FEDS STIFF BANKS ON CREDIT CARDS.

Byline: Bill Hillburg Washington Bureau

WASHINGTON - The federal government's decision to issue credit cards to employees for official travel has spawned a mountain of bad debts and a small army of deadbeats, Congress was told Tuesday.

Rep. Stephen Horn, R-Lakewood, expressed outrage at the fact that, since the General Services Administration's SmartPay Travel credit card program was launched in 1998, military personnel and civilian employees have amassed more than $1.5 billion in overdue bills.

Horn, who chairs the Subcommittee on Government Efficiency, Financial Management and Intergovernmental Relations, took testimony from several federal agency officials as well as representatives of banks involved in the program.

Urging that reforms be enacted, Horn said, ``We want action, not a song and a dance that you are thinking about it.''

Under SmartPay, government employees and military personnel are issued government credit cards that are to be used only for official travel expenses. The personnel are responsible for paying the credit card bills and are then reimbursed by the government. All cards must be paid off in full each month.

The Department of Defense was the worst offender. Since 1998, military personnel and civilians employed by the department have piled up nearly $1.1 billion in bills that are at least 60 days overdue. The total includes $1.96 million in overdue SmartPay bills that were recorded in March of this year.

Bank of America and three other major lenders involved in the program have had to write off more than $65 million in unpaid SmartPay bills since 1998, including $50.1 million recorded by the Pentagon. Under the program, banks have to eat the losses once a debt is more than 200 days old.

Other agencies with high levels of employee bad debts included the departments of Transportation ($2.3 million in write-offs since 1998) and Justice ($2 million.).

Clifford A. Skelton, who administers the SmartPay operation for Bank of America testified that his company is currently writing off $2 million per month in bad government employee debts, with most of the losses coming from the 1.4 million card accounts the bank has with military personnel.

Jerry S. Hinton, a Pentagon finance official, said reforms are under way. He blamed many of the abuses on the fact that young military personnel have little experience in dealing with credit cards and personal finances. He said that reforms include closing the accounts of abusers and limiting access to travel cash via ATM machines.

Rep. Adam Putnam, R-Fla., a member of the subcommittee, questioned the wisdom of issuing government credit cards to millions of employees without any background checks.