By JANE BRYANT QUINN

Thank you, Chief Petty Officer Zeno F. Brown USN Ret., in Raymore, Mo. John Hawke Jr., the U.S. Treasury's undersecretary for domestic finance, thanks you, too. You alerted us both to something that the Defense Department shouldn't be doing: It has been unfairly muscling some of its retirees.

Your personal issue is military pension checks, but the story is bigger than that. It also affects people receiving Social Security, Supplemental Security Income, federal disability, veterans benefits and federal checks to vendors everything but tax-refund checks.

The government hopes to persuade everyone who's still getting paid by check to switch to direct deposit, instead. A direct deposit is an electronic transfer of money, from the Treasury into your bank account. The government would like you to switch by Jan. 1. But you won't be required to comply. If you love paper checks, for any reason, you can keep them, Hawke says.

That was news to Zeno Brown. In May, he got a letter from the Defense Finance and Accounting Service about his monthly retirement check. It said, "Please be advised that effective Jan. 1, 1999, your paycheck will be held, unless you enroll in direct deposit." The military was threatening not to pay him what was owed.

That letter came to me and I faxed it to the Treasury, which scrambled its financial troops. "This is completely inaccurate," a Treasury spokesperson says. "The Treasury has no plan to deny people checks, for any reason."

It's against the law to do so. The government can't withhold benefits that are legally owed, officials say.

A private company, Western Union, has also been telling people erroneously that their federal checks will stop on Jan. 1 unless they switch to direct deposit. Western Union has an interest in your thinking so. It's selling an account called Benefits Quick Cash to handle federal transfers.

The Treasury is forcing Western Union to correct the error. The company is mailing a corrections notice to some 9,000 people who signed up for Benefits Quick Cash. The notice says that Western Union was wrong, and offers the customers their money back.

As a practical matter, direct deposit has a lot of advantages. No one steals your check from your mailbox. You don't have to get someone to cash it. In the rare event that a deposit goes astray, it can generally be tracked within 24 hours. You don't have to wait for a missing check to be replaced.

At present, Social Security officially requires new beneficiaries with bank accounts to accept direct deposit. If they absolutely refuse, however, Social Security has to say OK. It can't withhold their checks.

Social Security will be taking a softer stance after July, when the Treasury publishes its new regulations on direct deposit, Hawke says. The regs are going to send the message loud and clear: If you don't want direct deposit, you don't have to have it.

Once the regs are out, anyone who hates direct deposit can ask Social Security to restore his or her paper checks.

This brouhaha began with a federal law on direct deposit, passed in 1996. It mandated electronic transfers by Jan. 1, 1999. For people who don't have bank accounts, the government is arranging for a new class of electronic accounts to become available by mid-1999.

Despite the mandate, Hawke says, the government can't threaten to withhold checks. "We hope to reach people by rational persuasion, not intimidation," he says. He adds that the two largest federal agencies, Social Security and Veterans Affairs, are solidly on board.

Hawke says that Treasury officials met with the Defense Department and Western Union some time ago, to tell them that direct deposit was going to be optional. The tough line taken on Western Union should help get the message out that there's a price to pay, if businesses scare people about their checks.

Western Union's general counsel Adam Coyle says that "to our understanding, we met all Treasury requirements. ... We are not trying to mislead anyone. It has been an evolving process."

The Defense Department believes it's complying with the law, says spokesperson John Barber. "But we'll do what the Treasury tells us to," he adds. "If it means retracting this at some point, we will."

So thanks again, Zeno Brown. Your quick response put the Defense Department on the right track, faster than would otherwise have been the case.

I favor direct deposit. But Hawke has promised that you'll still be able to get paper checks if you want them, and I believe him.

Finding lost shareholders

What if you own securities you've forgotten about? You're not getting dividend payments because the company lacks a good address.

You're probably easy to find especially through a computer database. But the company never bothers to look.

The Securities and Exchange Commission has taken a first step toward breaking this logjam. The first step involves transfer agents who transmit interest, dividends and stock distributions from corporations to their bondholders and stockholders.

People inevitably get lost. Sometimes it's your fault: You move without leaving a forwarding address. Sometimes it's the fault of the transfer agent, who might mishandle your address. Either way, a dividend check goes back to the agent, stamped "addressee unknown."

The SEC believes that transfer agents are holding some 3 million lost accounts, with a value exceeding $450 million. Each year, an additional 250,000 securities holders go missing.

When checks aren't cashed, the corporation keeps the money for anywhere from two to seven years, depending on your state. Then it goes to the state's unclaimed property office. If the missing owner ever turns up, he or she gets the payment but not any interest that the money earned.

Last Dec. 7, the SEC adopted a rule to help track lost accounts worth $25 and up. Under the rule, transfer agents have to conduct two searches of a national database, for the name or Social Security number of a lost security holder. The searches have to be roughly a year apart. With this simple step, some 60 percent of the checks can probably be delivered, the SEC says.

But there's a great big hole in this rule. It doesn't affect the brokerage firms. Stockbrokers hold the vast majority of shares for customers. Some of these customers are lost, but brokers aren't required to search for them.

An SEC official says brokers weren't included because the original proposal focused only on transfer agents and there wasn't much comment about brokers.

Syndicated columnist Jane Bryant Quinn can be reached in care of the Washington Post Writers Group, 1150 15th St., Washington D.C. 20071-9200.

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