So what's the hurdle? What's not to like about having a check arrive at the bank or credit union sooner than it would in your mail box, cutting the risk of having it stolen or misplaced and eliminating the chore of depositing it?

A Treasury study identified four major barriers that prevent federal benefit check recipients from switching to direct deposit:

- Emotion. The recipient is attached to the monthly ritual of the paper check.

- Inertia. The recipient is receptive to direct deposit, but needs motivation.

- Information. The recipient doesn't understand how direct deposit works.

- Mechanics. The recipient has no bank or credit union account.

"A major problem obviously, one we've been aware of from the beginning and are trying to address, is dealing with a fairly significant unbanked population in this country," McHale notes.

Treasury is piloting a debit card program in Illinois called Direct Express. This summer the department will conduct a customer satisfaction survey of people enrolled in that program. So far more than 2,600 individuals have signed up and Treasury expects to expand that in 2008.

"When we do inserts with paper checks--and we do inserts every third month promoting direct deposit--it's very frustrating because a lot of people phoning us at the call center are people without accounts. We really want to have a solution that's going to work for a lot more people."

In addition to issuing flyers about the debit card option, Treasury did a direct mailing to the Chicago area and some areas in rural Illinois.

The Direct Express contract with JP Morgan Chase is for calendar year 2007.

"That's for the pilot," McHale indicates. "That's not to say who will be the provider going forward. We're actually going to be going out and doing some queries to get a sense of who would be interested in working with us."

Treasury will definitely be reaching out to boomers and other new enrollees as they sign up for Social Security and SSI benefits in the years ahead.

Contrary to what may seem logical, that boomers would be more technology savvy and willing to sign up for direct deposit than their older parents, when Treasury measured interest in direct deposit across different age groups the boomers were actually not as receptive as their parents.

In fact, only 59% of boomers appear likely to elect direct deposit of Social Security compared to more than 80% of current recipients. The numbers are significant, since 77 million boomers are slated to start collecting Social Security in the coming years.

"That was a real wakeup call to us. We frankly thought we had the boomers sort of locked in," McHale says.

The number one reason appeared to be that their employer didn't offer it, so it was a new concept. McHale agrees credit unions may be in a good position to talk to sponsor employers and SEGs included in fields of membership about direct deposit of paychecks. That will not only bring more money into credit unions on a low-cost electronic basis, but will position the boomers to move seamlessly into Social Security direct deposit.

McHale points out tellers are in an excellent position to encourage direct deposit when a member hands a Social Security check over the counter. So Treasury is looking at best practices, in effect a competition among large, medium and small financial institutions. So far more than 60 credit unions have signed up. That best practice information will be shared with other credit unions and banks. Results will be announced July 24.

"We really want people to learn from what's working in other places," McHale stresses.

A positive move is the growth of low-cost and no-cost accounts at many financial institutions, with banks and credit unions reaching out to people in new ways.

Even so, some people "like to get those paper checks in their hands," McHale says. "Even if they have accounts, they are not as aware as we'd like them to be of the vulnerability of a paper check. We don't want to scare people, but at the same time we want them to understand that nine times out of 10, when we have a problem with a payment it's paper check related, not direct deposit."

She points out that when Hurricane Katrina hit, 85,000 people were scheduled to receive paper checks. Treasury had to scramble to find them. A lot of documentation had disappeared along with their houses.

[email protected]