Before the end of the year, the government plans to axe the use of paper checks when making Social Security, tax refunds, and other such payments for disbursements. This changes is coming about as a result of an executive order signed by President Donald Trump which calls for almost all payments coming in to and going out from executive departments to be transitioned to electronic fund transfer methods. The government plans to put this change into effect in less than four months.
The government says goodbye to paper checks — and that includes Social Security benefits
According to experts, shifting towards a digital approach in lieu of the “old fashioned” method of disbursements is probably a good idea in terms of security. Furthermore, at present, the vast majority of Social Security beneficiaries have already opted to receive their monthly benefit throughs means of a direct deposit.
Despite the number of Social Security beneficiaries who already receive their payments electronically, a change of this nature will still impact a significant number of people. Over 485,000 people still receive their benefits in the form of a paper check and a notable change like this could lead to some confusion or complications.
However, with the rise in check washing scams, switching over to electronic transfer methods can add additional security. Check washing occurs when a check is stolen and the payee and amount is erased from the check using chemicals and thereby granting the thief the freedom to write in another payee and amount. Social Security checks in particular are often targeted for this kind of scam. This is because “they go out at the same time each month to, generally, the same recipients, criminals are able to easily plan to steal them out of mailboxes,” according to Haywood Talcove, CEO of LexisNexis Risk Solutions Government.
What makes this type of crime even more frustrating is that it is difficult to track since checks take several days to clear. As result, when the victim finally becomes aware of the situation, it is near impossible to resolve, Talcove says.
According to a recent survey of financial institutions conducted by the Federal Reserve, “check fraud is second only to debit-card fraud in total attempted scams and monetary loss, accounting for 30% of all fraud losses.” Each year in America, fraudulent deposits amount to hundreds of millions of dollars.
“In the world that we live in today, it is just much, much safer to electronically transfer that payment into an account, as opposed to mailing it,” Talcove stated.
Will this transition be challenging?
Currently, there is only a miniscule percentage of individuals who still receive their benefits in check form — with the vast majority of over 68 million (over 99%) beneficiaries receiving their benefits via direct deposit. The close to half a million who still receive checks in the mail are typically from the older cohort of beneficiaries. Alternatively, they may be unbanked or are unable to access the internet.
Making a switch to electronic transfer methods could prove to be quite difficult for this cohort who are already vulnerable to begin with. The Trump Administration has, however, stated that exceptions will be made for “people without banking or electronic payment access and certain emergency payments.”
Another issue that could crop up with the change is if a beneficiary needs help from the Social Security Administration with this transition. The recent cutbacks at the agency at the behest of the Trump Administration’s so-called Department of Government Efficiency has left many field offices overwhelmed and understaffed due to increased levels of foot traffic.
Regardless of this, Talcove still believes that this transition is a worthwhile one. “I understand there’s two sides to this. An 83-year-old, any any change is hard for her,” he asserts. “On the other hand, if it’s part of a fraud scheme…there’s even more pain for your elderly mother, who now has to fill out other forms, get police reports and all that stuff, to be able to get her money back.”