IMPACT: Treasury to start Comerica deal to brand new bids after CPI report

Debit card system questioned

Introduction

The U.S. Treasury has decided to start thinking about employing a new merchant when a controversial cope with Comerica bank to issue debit cards to beneficiaries of federal programs expires in 2015.

Comerica posseses an exclusive agreement to issue Direct Express cards, which Treasury makes use of to provide Social Security as well as other advantageous assets to those who usually do not directlly deposit advantages into a banking account.

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Treasury chose to get fresh bids and start thinking about changing bank partners due to issues which were first raised publicly in a study the other day by the guts for Public Integrity, according to a couple with direct familiarity with the situation. They talked on condition of privacy to prevent souring their relationships with Treasury.

CPI stated that Comerica won the original deal in 2008 by providing to produce the cards free of charge to taxpayers. About couple of years later, Treasury quietly amended the agreement to incorporate tens of millions in brand brand new re payments to Comerica. The financial institution had complained it was having trouble profiting beneath the economic terms to which it originally consented.

Treasury’s inspector general, its separate, interior watchdog, is probing the offer. One core concern: Treasury did not give consideration to other banking institutions when it included the payment for Comerica. Comerica has gotten about $30 million in direct re payments from Treasury, relating to testimony at a congressional hearing. The total amount will increase as more likely individuals join Direct Express cards.

The offer additionally attracted scrutiny through the Senate Special Committee on Aging. At last week’s hearing, Democrats in the committee grilled Richard Gregg, Treasury’s Fiscal Assistant Secretary, in regards to the deal’s lack of transparency and available competition.

Treasury’s special contracts with banking institutions hardly ever are placed down for competitive bidding—especially whenever a course can be as new as Direct Express. A far more typical instance is Navy Cash, a method of stored-value cards and kiosks on vessels as well as other shut federal government places. JPMorgan was chosen to perform the scheduled system on a pilot foundation in 1999. The Wall Street behemoth still holds the contract, well worth approximately $18 million per after routine renegotiations and one “re-designation” by Treasury in 2003 year.

CPI discovered that Treasury has forced people to make use of Direct Express, also them to higher fees if it exposed. The report additionally detailed the Treasury’s choice to offer Comerica tens of vast amounts in compensation that has been not an element of the initial deal.

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