Back in July, we wrote about predatory lending and how, “In addition to the physical, emotional, and economic hardship brought about by COVID-19, Americans now faced another danger… predatory lenders.” Back then, we cited a July 2020 CNBC story entitled, New payday lending rules could leave 12 million Americans exposed to unaffordable payments. In it, Alex Horowitz, senior research officer with Pew Charitable Trusts’ consumer finance project, said “that by eliminating the ability-to-repay protections, the Consumer Financial Protection Bureau (CFPB) is making a grave error that leaves the 12 million Americans who use payday loans every year exposed to unaffordable payments at annual interest rates that average nearly 400%.”
Looks like the ABA is stepping in where the CFPB wouldn’t.
On October 18, the American Bankers Association called for a renewed effort to address the tremendous number of families without access to banking services who, subsequently, are forced to turn to payday lenders. At the ABA’s Unconventional Convention, President and CEO Rob Nichols called upon every bank in the country to consider offering Bank On-certified accounts to expand access to banking services and reduce the number of unbanked and underbanked Americans. “Despite a strong financial services industry, we know that millions of Americans – and families of color in particular – remain outside the mainstream banking system and are missing the economic opportunities that come from having a bank account,” said Nichols. “By offering Bank On-certified accounts with the help of their core providers, America’s banks can open doors of opportunity to new and returning customers, demonstrating the banking industry’s commitment to financial inclusion.”
The FDIC has reported that 14% of African American households and 12% of Hispanic households were unbanked in 2019. What do those numbers look like now, in an economy where millions are unemployed? I hazard to think. And why are these numbers so outrageously high, in particular, among minorities? Some say they don’t have the funds to meet minimum account opening requirements. Others say that they simply don’t trust banks.
Bank On is Born
In response to this unbanked and underbanked “epidemic,” the ABA has launched a new initiative aimed at encouraging every US bank to offer ‘Bank On’ certified accounts, which are specifically designed to offer simple access to deposit accounts, online payments and debit cards for those currently outside the banking system.
“With more banks offering these kinds of accounts, we can further expand access to the mainstream banking system and all the economic opportunities that come with a bank account,” the ABA said in a statement.
More than 40 banks already offer Bank On-certified accounts, while the ABA’s website lists 20 banking technology providers that have signed up to facilitate such accounts, including FIS, Fiserv, Finastra, Jack Henry, CSi and UFS Data. The Bank On certification was created by the Cities for Financial Empowerment (CFE) Fund. To be certified, accounts must have low costs, no overdraft fees and online bill payment facilities.
Jonathan Mintz, president and CEO of the CFE Fund, said: “By urging banks of all sizes to join this initiative, particularly community banks, we can welcome millions of Americans into the banking system safely and efficiently. We also deeply appreciate the critical role the nation’s core providers are playing to make it happen.”
Let me just wrap up by saying that it’s this kind of thinking and action that make me proud to be in the banking business. I hope you feel the same way and will support the ABA in their Bank On efforts. To do so, you can start by going here, joinbankon.org.
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