655 15TH ST, NW, SUITE 700 WASHINGTON, DC 20005 TELEPHONE: 202/452-8444 FAX: 202/429-4519

January 6, 1999

Cynthia L. Johnson
Director, Cash Management Policy and Planning Division
Financial Management Service
U.S. Department of the Treasury
Room 420
401 14^th Street, SW
Washington, DC 20227

Dear Ms. Johnson:

Thank you for the opportunity to comment regarding EFT '99 and the design of the Electronic Transfer Account (ETA^SM) on behalf of the 1,500 companies represented by the Food Marketing Institute.

The Food Marketing Institute is a non-profit association conducting programs in research, education, industry relations and public affairs on behalf of our 1,500 members including their subsidiaries - food retailers and wholesalers and their customers in the United States and around the world. FMI's domestic member companies operate approximately half of all retail food stores with a combined annual sales volume of $220 billion - more than half of all grocery sales in the United States. Our retail membership is composed of large multi-store chains, small regional firms and independent supermarkets.

With industry-wide sales of over $400 billion, the nation's supermarkets clearly have a vital stake in financial services issues that may affect the type of payment tendered by our customers at checkout. As you may know, 25 percent of the federal benefits recipients that do not have banking relationships currently cash their checks at supermarkets. We value these customers and we are pleased to be able to offer "financial services" as a customer service at a very minimal charge.

Our industry appreciates Treasury's willingness to listen to and address some of the concerns we raised previously. Several of the ETA^SM features you proposed in response to our remarks will significantly improve the account in a manner that will make it easier to use and thereby more attractive to consumers.

In this regard, we commend the incorporation of the added protection of a personal identification number (PIN) into the design of the ETA^SM and the determination that any electronic access of the account must be via an on-line electronic access card only.

Moreover, we are very pleased that Treasury has decided to include point-of-sale (POS) transactions as a proposed feature of an ETA^SM. POS transactions are an important way to increase consumer convenience and choice.

In addition to the positive design features you have already incorporated, we encourage you to permit those arrangements between financial institutions and non-financial institutions that will be helpful to consumers. We understand and support the requirement that all funds be held in insured depository accounts. Additionally, we understand Treasury's fear that some non-financial institutions may charge customers up to 20 percent of the value of a check for check cashing or other services. We want to assure you, however, that for each negative non-bank relationship, there are a multitude of positive ones that are less expensive for customers than an existing bank account or even the proposed ETA^SM account. We hope Treasury will take a look at some of these existing and future non-bank relationships and services, particularly in urban supermarkets.

Additionally, Treasury apparently intends to limit the use of ETA^SM access cards to ATM's owned by a financial institution. We strongly oppose any limitation of that type. Many retailers own and operate ATM terminals in their stores. Limiting the use of ETA^SM access cards to certain ATM's may confuse ETA^SM account holders, thereby eroding their confidence in electronic banking.

The September 25, 1998 final rule with regard to Management of Federal Agency Disbursements defines Federal/State EBT Programs and outlines Treasury's intention to work with states, where requested to do so, to implement joint Federal/State EBT programs. We feel that further investigation is needed in this area, especially with regard to EBT access cards that hold both federal and state benefits because the joint program raises several issues that have not yet been addressed, such as: How will program eligibility of purchases be determined (i.e., food stamps and WIC)? Will retailers simply see the benefits as "cash?" If so, how will retailers and states designate purchases that are protected or exempt from Regulation E (in the case of EBT adjustments)? How will portability of benefits be ensured? How will performance standards for contractors of joint programs be defined and enforced?

With regard to POS withdrawals, the proposed rule states that there will be "no additional fees for these transactions imposed by the financial institution providing the ETA.^SM" 63 Fed. Reg. 64820, 64824 (Nov. 23, 1998). The statement suggests that financial institutions would be prevented from charging additional fees to either ETA^SM account holders or merchants. In light of the compensation Treasury will provide to financial institutions to establish ETA^SM accounts, we agree that financial institutions should not be allowed to assess additional fees to either

ETA^SM account holders or merchants. Merchants should not be forced to subsidize financial institutions by paying additional fees on ETA^SM accounts.

Thank you for your consideration. We look forward to continuing to work with you on the implementation of EFT '99, and would be pleased to discuss any of these topics with you in more depth.

Sincerely,

Timothy Hammonds
President and Chief Executive Officer

cc: Donald V. Hammond, Fiscal Assistant Secretary
Richard Gregg, Commissioner, Financial Management Service
Michael Barr, DAS, Community Development Policy

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