Are you receiving payments or benefits from the federal government in the form of paper checks? The Treasury wants to switch you to "direct deposit." With direct payments, the money moves into your bank account electronically.

We're talking here about Social Security, Supplemental Security Income (for low-income seniors), disability, veterans benefits, federal pensions, vendor payments--in fact, everything but tax-refund checks.

A switch to direct deposit won't be mandatory, as was originally feared by advocates for older people and low-income consumers. But it will be strongly encouraged.

The government hopes for a clean transition into this new electronic world. Banks, check cashers and similar institutions will be offering special accounts to people who don't already have a banking relationship.

But there's going to be a lot of confusion. Some money handlers will inevitably misinform people about the choices they can make.

Already, Western Union--which is peddling an electronic account--has been dishing out misleading information. Company officials say it was an innocent error. But I cite it as a good example of what can occur.

Before I go further with Western Union's story, let me tell you what direct deposit will probably look like.

Starting Jan. 1, everyone who is currently getting paper checks from the government--and has a bank account--will be encouraged to switch.

The vast majority of federal checks are already paid this way. Social Security, for example, direct-deposits more than 71 percent of the old-age payments it sends out.

Direct deposit has a lot of advantages. No one steals your check from your mailbox. You don't have to mail or carry your check to the bank, or get someone to cash it for you. In the rare event that a deposit goes astray, it can generally be tracked within 24 hours. You don't have to wait 10 days for a missing check to be replaced.

If you love paper checks, however, you will not be forced to accept direct deposit. You can excuse yourself for any reason, says John D. Hawke Jr., the Treasury's undersecretary for domestic finance.

Say, for example, that you're on Social Security and get a notice asking if you want to switch to direct deposit. If you don't return the notice, your checks will continue as usual, Hawke says. Payments won't be interrupted.

What about the estimated 10 million people who get government benefits but don't have a bank account? They'll be offered an optional electronic transfer account, or ETA.

The Treasury is still considering how to structure ETAs. As currently conceived, they'll be federally insured accounts, with no minimum balance, costing somewhere around $3 a month. Any bank, savings and loan or credit union could offer them. If you sign up, your federal payment would be deposited there.

You'd get three or four free withdrawals every month, through a human teller or automated teller machine, plus unlimited use of your ATM card at terminals in supermarkets and other stores. You could not write checks, although banks might offer checking at an additional fee.

ETAs would have special protection from creditors. By law, creditors can't seize Social Security checks, SSI, Railroad Retirement or veterans benefits.

Old-fashioned paper checks would still be attractive, however, if a retailer or relative cashes them free.

This brings me back to Western Union's new program, called Benefits Quick Cash. Under it, your federal check is sent to a bank electronically, then switched to Western Union's account. You can retrieve your money from any Western Union outlet, paying $7.50 for each withdrawal.

That's a lot more expensive than ETA accounts are going to be. What's more, your account won't have the same protection against creditors and won't be federally insured.

Western Union's telephone salespeople have been telling potential customers that they must sign up for direct deposit or else their federal checks will stop next Jan. 1. False, false, false.

"That's not in their script," says Western Union's Alexandra Hoy, director of business development. "We'll go back and work with it immediately."

Western Union's brochures also say that federal payments "must" be distributed electronically starting next year. Also not true.

Hoy says that the 1996 law originally mandated direct deposit but that the Treasury's view of the law has changed. Western Union's brochures will be modified. Hawke is sending out a news release warning financial companies not to mislead the public.

Many more marketing problems are going to arise. The Treasury is preparing a consumer-education program and counting on consumer groups to pitch in and help.