House Office Building, Hon. Sue W. Kelly, 
[chairwoman of the subcommittee], presiding.
    Present: Chairwoman Kelly; Representatives Tiberi, 
Gutierrez, Inslee, Moore and Shows.
    Chairwoman Kelly. The hearing of the House Financial 
Services Subcommittee on Oversight and Investigations will come 
to order. Without objection, all Members' opening statements 
and answers to their questions then will be made part of the 
record.
    Good afternoon. We are here to examine the status of 
electronic funds transfer requirements of the Debt Collection 
Improvement Act of 1996, known as the EFT 99 program.
    The purpose of this hearing is to examine how far we have 
come in moving toward a checkless system for paying Federal 
salaries, pensions, vendor payments, and Social Security 
benefits, and whether or not the change has reduced costs as 
was promised when the Act was passed.
    We will also discuss the use of electronic transfer 
accounts, (ETAs) that allow low- and middle-income Federal 
payment recipients who do not have bank accounts to receive 
their funds electronically.
    The ETA can be the first step for the unbanked toward 
participating in the financial system, and a lifetime of sound 
money management and personal savings toward that first house, 
a child's education, and a secure retirement.
    Further utilization of ETA accounts should save the 
Government money, ensure speed and efficiency of the 
distribution of Government benefits, save a beneficiary's time, 
increase the security of beneficiaries' benefits and provide a 
sector of the population who have been without bank accounts 
with this necessary service.
    This program, should its full potential be realized, can be 
a winner for all involved. We need to ensure that the program 
is reaching the population it needs to reach. And in order to 
do so, we should investigate who is not using this service and 
why.
    In addition, we need to ask what problems these accounts 
pose to the beneficiaries, the banks, and the Government, so 
that we may ensure adequate steps can be taken to correct any 
problems that may be occurring.
    Finally, we need to investigate what the fraud level is 
with these accounts, and what steps might be taken to stop such 
problems.
    The Ranking Member of the Subcommittee, Mr. Gutierrez of 
Illinois, and I, are committed to the long-term success of the 
EFT and ETA programs.
    To ensure that the greatest amount of Federal payments are 
made electronically, and all eligible recipients who want to 
open ETAs can do so, we are today asking the General Accounting 
Office (GAO) to start a comprehensive review of the EFT program 
and of the use of ETAs.
    At this point, I would like to let Members of the 
subcommittee and the subcommittee staff know that it is my 
intention to enforce the 5-minute rule, and I would appreciate 
their cooperation in this.
    At this time, I would like to turn to the Ranking Member, 
Mr. Gutierrez, my good friend who is also very interested in 
the success of this program.
    Mr. Gutierrez, your opening statement.
    [The prepared statement of Hon. Sue W. Kelly can be found 
on page 22 in the appendix.]
    Mr. Gutierrez. Good afternoon, and thank you, Chairwoman 
Kelly, for holding this important hearing. I was very proud 
that you and I were able to send this letter out from the 
Committee on Financial Services to get a GAO report so that we 
can work in a bipartisan fashion. I think that's the first step 
to get information from all the relevant sources. I look 
forward to continuing working with you in this endeavor. I 
think it's extremely important.
    I would like to start by commending the Department of the 
Treasury for its continued efforts in helping bring into the 
mainstream of our financial system the millions of Federal 
payment recipients who currently do not have bank accounts.
    Today, we have a series of witnesses who are going to bring 
us up to date with the progress of the EFT 99 Program and the 
status of ETAs.
    I would like to welcome Mr. Donald Hammond from the 
Department of the Treasury and Ms. Margot Saunders from the 
National Consumer Law Center.
    I would also like to welcome my friend, Mr. Richard 
Carrion, President and CEO of Banco Popular de Puerto Rico and 
Banco Popular, whose vision and foresight has played an 
instrumental role in the success of Banco Popular being the 
number one ETA provider in the United States and in Puerto 
Rico, a success story I think that this subcommittee has to 
examine very, very carefully.
    They've obviously shown how it can be done, and so I'm 
excited to hear his testimony and his insight and his vision as 
to how he's getting it done there.
    ETAs offer a unique opportunity to fill consumer protection 
voids, increase the attractiveness of the account for those 
outside the banking mainstream, and build positive 
relationships between banks and communities they serve, not 
requiring a minimal monthly balance to maintain an ETA, except 
as provided by State or Federal law, setting a maximum fee of 
$3 per month, providing a monthly statement, and making ETAs 
voluntary are important inclusions that demonstrate commendable 
sensitivity to many low-income Federal payment recipients who 
must live on what is essentially a fixed income.
    However, I believe there are some flaws with current 
requirements of the ETAs. One of the problems is that it sets a 
minimum number of ATM and tele-transactions that consumers must 
do in a month, and it also leads to the financial institution, 
rather than the account holder, deciding whether to use a 
teller, an ATM, or both.
    Prospective ETA account holders average 61 years of age. 
ATM usage decreases with age and only 33 percent of consumers 
over 64 years of age use an ATM card. Therefore, teller access 
is an important factor in encouraging the use of ETAs by these 
prospective account holders.
    It is also a crucial factor in assuring that the goal of 
bringing those without bank accounts into the mainstream 
financial system is realized.
    ETA prospectives are not likely to enroll in a pure debit 
card product. For this group, the branch is their primary 
choice for any type of transaction. Therefore, it should be up 
to the account holder, not the financial institution, to decide 
whether to use an ATM or a teller.
    Another concern is that the ETA does not provide means for 
account holders to pay bills. Consequently, they must withdraw 
cash and then purchase a money order.
    These and other issues really do have a detrimental effect. 
An important aspect of implementing the Act and establishing 
ETAs is the confidence of recipients in the system. It is vital 
that the unbanked receive effective, targeted education about 
the availability of the account and how to use it.
    Recipients should be given clear and understandable 
information about the nature of the account, associate fees, 
free items, additional fees, types of transactions that are 
allowed. Any educational effort must consider potential 
cultural and language barriers that could inhibit understanding 
of the ETA in the unbanked population.
    For this reason, it's important to ensure that 
informational materials are provided and customer service lines 
are available in a wide variety of languages.
    I thank you again for coming here today, and I look forward 
to hearing the testimony. And I thank you, Madam Chairwoman.
    Chairwoman Kelly. Thank you very much, Mr. Gutierrez. With 
unanimous consent, I would like to include a copy of the letter 
to the GAO in the subcommittee record.
    [The information referred to can be found on page 23 in the 
appendix.]
    Our first witness today is Mr. Donald V. Hammond, Fiscal 
Assistant Secretary of the United States Treasury Department. 
Mr. Hammond was named Fiscal Assistant Secretary on September 
28th, 1998. As Fiscal Assistant Secretary, he provides policy 
oversight for the Financial Management Service and the Bureau 
of the Public Debt.
    Assistant Secretary Hammond chairs the Treasury Working 
Group on implementing the statutory mandate for the EFT 
program.
    Assistant Secretary Hammond also serves as the Treasury's 
liaison with the Federal Reserve System in its capacity as the 
Government's fiscal agent.
    Mr. Hammond, we welcome you here today. We welcome your 
testimony on the EFT and the ETA programs. Without objection, 
your entire written testimony will be included in the record, 
and we invite you to begin your 5-minute oral summary now, and 
I will notify you when you have about a minute remaining by 
just simply tapping a little bit with this handle.
    [Laughter.]
    Chairwoman Kelly. Please proceed, sir.
    Mr. Hammond. OK. Thank you very much.

  STATEMENT OF DONALD V. HAMMOND, FISCAL ASSISTANT SECRETARY, 
                U.S. DEPARTMENT OF THE TREASURY

    Mr. Hammond. Good afternoon Chairwoman Kelly, Ranking 
Member Gutierrez. Thank you for the opportunity to appear 
before you today to discuss Treasury's efforts to implement the 
electronic funds transfer, or EFT, requirement of the Debt 
Collection Improvement Act of 1996, the DCIA.
    The DCIA requires the Federal Government to issue most 
payments via EFT and directs Treasury to ensure that any 
recipients who are required to receive payment electronically 
have access to an account at a financial institution at a 
reasonable cost and with the same consumer protections as other 
account holders at the same financial institution.
    We believe the program thus far has been very successful, 
resulting in approximately 80 percent of all Federal payments 
currently being made electronically and generating considerable 
efficiencies for the Federal Government, financial 
institutions, and payment recipients.
    In fact, the reduction in the number of check payments 
alone, since the end of fiscal year 1995, has saved the Federal 
Government almost $250 million and will generate recurring 
savings each year.
    We expect to expand on these accomplishments by increasing 
our percentage of electronic payments in the future.
    I commend the subcommittee for its continued interest in 
and support of increasing the Government's usage of electronic 
payments in a way that balances the interests of our payment 
recipients and the cost to Government operations.
    Treasury intends to continue with the implementation of 
this important initiative in the same manner going forward.
    In developing the EFT rule, Treasury followed four 
principles. The interest of recipients should be of paramount 
importance. Treasury's policies should maximize private sector 
competition for the business of handling Federal payments in 
order to promote the greatest possible convenience, 
flexibility, efficiency and security.
    Recipients, especially those having special needs, should 
not be disadvantaged by the transition, and recipients without 
accounts at financial institutions should be brought into the 
mainstream of the financial system to the greatest extent 
possible.
    As a result, the EFT rule emphasizes recipient choice 
through an accommodative waiver policy formulated for the 
purpose of minimizing hardships to Federal recipients.
    Treasury is confident that this balanced approach supports 
the goals of the program, and the widespread use of EFT by 
payment recipients indicates broad acceptance of EFT by the 
public.
    Through the DCIA and the Government's education and 
outreach programs, we have made tremendous progress in the 
conversion of check payments to EFT among Treasury and non-
Treasury disbursed agencies.
    A couple of examples are noteworthy. Today, nearly 8 out of 
every 10 Social Security and Veterans Administration benefit 
payments, and 98 percent of all Federal salary payments, are 
made electronically.
    Half of all Supplemental Security Income (SSI) payments are 
currently electronic, compared to just 24 percent for fiscal 
year 1995.
    We attribute our success to our public education effort, 
our efforts to publicize and explain the requirements of the 
DCIA and Treasury rules to key stakeholders and our efforts to 
assist agencies operationally in converting more payments to 
EFT.
    The most complex and challenging task that has confronted 
us in increasing the number of EFT payments, is how to meet the 
needs of the millions of Federal payment recipients who do not 
have an account at a financial institution.
    Despite our waiver policy in keeping with the DCIA's intent 
for access to a reasonable cost account, Treasury designed the 
low-cost electronic transfer account, or ETA. The ETA is being 
voluntarily offered by federally-insured financial institutions 
that choose to offer the account, subject to the terms and 
specifications prescribed by the Treasury.
    We anticipate that we will have a national presence of over 
600 ETA providers with more than 16,000 locations by the end of 
this year.
    As of April 2001, Federal payment recipients have opened 
almost 11,000 ETAs. We project that the number of ETAs opened 
will gradually increase over the next few months, and 
substantially in the years to follow.
    With regard to education, in fiscal 1997, Treasury began 
developing a comprehensive public awareness and education 
campaign to inform Federal payment recipients of their options 
under the EFT legislation and to promote the safety and 
reliability of EFT.
    The components of the campaign included development and 
distribution of printed materials, an educational video, public 
service advertising for radio, television and print media, 
public relations activities and a precedent-setting grassroots 
community outreach initiative.
    To expand EFT 99 public awareness to a grassroots level, 
Treasury developed a regional network for its public education 
efforts. Through that network, we reached over 1400 local 
organizations and held more than 3500 consumer sessions through 
the grassroots campaign.
    With regard to ETA-specific activities, during the past 18 
months, we have brought together providers and community groups 
in order to expand our marketing opportunities and increase 
awareness of the program.
    Let me now turn to costs and savings. Costs to implement 
EFT 99, including portions of the ETA program, from fiscal 1997 
to 2001 are approximately $21 million. The public education 
campaign that I just described has cost approximately $18 
million over the same period, with most of the funds expended 
in the first 3 years.
    Specifically for the ETA, we have reimbursed financial 
institutions approximately $100,000 and project an additional 
$155,000 in the year to come.
    Our costs for the Federal Reserve Bank of Dallas, who is 
our fiscal agent in this endeavor, have been $2.7 million. 
Therefore, total program costs have been $24 million.
    In return, we have received----
    In summation----
    [Laughter.]
    Mr. Hammond.----What we've received from these expenditures 
is an annual savings of 140 million checks accumulating to $580 
million, an annual recurring savings of at least $70 million a 
year going forward.
    In addition we've saved in excess of $41 million through a 
decrease in fraudulent checks. We believe the program has been 
a tremendous success. We look forward to its continuation. And 
I look forward to the questions from the panel.
    [The prepared statement of Donald V. Hammond can be found 
on page 31 in the appendix.]
    Chairwoman Kelly. We thank you very much, Mr. Hammond.
    We have been joined by Mr. Shows. Mr. Shows, have you an 
opening statement of any kind?
    Mr. Shows. No. Thank you.
    Chairwoman Kelly. Thank you very much.
    Mr. Hammond, one of the reasons for converting paper checks 
to electronic funds transfer is to reduce the costs associated 
with fraud and paper checks.
    What are the risks of fraud with the ETAs, and--well, let's 
just stop right there. What are the risks of fraud with these 
ETAs?
    Mr. Hammond. We think that the risk of fraud with an ETA is 
actually slightly less than the risk of fraud with a 
conventional bank account. We designed the ETA to try to 
minimize the risk of fraud, understanding that financial 
institutions are very concerned about that important component 
of their costs.
    As a result, the ETA only offers additional deposits at the 
discretion of the offering financial institution. We limit the 
types of transactions. For example, there's no check writing 
against the ETA permitted as check management was both an issue 
that was a concern to the recipient population, but also a 
concern to the financial institutions offering the accounts.
    Obviously, you can't design any product in today's day and 
age that totally eliminates the risk of fraud. And, in all 
honesty, the ETA has some incidence. We think the account is 
designed to minimize that incidence and to give the financial 
institution offering it the opportunity to close the account if 
it has been abused.
    Chairwoman Kelly. Can an individual who is not eligible 
open an ETA?
    Mr. Hammond. An individual could open--if I understand the 
question correctly--an individual who would not be a Federal 
benefit recipient, they can attempt to open an ETA. In fact, 
we've had cases, particularly on the West Coast, where accounts 
have been opened by members of the public who do not receive a 
recurring Federal payment.
    What we quickly discover though, through the financial 
institution, is that when no Federal payment is direct 
deposited into the account, the institution then closes the 
account based on non-eligibility.
    So there have been cases where it's happened. It's been a 
relatively small percentage of the accounts that have been 
opened, and there is an easy way for the institution to verify 
their eligibility and to close the account.
    Chairwoman Kelly. And you find that's working?
    Mr. Hammond. Yes.
    Chairwoman Kelly. I'm wondering if you could submit to the 
subcommittee any recommendations the Treasury might have for 
amending the Act or regulations to further advance the EFT to 
other Government programs.
    For example, on the business side of Government, Treasury 
has really made dramatic strides in converting Federal payments 
to vendors from paper checks to the EFT.
    I'm wondering if you've also made progress in converting to 
electronic bill presentment? In other words, can the Federal 
Government bill directly to the vendor and have the vendor pay 
through the account?
    Can all of that happen electronically? I'm interested 
obviously in paper reduction and also in an anti-fraud 
mechanism.
    Mr. Hammond. We would be happy to get you some legislative 
recommendations or proposals, specifically addressing the 
business processes.
    The aspects of Federal procurement and making that an all-
electronic process have been a very high priority of both the 
Procurement Executives Council, as well as OMB, for some time.
    It's a very difficult process, because it involves every 
aspect of the organization's management as well as the vendor 
community, but it is something that is very high on the 
management initiatives of the Administration going forward, but 
I can get you some more information on that.
    [The information referred to can be found on page 42 in the 
appendix.]
    Chairwoman Kelly. And perhaps we can also ask the GAO to 
take a look at it. Do you think it would offer any major 
savings or efficiency in the Federal procurement programs if we 
were able to get that put together?
    Mr. Hammond. Absolutely. I think you can see an example of 
the kind of efficiency that you can find in Federal procurement 
from the adoption of the Government credit card program a 
couple of years ago, and the number of steps it has reduced in 
the procurement process for small purchases, the efficiency 
that it has created on the bank end processing for paying those 
bills, you can, through electronic processes for larger 
procurements, where a credit card would not be an appropriate 
payment mechanism, presumably extract similar, or maybe even 
greater, savings.
    Chairwoman Kelly. I'm a little concerned about the fact the 
subcommittee has tried to get information from the Treasury on 
how the ETA program is working. Although the Treasury can tell 
us how many ETA accounts have been opened, they are not able to 
tell us apparently who is opening them, or whether they are 
Social Security retirees or VA beneficiaries. Treasury 
apparently can't even tell us how many ETAs have been opened 
for residents just in the City of New York, even though we know 
that there are thirteen banks offering them there.
    And you, at Treasury, have to pay each bank $12.60 for 
every account. We haven't been able to find out from Treasury, 
except anecdotally, why people refuse to open an ETA.
    Apparently, Treasury also doesn't know how long an ETA may 
be opened and whether or not some of these accounts, after 
being opened with $12.60 paid by the Federal Government, are 
quietly closed and converted to a regular account.
    These are questions we can ask the GAO in its study, but I 
really have to ask if you can also give us some answers to 
questions like these. Without more detailed data on how the 
program is working, I don't know how we can accurately assess 
its effectiveness.
    And also, any other issues that you think the GAO should 
analyze during their review, and what data you would like to 
see come out of it.
    You don't have to answer that verbally right now. I just 
want you to answer that in writing or in discussions with the 
staff.
    I think it's interesting the fact that only 11,000, less 
than \1/10\ of 1 percent of the people eligible have opened an 
account, even after we've mailed, done a lot of public 
education. It tells me that something may not work, and doesn't 
that tell you something may not be working with these accounts?
    We'll hear testimony from someone who will testify later 
who has done a great deal of outreach in making these accounts 
work. It seems to me that maybe the outreach isn't working. And 
I'd like to have some more explanation about that.
    Also, I want to know what Treasury is able to do to beef up 
its ability to monitor the programs.
    So there are some questions, just a big block.
    I've run out of time. I'm going to time limit myself also, 
and we will move now to Mr. Gutierrez.
    [The information referred to can be found on page 43 in the 
appendix.]
    Mr. Gutierrez. Thank you, Madam Chairman. I'm going to 
follow up right where you ended.
    Mr. Hammond, thank you for being here this afternoon.
    There are approximately 10 million unbanked recipients in 
the United States of America. Only 11,000 ETA accounts have 
been established since ETA became available in 1999.
    So we have a pool of 10 million people. I don't even want 
to estimate what the percentage is. I didn't do the percentage, 
but 11,000 out of 10 million people. That means there are 10 
million people that are still getting their checks in the mail 
after the program has been implemented.
    To what do you attribute the numbers? I mean, I know that 
the Chairperson has asked you, and I certainly look forward to 
your comments in writing, but if you could just enlighten us 
this afternoon, what's going on?
    Mr. Hammond. Sure. There are a couple components to that 
response. First, that the ETA is really a two-step program. The 
first was to interest financial institutions in offering the 
account, market it to the financial institutions such that 
there would be an account structure available.
    As a result, outreach to the ultimate recipient population 
had to lag the enrollment of financial institutions who are not 
only interested in offering the account, but also prepared to 
offer it in their systems environment at that point in time.
    It would make no sense for us to market the account before 
the accounts were available in a particular county, only to 
have consumers go ask questions and find out it wasn't 
available.
    Once we got a critical mass of recipients available in an 
area, then we began to market the account to the ultimate 
recipient population.
    Now keep in mind, we're marketing two messages at the same 
time. We're marketing the message EFT and electronic payment 
and the availability of the option of the ETA account.
    We do find that as our numbers continued to increase, we 
suspect that a significant number of unbanked recipients of 
that original 10 million person estimate have signed up for 
some sort of account relationship.
    I use, as an example, the Supplemental Security Income 
(SSI) program. In composing that original estimate of 10 
million unbanked recipients, we estimated that 50 percent of 
SSI recipients were unbanked.
    Today, 50 percent of SSI recipients receive electronic 
payment.
    Mr. Gutierrez. So what do we need to do to have that same 
kind of success story with the 10 million population?
    I understand what you're doing with the financial 
institutions. Has there been a lag in the number of financial 
institutions that wish to engage in the program?
    Mr. Hammond. I think it's more a question of the timing, 
and we were a little unfortunate in our timing of rolling out 
the account in that, at the time of initiation, the 
preparations for the Y2K systems conversions.
    Mr. Gutierrez. How many financial institutions in the 
United States of America, of the 10,000 banks, FDIC-insured, 
offer this service?
    Mr. Hammond. Right now approximately 600.
    Mr. Gutierrez. Six hundred out of 10,000. You think maybe 
that's a little bit of our problem?
    Mr. Hammond. Well, except I think we have some encouraging 
signs in that there are some very large financial institutions 
who are committed to the program that give us great geographic 
reach. Bank of America is now rolling it out in all their 
branches. Wells Fargo is completing their roll-out of the 
program. FirStar, which has just recently merged with U.S. 
Bank, increases the penetration throughout the Midwest, and the 
upper Midwest, and then Bank One.
    So, I think you can't necessarily look to just the absolute 
number. You want to look to the reach and where they hit the 
geographic portions.
    Mr. Gutierrez. But we're still at 600 of 10,000 financial 
institutions?
    Mr. Hammond. Yes, we are.
    Mr. Gutierrez. Some have probably reached smaller 
communities, larger communities. Geography must have something 
to do with this. In terms of languages the people speak, 
cultural.
    I mean, where are the, especially all of the different 
kinds of financial institutions that can out as long as they 
are FDIC-insured?
    Shouldn't we start maybe looking at some regulations, since 
there are some that are obviously on the leading edge, and 
we're going to hear from one soon, that other financial 
institutions are bound to encourage, either through regulations 
or through a change?
    Because otherwise I have a funny feeling that they're just 
not going to be involved in the program and we're going to stay 
at that 600 level. Six hundred to 10,000, it's not a lot, it's 
6 percent of all the financial institutions.
    Mr. Hammond. Well, I think you make some very good points. 
I think the question we've got in designing the product was, 
one, to make it so that financial institutions truly had to be 
interested in offering the account.
    As you'll see later on, the success that Banco Popular has 
enjoyed requires a real commitment by the offering financial 
institution.
    To simply require an institution to offer this account and 
expose themselves to a new product offering, is something that 
really should be voluntary.
    Mr. Gutierrez. Let me, just so that I can continue, because 
the sign says ``sum up'' and I have to. I have the luxury of 
being here and watching the sign light up.
    It says ``stop.''
    Real quick, just in coordination with the Chairwoman's 
request, please look at what steps can be taken to increase the 
number of financial institutions from the 600 to the 10,000 
eligible FDIC-insured institutions. What we can do to expand 
that, and what measures have worked in the past specifically, 
as you said with the Social Security checks, and what is the 
plan to get the other 10 million; roadblocks, obstacles, and 
how we're going to overcome that.
    I know we're going to learn a little bit about that in a 
minute, and as we're into the private sector, maybe you might 
want to have a consulting contract with Banco Popular to 
expedite your process.
    Thank you, Madam Chair.
    [The information referred to can be found on page 45 in the 
appendix.]
    Chairwoman Kelly. Thank you, Mr. Gutierrez.
    I know that we can again ask the GAO to investigate the 
issues that you've raised.
    I'm just going to use the privilege of the Chair to do one 
follow-up with my colleague's question.
    And that is, I want to know if you're partnering to present 
this to the public with any minority-owned radio, TV stations, 
with any minority-owned print, any print mechanisms to 
advertise ETAs?
    Because as we were talking just before we began the 
hearing, we both recognized that one of the problems that 
people have is a fear of the mechanics themselves. Many people 
fear a machine, the use of that kind of machine.
    The second thing is that people cannot utilize the machines 
because of language barriers.
    What is your outreach?
    Mr. Hammond. We've done a lot of outreach.
    Chairwoman Kelly. With minority stations?
    Mr. Hammond. Very definitely. In fact, our public service 
announcement materials were prepared in both English and 
Spanish and the print materials were, in fact, produced in a 
number of other languages. I think I can get the answer for you 
explicitly for the record, but I believe it was in 16 different 
languages at one point in time.
    Chairwoman Kelly. And you advertised in that, or you just 
printed things?
    Mr. Hammond. We've used no paid advertising as part of our 
program. Quite honestly, that's a factor of cost.
    Chairwoman Kelly. Have you used public service 
announcements?
    Mr. Hammond. Yes, we have. And we found that we had some 
success with print, actually substantial success with print 
advertising, limited success with radio, and from a personal 
standpoint, somewhat disappointing success with television PSA 
advertising. And I think that's consistent with Government 
programs in general.
    [The information referred to can be found on page 46 in the 
appendix.]
    Chairwoman Kelly. Well, we thank you very much, Mr. 
Hammond. I know that both Mr. Gutierrez and I have further 
questions. We will submit them to you in writing, because I 
will hold the record open for 30 days. There are no more 
questions, but I know there will be these additional questions 
and we'll have 30 days for Members to submit those questions to 
the witnesses and get those responses placed in the record.
    Mr. Hammond, I'm going to excuse you with the 
subcommittee's great appreciation for your time. We really 
appreciate your being here.
    Before I empanel the second group to speak, I want to say 
to the people standing here at the door, there are seats so why 
don't we just take a moment while Mr. Hammond leaves this 
table, and feel free to walk through here and sit down. You 
don't have to stand for the second half of this hearing.
    Thank you very much, Mr. Hammond.
    Mr. Hammond. My pleasure, and we'll have the responses to 
you very timely.
    Mr. Gutierrez. Thank you, Mr. Hammond.
    Chairwoman Kelly. For the purposes of the introduction of 
our first witness, I am going to turn that privilege over to my 
Ranking Member, Mr. Gutierrez.
    Mr. Gutierrez. Thank you very, very much. I really 
appreciate the distinct privilege and honor of going out of the 
regular order and allowing me to make these introductions.
    Our second panel consists of Mr. Richard L. Carrion, the 
President, Chairman of the Board, and CEO of Banco Popular of 
Puerto Rico and Popular Incorporated, the holding company that 
holds Banco Popular, and Ms. Margo Saunders, Managing Attorney 
for the National Consumer Law Center.
    First, Mr. Carrion. Banco Popular is the largest bank in 
Puerto Rico and one of the largest in the United States and 
throughout Latin America. Banco Popular North America, a 
subsidiary of Banco Popular, Banco Popular Incorporated, is the 
largest Hispanic bank in the United States.
    It operates over 100 branches in the continental USA, 
including over 30 in New York, and I might say gaining quickly 
in Chicago.
    Mr. Carrion is President of the Committee for the Economic 
Development of Puerto Rico, a member of the Executive Committee 
of the Puerto Rico Banking Association, President of Banco 
Popular Foundation, and a member of the International Olympic 
Committee.
    He received a Bachelor's degree from Wharton School of 
Finance and Commerce, and an MS in Management Information 
Systems from the Massachusetts Institute of Technology.
    During Mr. Carrion's tenure at Banco Popular, he was the 
driving force to implement the ATM system throughout the branch 
network in Puerto Rico and the United States, as well as 
successful electronic services to facilitate banking 
transactions.
    In fact, Banco Popular Puerto Rico is ranked first in the 
entire Nation as the bank with the largest number of electronic 
transfer accounts. It is precisely this expertise in this field 
that makes Mr. Carrion's testimony so relevant for today's 
hearing.
    Mr. Carrion, we are especially pleased that you are here to 
discuss your outstanding performance in opening ATAs, and we 
deeply appreciate your traveling from Puerto Rico to be with us 
today.
    Chairwoman Kelly. Thank you very much.
    Before I introduce our next witness, I want to say that I 
have given Anibal Acevedo-Vila, my colleague who is a Member of 
Congress from the Commonwealth of Puerto Rico, the subcommittee 
privilege of sitting with us today, and we welcome you.
    Next we have, as a witness, Ms. Margot Saunders. Margo 
Saunders is the Managing Attorney of the National Consumer Law 
Center (NCLC).
    Since 1969, the National Consumer Law Center has been 
providing legal services, attorneys, and others representing 
low-income clients, with technical and legal consulting, 
training and publications that cover all major topics in 
consumer law.
    Since its' founding, the NCLC has established itself as the 
Nation's consumer law specialist, making its' legal expertise 
available to low-income clients, private and legal services 
attorneys, and to State and Federal agencies.
    Ms. Saunders has been the managing attorney there since 
1991. She is a prolific writer and a witness on consumer 
issues. She's also been a member of the Federal Reserve Board's 
Advisory Council, and Chairperson of the North Carolina Bar 
Committee's Consumer Credit Committee.
    She received her law degree from the University of North 
Carolina Law School.
    We thank you both for joining us here today to share your 
thoughts on this issue.
    Without objection, your written statements will be made 
part of the record. You will each be recognized for 5 minutes 
in summary of your testimony. And once again, I remind you, if 
you go over, I will remind you.
    So we thank you very much, and we will begin with you, Mr. 
Carrion.

    STATEMENT OF RICHARD L. CARRION, CHAIRMAN OF THE BOARD; 
        PRESIDENT AND CEO, BANCO POPULAR DE PUERTO RICO

    Mr. Carrion. Thank you, Madam Chairperson and thank you 
Congressman Gutierrez and Congressman Acevedo-Vila for being 
here and for your kind words.
    My name is Richard Carrion. I am President and CEO of 
Popular, Inc., and Banco Popular Puerto Rico. Banco Popular 
Puerto Rico was founded on October 5th----
    Chairwoman Kelly. Mr. Carrion, I'm sorry to interrupt, but 
could you pull that microphone closer?
    Mr. Carrion. I sure will.
    Chairwoman Kelly. It's difficult for those in the back of 
the room to hear you.
    Mr. Carrion. It that better?
    Chairwoman Kelly. Better.
    Mr. Carrion. Banco Popular Puerto Rico was founded on 
October 5th, 1893, when Puerto Rico was still under Spanish 
domination. We have assets exceeding $28 billion and we are the 
oldest and largest financial institution on the island.
    We are also the 35th largest bank holding company in the 
United States and 8th in Latin America.
    The bank operates over 200 branches in Puerto Rico, 100 in 
the continental United States, as well as the U.S. and British 
Virgin Islands.
    We also operate several subsidiaries including Popular 
Mortgage, Popular Securities, Popular Leasing in Puerto Rico 
and we also have a presence in over 30 U.S. States with our 
Equity One Mortgage Subsidiary, Popular Cash Express, Banco 
Popular National Association and Banco Popular North America, 
the largest Hispanic bank in the mainland.
    Throughout its history, Banco Popular has embraced several 
institutional values upon which we have based our business 
objectives generation after generation.
    Two of those values are innovation and social 
responsibility. We are particularly proud of our initiatives to 
convert the so-called unbanked segment of the population in 
Puerto Rico, as well as in the continental United States.
    In the 1950s, Banco Popular put in place an outreach 
program serving then-isolated communities with mobile units, 
buses, a fleet of buses that then operated as bank branches 
throughout the island.
    We introduced Farmers Home Administration loans in Puerto 
Rico and we are still one of the five Small Business 
Administration lenders in the continental United States.
    Two months ago, we launched a new product: ``Acceso 
Popular'' and a new outreach program: ``El Banco en al 
Comunidad'' or ``The Bank in the Community,'' also directed to 
converting the unbanked segment.
    Moreover, since its inception, Banco Popular de Puerto Rico 
has ranked first in the entire Nation as the bank with the 
largest number of electronic transfer accounts, or ETAs--4,349 
as of May.
    Likewise Banco Popular North America ranks fourth after 
Banco Popular de Puerto Rico, Firstar Bank-Milwaukee and Wells 
Fargo & Co., San Francisco.
    Another Popular, Inc. subsidiary, GM Group, is in charge of 
processing electronic payments of the U.S. Department of 
Agriculture Nutrition Assistance Program to over 450,000 
beneficiaries in Puerto Rico.
    Individual benefits are electronically accessed through our 
network of 624 ATMs on the island, a network we have owned and 
operated since 1983.
    Several years later, we also introduced the point-of-sale 
technology and we currently own and operate over 40,000 
terminals. Both initiatives have been responsible for a 
dramatic transformation of consumer behavior in Puerto Rico.
    In the year 2000, our ATMs and point-of-sale terminals 
processed 184.9 million electronic transactions. Our clients 
averaged 11 transactions a month at our point-of-sale 
terminals, and 9.6 at our ATM network, a user pattern that 
doubles the U.S. average.
    In total, our clients conduct 76 percent of all their 
transactions electronically, which represents the highest usage 
of electronic banking in the entire United States.
    In Puerto Rico, Banco Popular owns and operates the local 
ATM and POS switching networks. This allows us to provide free 
and unlimited access to the ATM and POS networks since the 
marginal cost of processing these additional transactions is 
extremely low.
    I believe this has been one of the principal reasons for 
the success we've had with the ETA and other similar products 
in Puerto Rico.
    If the U.S. Federal Government and the U.S. Congress are 
committed to the expansion of ETAs and EFTs in general, there 
are two areas on which it should focus.
    One, access to the national ATM networks. Some mechanism 
must be found to enable a lower cost of access to the ATM 
network for these account holders. While I instinctively recoil 
from mandated subsidies or additional regulations, I think that 
a voluntary agreement can be reached with the major ATM 
networks.
    Again, the marginal cost of processing these additional 
transactions is small and it is in the long-term interest of 
these networks to promote a shift toward electronic 
transactions.
    Second, a check-cashing or money exchange industry. There 
are currently over 10,000 check-cashing locations in the United 
States. They are the primary providers of basic financial 
services to the unbanked, mostly check-cashing, money 
transmission and bill payment.
    I would urge this subcommittee to include them in your 
discussions.
    And for the record, I will mention that our subsidiary, 
Popular Cash Express, currently operates 87 check-cashing 
locations in the U.S.
    It is imperative that we recruit the support of these 
institutions in promoting electronic transactions among their 
clients and reevaluate both the Bank Secrecy Act and anti-money 
laundering regulations that currently curtail this industry's 
possibilities of growth and of servicing the unbanked 
population.
    Madam Chairperson, as telecommunications redefine the 
banking industry, we need to move forward in providing equal 
access to this technology.
    Thank you, Madam Chairperson.
    [The prepared statement of Richard L. Carrion can be found 
on page 47 in the appendix.]
    Chairwoman Kelly. And I thank you, and I thank you for 
observing the 5-minute rule.
    Ms. Saunders.

   STATEMENT OF MARGOT SAUNDERS, MANAGING ATTORNEY, NATIONAL 
              CONSUMER LAW CENTER, WASHINGTON, DC.

    Ms. Saunders. Madam Chairwoman and Mr. Gutierrez, thank you 
for inviting us here today to testify.
    I offer my testimony today on behalf of our low-income 
clients as well as the Consumer Federation of America and 
Consumers Union.
    Treasury has accomplished a great deal of good things in 
the past few years regarding implementation of EFT 99. We 
especially applaud them for the excellent waiver system that 
they adopted.
    They have aggressively ensured that no recipient is led to 
believe that a bank account is necessary to receive Federal 
benefits, which was a tremendous concern originally. There was 
a lot of misinformation out there.
    The Treasury has adopted an excellent education program. We 
are hearing from all around the country from our local 
communities and our partners, that the education effort 
Treasury has engaged in is really a leader in the Government 
efforts.
    The design of the ETA account is excellent in many ways. We 
especially like that it's open to all Federal recipients 
regardless of credit status, that it appropriately limits fees 
for basic services--and this is very important--that it 
prohibits attachment by judgment creditors for all exempt 
proceeds in the account. And we believe that is of significant 
importance to many of our clients.
    However, we do think there is a problem with the ETA in 
that it does not provide any payment mechanisms for recipients, 
and it does not limit charges for additional services.
    As you have already noted, the ETA account has currently 
only opened 11,000 new accounts. Whether this is \1/10\ of 1 
percent, which is my math on that, or some higher number, it's 
clear that the ETA account has not begun to reach its full 
potential.
    We in the consumer community feel strongly that a number of 
things have to be done differently. One big problem the 
Treasury has already acknowledged is the lack of regulation of 
the method of receiving all Federal payments.
    Treasury has said in its regulations that all Federal 
payments must be deposited in an insured financial institution, 
in an account established in the name of the recipient.
    However, Treasury has not required that the recipient 
actually have access to that account directly. As a result, 
many check-cashers and other fringe bankers, unregulated 
financial service providers, have established accounts through 
their own storefronts. While we don't have any idea of the 
actual number of these relationships, we believe that it is a 
substantial number of low-income recipients of Social Security 
and SSI benefits who receive their Federal benefits through the 
check casher.
    I indicated in my written testimony just a few examples of 
how much this can cost a low-income recipient. For example, in 
Philadelphia, in one of several programs offered, recurring 
monthly recipient fees are typically charged to access $500 of 
monthly benefits that total approximately $234 a year. On a 
yearly basis, half-a-month's benefits is being spent on 
accessing the benefits through the check-cashers.
    Why is this a problem? We think it's not only a problem 
because of the fees necessary to access the Federal payments, 
but it is also a problem because it feeds these recipients into 
the other onerous services that these financial services 
alternative fringe bankers are providing, such as payday loans, 
and other sources of high cost credit.
    We think the law is absolutely clear. The Treasury has the 
mandate to provide access to an account at a financial 
institution at reasonable cost to all recipients. That's what 
the law says, that's what Congress said when it adopted the 
DCIA.
    But I'm afraid that the establishment of the ETA, as good 
as it is, does not fulfill Treasury's obligations under the 
law.
    I've run out of time. I don't want to see that stick, so I 
will stop there.
    Chairwoman Kelly. You still have a little time if you want 
to take it.
    Ms. Saunders. I've supplied you with lots of paper, and if 
you have any questions, I'd be glad to answer them.
    [The prepared statement of Margot Saunders can be found on 
page 52 in the appendix.]
    Chairwoman Kelly. Thank you very much. We appreciate your 
testimony.
    I'd like to begin the questioning actually by utilizing 
your testimony and addressing Mr. Carrion.
    Ms. Saunders raised the issue of banks partnering in with 
check-cashers in which a Federal benefit is electronically 
transmitted to a bank, and then the beneficiary withdraws the 
benefit at a check-casher.
    Does Banco Popular have a product like this?
    Mr. Carrion. No, we don't. We're aware that is done, but we 
don't have that product.
    Chairwoman Kelly. Would that be a helpful thing?
    Mr. Carrion. What I think would be helpful is to take 
advantage of the fact that there are 10,000 locations where 
these accounts could be opened--ETA or similar type of 
account--could be opened.
    And I would use that infrastructure and I would bring them 
into the discussion rather than leave them out.
    Chairwoman Kelly. You'd like to see us bring the check-
cashing industry into the ETA account system?
    Mr. Carrion. Yes, I would.
    Chairwoman Kelly. If I understand you correctly.
    Ms. Saunders suggests that we should then, if we were to do 
that, subject the check cashing industry to Federal regulation 
in order to increase that usage and also to make sure that 
everything works properly. Do you agree with that?
    Mr. Carrion. Far be it from me to request Federal 
regulation of anything, but I would say that insofar as the 
specifications for the product that is to be offered should be 
mandated by the Treasury in the same way that the 
specifications for the ETA product through banks was mandated 
by Treasury, and that means inevitably regulating the costs and 
the revenues that are associated with that product.
    Chairwoman Kelly. Well, as you probably know in New York, 
the check-cashers are pretty heavily regulated.
    Mr. Carrion. Yes, they are.
    Chairwoman Kelly. It's one of the States where we do have 
regulation on the check cashing industry, and it does work.
    I'm wondering, though, with regard to that, what 
improvements you would like to suggest to the ETA program 
itself?
    Mr. Carrion. Well, as I mention in my testimony, I think 
the main factor of our success in Puerto Rico, and we've also 
had success in the United States, but our main factor in Puerto 
Rico has been the fact that we own and operate the ATM network, 
and that we have really not charged for access to that network. 
I think that is a big part.
    Obviously, the outreach programs and the communications and 
education associated with those programs have been a part of 
our history and it's something that we continue to do, and that 
it has been a large part of our success here in the States 
where we are actually in those communities and we do spend a 
lot of time and resources on the outreach.
    Chairwoman Kelly. You mentioned that you thought a 
voluntary agreement could be reached with the networks?
    Do you think it could work?
    What kind of a process or structure do you think you would 
envision there?
    Mr. Carrion. There are two major and several regional ATM 
networks, and they're all owned by banks. I think the fact is 
that we are moving away from the paper-based system which 
imposes higher costs on the banking system and moving toward an 
electronic system which essentially has a very low marginal 
cost associated with it.
    I think this would be very positive and convince the 
networks to do it.
    There is also using the Community Reinvestment Act (CRA), 
these kinds of things, to stimulate this kind of activity. I 
think it would be helpful, as well.
    Chairwoman Kelly. I'd like both of you, just quickly, to 
answer what issues you think you would like to see the GAO 
review and what data you think that it would be helpful to have 
them determine so that we can get a better handle on this 
situation.
    Let me just ask both of you that question.
    Ms. Saunders. I think there is still some controversy over 
how many unbanked Federal recipients there are. And I think 
actually clarifying that question would be helpful.
    But you've already asked that and I think that's the most 
important question.
    I would like to find out how many check-cashers and 
alternative service providers actually have established these 
relationships. And if we're talking about a few thousand, then 
I don't need to spend all my time worring about it.
    But if we're talking about tens of thousands, as we 
believe, then it becomes an altogether different matter, so I 
think that's the primary other question.
    We have an alternative way that we have long proposed to 
Treasury to address this problem, and I don't know if the 
efficacy of that proposal is something that might be within 
GAO's purview.
    But if I could explain it, you might be interested.
    Chairwoman Kelly. Well, I think that's something that the 
subcommittee and I would be very interested in talking with you 
about it later, and we could perhaps develop something for GAO.
    I have run out of time, but I think, Mr. Carrion, perhaps 
with the indulgence of my colleague, perhaps he would be 
willing to allow you to answer that question also.
    Mr. Carrion. Well, I think you've all proposed the right 
questions. I would look at the difference in the profile in 
terms of socioeconomic profile, ethnic profile of recipients 
that are currently signed up for the ETA and those that are not 
signed up, and look at the difference amongst them.
    And of course, our database is open for whatever help we 
can provide in this matter.
    Chairwoman Kelly. Thank you very much.
    Mr. Gutierrez.
    Mr. Gutierrez. Thank you. Well, I just want to go over some 
things because, as I understand it, Banco Popular of Puerto 
Rico currently has more than 4,000 ETAs. The approximate number 
of ETAs opened in my home State of Illinois is 500, and that 
includes 40 banks in Illinois that currently provide these 
accounts to consumers.
    Now this is only 500 accounts opened and there are 12.3 
million people in Illinois, compared to 3.8 million in Puerto 
Rico. Of those 12.3 million, almost 2 million are Social 
Security recipients and nearly 1 million are recipients of 
Veterans Administration benefits.
    I guess we have a lot. I simply raise the issue just to 
compare a State to financial institutions to a population which 
is \1/3\ the population with many more people participating and 
yet such a higher rate. So I think Mr. Carrion, if you would 
open up your books to us in terms of showing us who it is 
that's getting engaged and maybe, you know, the education. 
Sometimes I can get a little sensitive.
    I know that technology and fear of technology, and 
something that has nothing to do particularly with education is 
that I have a Bachelor's degree, but my daughter who is in 
seventh grade uses the computer. I always think it's going to 
break down on me.
    Chairwoman Kelly. My husband can't turn one on.
    Mr. Gutierrez. You know, so I mean just technology, 
education, understanding and anything that you have insight.
    I think also it's important to understand, given my own 
personal experience, because I think Mr. Carrion has explained 
why his program works, it's because they go out into the 
community and they actually do the outreach.
    You know, we don't have a CRA problem with Banco Popular, 
because Banco Popular is opening and expanding branches 
throughout Chicago, Houston, in Florida, in New Jersey, in 
areas where, quite honestly, before were under-served 
communities.
    I think part of the solution here is to get the 600 
financial institutions that are already in the program, 
congratulate them, give them incentives and then figure out how 
we get the other 9400 FDIC-insured institutions to do what 
Banco Popular has already done in terms of doing that.
    And I would just like to say that part of, I think, making 
this work--and I may be wrong, and once we get the information 
about just who it is who is signing up and who isn't signing 
up, Madam Chairman, and you and I will talk about that in terms 
of their education level, in terms of their social standing--is 
trust that people have.
    I have a feeling that a lot of people are staying away 
because they would rather still have that piece of paper in 
their hand at the end of the month, because they don't trust 
the financial institution to take that piece of paper away from 
them.
    And so we may have to gear ourselves especially to--you 
know, we're talking about Veterans, we're talking about Social 
Security recipients. They tend to be older. They come from a 
different time. And maybe we should examine how it is, trust.
    Because I know one of the things that, if you were in 
Puerto Rico, when you think about Puerto Rico and you think of 
the different icons of the Puerto Rican society and culture, 
and I'm sure the resident commissioner will share on this, is 
that when my mom and dad went from Puerto Rico to Chicago, and 
they saw Banco Popular, they went there.
    They went there because they saw it as an institution that 
they knew and had learned about and trusted. And so I think 
that's part of the success that I think Mr. Carrion has been 
very good about not telling us, because I'm sure he's very 
proud of it.
    But I'll tell you that's why I think part of the reason 
Banco Popular is part of the society and if it's part of the 
society and the makeup of the society in terms of financial, in 
terms of philanthropic and other kinds of endeavors and it's 
part of the fabric of a society, then people tend to sign up.
    That's why I think people sign up.
    Thank you.
    Chairwoman Kelly. Thank you very much.
    I would like to go now to Mr. Moore.
    Mr. Moore, thank you for joining us. Have you any 
questions?
    Mr. Moore. I have no questions. I hate to come into a 
hearing late. Not hear what's gone before. Madam Chairman, 
thank you for the invitation for questions. I apologize for 
coming in late. I had another hearing earlier and I don't like 
to come into hearings in the middle of a hearing and then ask 
questions that may have been asked, so thank you very much.
    Chairwoman Kelly. I'm holding the record open for 30 days, 
should you have some.
    Mr. Tiberi.
    Mr. Tiberi. Ditto.
    Chairwoman Kelly. Thank you both.
    Mr. Acevedo-Vila do you have anything you would like to 
say?
    Mr. Acevedo-Vila. I just have one question and one comment. 
Welcome Mr. Carrion and Ms. Saunders.
    As Louis just said, Banco Popular is part of the Puerto 
Rican society. It's my bank. I've been using this for the last 
50 years. I have never seen a paycheck for the last 10 years, 
and now I don't even issue checks anymore, because I pay almost 
everything through the internet. So it's really a success 
story.
    But I have a question. You point out the fact that you 
don't charge customers when they use ATMs because you own them. 
But, other banks have ATMs in Puerto Rico, don't they?
    Mr. Carrion. Yes.
    Mr. Acevedo-Vila. And they don't charge either, because 
they are following you?
    Mr. Carrion. Yes.
    Mr. Acevedo-Vila. So that's also very important.
    I live half of the time here, half of the time in Puerto 
Rico, and I'm shocked whenever I go here and have to use any 
card, and they charge me $1 or $1.50.
    In Puerto Rico, even if you go using this one, to another 
one that is not owned by Banco Popular, they don't charge you.
    Why? Because they have basically established the lead, and 
everybody's following.
    Chairwoman Kelly. Thank you very much.
    I must say that I am very impressed with what Banco Popular 
has been able to do in this regard, and we do thank you for 
taking your valuable time, Mr. Carrion.
    And Ms. Saunders, also, I know you are a busy woman.
    We thank both of you.
    If there are no more questions then, the Chair notes that 
some Members may have additional questions, and as I stated 
before, they may wish to submit them in writing, so without 
objection, the hearing record is going to remain open for 30 
days.
    The second panel is now excused with the subcommittee's 
great appreciation for your time.
    And this hearing is adjourned.
    Mr. Carrion. Thank you, Madam Chair.
    [Whereupon, the hearing was adjourned.]


                            A P P E N D I X



                             June 20, 2001


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