Some 51 million Americans hold a bank account, but also rely on alternative financial services like payday lending, pawn shops, tax refund shops, rent-to-own agreements, and other services with fees that are considered high, according to a survey by the Federal Deposit Insurance Corp. released in Sept. 2012. Another 17 million U.S. adults don’t have access to any traditional banking services.
Within that segment of the population, there are plenty of angles and ground for reporters to cover.
In more than 70 cities across the U.S., officials have partnered with banks and nonprofit partners to offer low-cost or no-cost banking services to unbanked consumers through the Bank On movement. Regulators also have encouraged banks to court the unbanked in recent years, but most efforts have fallen short. Most Bank On movements also focus on financial literacy outreach.
The FDIC, The Federal Reserve and other government agencies have thrown their weight behind the movement because families with access to traditional financial services are better able to save for the future, conduct financial transactions and access credit on fair and affordable terms. There’s a plethora of available data here.
A great place to start is to check the most recent FDIC Survey of Unbanked and Underbanked Households to find local data on how many consumers have access to traditional banking services in your community (See Appendix D –MSA Tables). The report is also full of detailed demographic data, including regional information.
What’s going on in your community? Is there an active Bank On movement? If it’s a newer movement, it’s a great idea to track the movement’s progress going forward. If the movement’s been around for several years, reporters have an opportunity to take a look at the program’s impact thus far.
Erin Williams, a producer with St. Louis Public Radio, recently reported on the city’s newly launched Bank On program. She says reporters should move beyond common stereotypes and beliefs about the unbanked.
The reasons that households don’t have bank accounts can vary widely. Some households feel that they don’t have enough money to open an account, while others have a poor credit history and may have trouble re-entering the financial system. Consumers from abroad may be leery of banks if they’ve emigrated from a country with an unstable banking system.
Williams also suggests reporting on the Bank On movement through the stories of consumers who have successfully opened accounts and tracking their household balance sheets over a period of time. Has the family rebuilt their savings? Is the account affordable? How has it changed their financial habits? Has having a banking account changed the household’s access to affordable credit products?
“You can find out if people are really taking the advice to heart,” she said. “The idea is that they are trying to curb people from going to check-cashing services with the hope that they can build something greater.”
Another angle to explore is that as more banks roll out fees for checking accounts, it’s become increasingly costly for some low-income households to keep their accounts open.
Reporters also should take a close look at which banks are reaching out to those without bank accounts in their communities. Many Bank On programs have official partner banks. What products and services are those banks offering consumers who don’t have access to traditional checking and savings products? Are they also offering credit products like payday loans or overdraft checking to Bank On customers? Are the products affordable and fair to consumers that are entering the banking system for the first time, or that have struggled with banking services in the past?
Some consumer advocacy groups like the Center for Responsible Lending have expressed alarm that some banks, are rolling out payday lending services to court the unbanked. Wells Fargo, US Bank, Regions Financial, Fifth Third, GuarantyBank and Bank of Oklahoma all offer payday-type products.
Payday advances are typically unsecured, shorter-term loans under $500 that are due on a borrower’s next payday. The average fee is about $15 per $100 borrowed over a repayment period of 2 to 4 weeks. But payday borrowersoften can’t repay the loans and take out new loans to pay off the old loans, or roll the loans from payday to payday. A $100 payday loan with a $15 fee can quickly balloon into more than $390 in fees over a one-year repayment period.
The FDIC and the Consumer Financial Protection Bureau also are taking a closer look at these payday-style credit services. Reporters taking a look at the unbanked market can scrutinize the banks offering payday-style loans in their markets.
Most larger banks aren’t offering payday products, but they are pushing into lines of business traditionally offered by alternative financial services providers. Many are rolling out pre-paid debit cards, check cashing services and wire transfers to court the unbanked. What products are the banks in your area offering?
Don’t forget to check out non-bank players like Walmart. The retail giant also offers a line of products marketed to those without access to traditional banking services.