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http://www.washingtonpost.com/
Not only are these Americans more vulnerable to high fees and interest rates, but they are also cut off from credit to buy a car or a home or pay for college, the report from the Federal Deposit Insurance Corp. said.
Released Wednesday, the study found that 821,000 households opted out of the banking system from 2009 to 2011 and that the so-called unbanked population grew to 8.2 percent of U.S. households.
That means that roughly 17 million adults are without a checking or savings account. Another 51 million adults have a bank account, but use pawnshops, payday lenders or rent-to-own services, the FDIC said. This underbanked population has grown from 18.2 percent to 20.1 percent of households nationwide.
The study also found that one in four households, or 28.3 percent, either had one or no bank account. A third of these households said they do not have enough money to open and fund an account. Minorities, the unemployed, young people and lower-income households are least likely to have accounts.
Stubbornly high unemployment and underemployment have placed millions of Americans in precarious financial positions, leaving them unable to absorb overdraft charges or minimum-balance fees.
In the past year alone, Wells Fargo, Capital One and SunTrust have alerted customers to pending fee hikes on checking accounts or have raised overdraft charges. Banks say service charges are needed to offset the loss of revenue from a cap on debit-card transaction fees imposed by the government.
“Banks need to have pricing and practices that consumers can trust and allow them to build wealth and have economic mobility,” said Deborah Goldstein, chief operating officer at the Center for Responsible Lending. “If the account fees will leave them worse off, then its going to be a challenge for people to use banking services.”
Banks say it is difficult to make money serving lower-income communities because the cost of managing their accounts outweighs the return.
“There has to be a recognition that there are costs to providing accounts and those costs have to be covered,” said Nessa Feddis, vice president and general counsel at the American Bankers Association. She estimated that it costs banks up to $300 a year to maintain a checking account because of expenses such as processing transactions.
National Community Reinvestment Coalition chief executive John Taylor argued that banks could make up some of that cost by the sheer volume of new accounts.
Feddis disagreed. “You can’t take a losing account and make it up in bulk,” she said. “You’re not going to spend money to lose money.”
Without access to traditional banks, Taylor said, Americans are susceptible to abusive practices at non-bank institutions and are likely to remain trapped in a vicious cycle of financial strain.
“A part of changing the condition of unbanked people is keeping them away from predatory lenders who keep them mired in debt,” he said. “One of the reasons you had all of these mortgage companies preying on low-income communities is because there were no options.”
A report from SNL Financial in April showed that banks have closed dozens of branches in neighborhoods with a median household income of $25,000 or less since 2007, shifting resources to areas where the median income is $100,000 or more.
“The [Community Reinvestment Act] has had a significant impact over the last 30 years, but did not contemplate some of the new abuses that we’re seeing and the way banking has changed,” Goldstein said. “But we’ve now seen financial reform that includes additional consumer protection.”
Congress passed the act in 1977 to address the shortage of credit available to low- and moderate-income neighborhoods. Consumer advocates, however, say that regulation has fallen short of ensuring that banks offer reasonably priced services.
The newly minted Consumer Financial Protection Bureau has jurisdiction over non-bank institutions and plans to weed out predatory practices. The agency reviews compliance with federal consumer financial laws such as the Fair Credit Act.
In the past year, a quarter of households have used at least one type of alternative financial service, such as a tax refund anticipation loan or money order, the FDIC study found. Some households, 7.5 percent, said they simply did not trust or feel comfortable dealing with banks. Another 6.6 percent said they could not open accounts because they lacked required identification or suffered from poor credit.
A growing number of consumers without bank accounts are turning to prepaid cards, with nearly 18 percent of households, up from 12 percent in 2009, reporting the use of such products.
Feddis of the banking association said prepaid cards are an innovative tool that banks could use to serve lower-income communities without incurring much cost.
“There are fewer ways to access the account, so there are fewer opportunities for fraud, which banks pay a lot to protect against,” she said.
More Americans opting out of banking system
By Danielle Douglas, Published: September 12
In the aftermath of one of the worst recessions in history, more Americans have limited or no interaction with banks, instead relying on check cashers and payday lenders to manage their finances, according to a new federal report.Not only are these Americans more vulnerable to high fees and interest rates, but they are also cut off from credit to buy a car or a home or pay for college, the report from the Federal Deposit Insurance Corp. said.
Released Wednesday, the study found that 821,000 households opted out of the banking system from 2009 to 2011 and that the so-called unbanked population grew to 8.2 percent of U.S. households.
That means that roughly 17 million adults are without a checking or savings account. Another 51 million adults have a bank account, but use pawnshops, payday lenders or rent-to-own services, the FDIC said. This underbanked population has grown from 18.2 percent to 20.1 percent of households nationwide.
The study also found that one in four households, or 28.3 percent, either had one or no bank account. A third of these households said they do not have enough money to open and fund an account. Minorities, the unemployed, young people and lower-income households are least likely to have accounts.
Stubbornly high unemployment and underemployment have placed millions of Americans in precarious financial positions, leaving them unable to absorb overdraft charges or minimum-balance fees.
In the past year alone, Wells Fargo, Capital One and SunTrust have alerted customers to pending fee hikes on checking accounts or have raised overdraft charges. Banks say service charges are needed to offset the loss of revenue from a cap on debit-card transaction fees imposed by the government.
“Banks need to have pricing and practices that consumers can trust and allow them to build wealth and have economic mobility,” said Deborah Goldstein, chief operating officer at the Center for Responsible Lending. “If the account fees will leave them worse off, then its going to be a challenge for people to use banking services.”
Banks say it is difficult to make money serving lower-income communities because the cost of managing their accounts outweighs the return.
“There has to be a recognition that there are costs to providing accounts and those costs have to be covered,” said Nessa Feddis, vice president and general counsel at the American Bankers Association. She estimated that it costs banks up to $300 a year to maintain a checking account because of expenses such as processing transactions.
National Community Reinvestment Coalition chief executive John Taylor argued that banks could make up some of that cost by the sheer volume of new accounts.
Feddis disagreed. “You can’t take a losing account and make it up in bulk,” she said. “You’re not going to spend money to lose money.”
Without access to traditional banks, Taylor said, Americans are susceptible to abusive practices at non-bank institutions and are likely to remain trapped in a vicious cycle of financial strain.
“A part of changing the condition of unbanked people is keeping them away from predatory lenders who keep them mired in debt,” he said. “One of the reasons you had all of these mortgage companies preying on low-income communities is because there were no options.”
A report from SNL Financial in April showed that banks have closed dozens of branches in neighborhoods with a median household income of $25,000 or less since 2007, shifting resources to areas where the median income is $100,000 or more.
“The [Community Reinvestment Act] has had a significant impact over the last 30 years, but did not contemplate some of the new abuses that we’re seeing and the way banking has changed,” Goldstein said. “But we’ve now seen financial reform that includes additional consumer protection.”
Congress passed the act in 1977 to address the shortage of credit available to low- and moderate-income neighborhoods. Consumer advocates, however, say that regulation has fallen short of ensuring that banks offer reasonably priced services.
The newly minted Consumer Financial Protection Bureau has jurisdiction over non-bank institutions and plans to weed out predatory practices. The agency reviews compliance with federal consumer financial laws such as the Fair Credit Act.
In the past year, a quarter of households have used at least one type of alternative financial service, such as a tax refund anticipation loan or money order, the FDIC study found. Some households, 7.5 percent, said they simply did not trust or feel comfortable dealing with banks. Another 6.6 percent said they could not open accounts because they lacked required identification or suffered from poor credit.
A growing number of consumers without bank accounts are turning to prepaid cards, with nearly 18 percent of households, up from 12 percent in 2009, reporting the use of such products.
Feddis of the banking association said prepaid cards are an innovative tool that banks could use to serve lower-income communities without incurring much cost.
“There are fewer ways to access the account, so there are fewer opportunities for fraud, which banks pay a lot to protect against,” she said.
3 comments:
An article that has some truth surrounded by distortion.
"Not only are these Americans more vulnerable to high fees and interest rates, but they are also cut off from credit to buy a car or a home or pay for college, the report from the Federal Deposit Insurance Corp. said."
Cut off from credit. Not money. Credit.
Banks issuing 'credit' and wanting 'money' in return or they take the 'property back'.
Credit issued, and money created based on the signature of the one attempting to purchase the property.
No equal consideration, as they create money from the signature.
Then the bank monetize the newly created money 10 times.
They loan what they monetized (credit created out of thin air) that would not exist had it not been for that signature from the live male or female.
They charge high fees and interest rates to get 'real money assets' from the sweat equity of the live male or female.
Who was the one who unknowingly and unintentionally gave them the power to create digital credits to loan to other people from the signature requesting the initial credit.
If no money was loaned, and only digits transferred in computers based on pieces of paper passed around, then how can they demand more than credit from the one who they gave credit to.
I tried to purchase a car once...about 6 months ago (back then I had a driver's license and didn't know that they needed it to put a lien on the car I was purchasing.) I wrote on the contract 'Demand is made for lawful money per 12USC411' and signed the contract.
The finance manager looked at the contract and stripped it from me and said he could not submit the application.
I asked why not, and he wanted to know why I wrote that on it. I told him, well if they are going to make payment for the car and I'm going to pay them back, I want the transaction to be in lawful money.
He said he could not send it to them. He held that contract like it was personal property and could not be seen by any eyes.
I asked him, just what kind of financing are you getting me, and he named the company, some blah blah credit company. I asked him, so are they loaning me 'money' or 'credit', and he said 'credit'.
So I told him, well if they can't transfer lawful money, then maybe I should pay him in credits!
The salesman did not know what was going on. I had already put down $1000. $500 Postal Money order, and $500 in dollar coins (rolls of 25 coins each).
So the transaction did not go through because I would not fill out another application and 'NOT' put that on it.
They refunded my money and the weird thing was I got a receipt I had to sign stating $500 refunded, but they gave me both the postal money order and the $500 in dollar coins. I could not tell which $500 they did not count on their books, but on the contract they showed a full $1000 down.
So I figured (no proof) that they put $1000 credits for this credit transaction and somewhere hidden from me was bookkeeping to hide the fact real money changed hands.
I wished I'd paid $600 in dollar coins and $400 in postal money order to figure out which was which.
If every one would close their bank and savings accounts or just keep enough money in them to pay monthly bills, the banks would shut down.
just learned when I went to buy a savings bond for our grand-daughter's birthday...banks (none of them) sell them....you must buy it on line from the IRS....WTF
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