There’s a difference between and a hand out and a hand up. The Cities for Financial Empowerment Fund recently announced Bank On National Account Standards, that seek to rescue the unbanked from unsafe bank products and payday lenders.
"People need low-cost, low-fee, no-overdraft financial products," says Linda Sherry, Consumer Action’s national director of priorities.
At the time of the announcement of the standards last month, Jonathan Mintz, president and CEO of the Cities for Financial Empowerment Fund said, "There are over 65 million adults outside the financial services mainstream, spending billions of dollars on routine transactions like paying bills and depositing and accessing their paychecks."
In fact, nearly 8% of households in this country don’t have a checking or a savings account, an additional 20% of households are underbanked, meaning that they use non-bank transaction or credit products that are in many cases are more costly, according to the FDIC’s National Survey of Unbanked and Underbanked Household, which periodically explores households’ uses of financial services.
The news is worse for Black, Hispanic, low-income households, and the disabled. The unbanked percentages are significantly higher, and in some cases, almost double the national averages.
The new initiatives are an attempt to level the playing field. Some of the core features include offering accounts with a $25 or less opening deposit, no inactivity fees, monthly fees if not waivable, $5 or less; if waivable, $10 or less and offer at least two options to waive fee with a single transaction (like direct deposit with no minimum deposit, online bill pay or debit card purchase). These accounts would have no overdraft or non-sufficient funds fees, and more. See the Bank On website.
Some big banks are on board. According to the Cities for Financial Empowerment (CFE), nationally, Chase Liquid account, Citi’s Access Account and Bank of America’s SafeBalance Banking account all meet these new national standards. Wells Fargo has committed to expand their EasyPay Card to meet the Standards by June 2016. Local Bank On coalitions will be able to use these new standards to identify other local and regional financial institutions, including both banks and credit unions, that offer accounts that meet the standards, or engage institutions to encourage them to do so.
"The new standards are a good example of private-public partnerships that can improve the financial lives of consumers. Through the initiative, the corporate banks partner with Bank On collations (locally led partnerships between public officials and community groups), the CFE Fund and the FDIC, to offer responsible products and services to meet all customers’ needs," says Sherry.
In remarks during the announcement of the launch FDIC Chairman Martin J. Gruenberg highlighted why access to banking is important. "Increasing households’ access to safe, secure and affordable banking services improves their ability to build assets and create wealth, makes them less susceptible to discriminatory or predatory lending practices and can provide a financial safety net against unforeseen circumstances. In addition, confidence in the banking system grows when more customers benefit from a banking relationship."
It’s not just the individuals who benefit, but communities too, as the economic activity of household increases with greater access to efficient and effective financial services. And the banks, no doubt couldn’t quibble with the possibility of 65 million new customers.
The CFE Fund also announced the opening of its Bank On Capacity Grant Fund, that will support the operations of existing and new local Bank On initiatives. The Capacity Grant Fund, which is supported by the JPMorgan Chase Foundation, will aid local coalitions’ efforts to partner with national, regional, and local financial institutions and other key partners to connect their unbanked and underbanked residents to safe and appropriate mainstream accounts.