There was action on both sides of prepaid debit cards this quarter. The Treasury Department Financial Management Service has amended its regulation governing the use of the Automated Clearing House system by federal agencies to permit the delivery of federal payments to prepaid debit cards that meet certain criteria. To be eligible to receive federal payments, a card must provide pass-through deposit or share insurance and the card account must not have any feature that triggers automatic repayment from the card account. The interim rule was effective January 21, 2011, and the deadline for filing comments has been extended to April 25, 2011.

Separately, the Treasury Department announced that it will allow low- and moderate-income individuals to receive tax refunds via prepaid card this year for the first time. Letters will be sent to 600,000 individuals inviting them to consider activating a prepaid card in time to have their tax refund direct deposited onto the card. The Treasury Department also began a companion pilot project to encourage thousands of current and potential payroll card users to direct deposit their tax refund onto existing payroll cards.