Farewell, Old Cheque

A 149-year tradition in Government of Canada cheques will end effective in 2016 with the substitution of paper payments with prepaid cards, officials say.

The Receiver General explained anyone receiving a federal cheque for tax refunds, pension or benefits payments will “automatically be switched to prepaid cards unless they qualify for and register as an exception” effective April 1, 2016. Authorities told Blacklock’s  that “some exceptions may be required for individuals who live in a remote location or those who do not have a bank account”; “Various solutions are being examined”.

Cabinet earlier set the same April Fool’s deadline for mandating direct electronic deposits as a cost-savings measure. Direct deposits cost 13¢ per transaction compared to 82¢ to cut a paper cheque.

“The question is, are we changing the nature of cash? The answer is yes,” said Ken Whitehurst, executive director of the Consumers Council of Canada. “There are an enormous number of privacy issues that go with that, and it is hard to see how the government could account for them all.”

The Department of Public Works said in a notice it will consult widely on the changeover. It would see banks, credit unions and other institutions issue, activate and load prepaid cards for people expecting a federal payment: “We will engage with Canadians.”

Whitehurst said the Consumers Council is concerned “whether or not there has been much evaluation of the unintended consequences of this.”

“Government cheques today are pretty negotiable, and you do have people for a variety of reasons who will not walk into a bank,” said Whitehurst. “A lot of people will like the convenience, but if the card is the front-end to an account, there are learning curve issues that could be considerable for others. How will they react to it?”

The Receiver General, the federal office that manages all money transactions between Canadians and the treasury, issues more than 300 million payments each year, by official estimate. Some 77 percent are currently made by direct deposit, with other payments handled through wire transfer and paper cheque.

“The use and prevalence of paper cheques will get smaller and smaller,” said Patrick Culhane, president and CEO of the Canadian Payroll Association; “Canada makes more use of technology in payroll than any other country. Where the government is headed is frankly the right move.”

Culhane cited association polling data that found of 2800 employees surveyed, 97 percent are paid electronically; 83 percent “had and liked” online pay statements; and 84 percent “had and liked” receiving electronic T4 statements for tax purposes.

“I made a presentation to Canada Revenue Agency and said, ‘These numbers are real,’” Culhane said.

Canada Revenue has urged taxpayers to file their annual returns electronically, estimating it saves $3.50 on every e-file. Eighty percent of last year’s returns were filed by internet with more than a million T1 e-forms filed on a single day, April 30 – the largest in history.

The tax department earlier closed in-person counter service at 26 offices; levied a $25 “disincentive fee” on tax preparers who file more than 10 paper returns; and in 2012 cancelled its Telefile system that permitted the filing of simple returns by telephone. Some 279,000 taxpayers, mostly seniors, had used the Telefile system.

By Tom Korski

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