Research from the Government Accountability Office shows that low-income, less educated and minority households are less likely to have bank accounts. Many of these affected people cite high fees, minimum balance requirements as the primary reasons why they don’t have a bank account. Having and maintaining a bank account is essential for a family’s financial well-being.
Meanwhile, federal agencies are working hard to make sure that minorities have banking access. For instance, the Federal Deposits Insurance Corporation has piloted a program to create a public awareness campaign on the benefits of bank accounts.
The research found that lower-income, less educated and minority households are more likely to be unbanked or are underbanked (have a checking account but use alternative financial services, which can be costly). This analysis was done on the FDIC’s survey data. The survey found that there are various reasons why consumers may not be using banks including; lack of money, unexpected or high bank fees, lack of trust, and privacy concerns, according to FDIC’s survey and market participants and observers.
Understandably so, it is important to highlight that there are several laws and regulatory factors that may intentionally or unintentionally affect the cost and availability of basic banking services. As an example, two independent studies found that large banks were increasing the checking account fees just to offset the regulatory limits on their fees for processing debit card transactions. By contrast, three studies done by the Consumer Financial Protection Bureau found that regulations requiring consumers to choose to receive overdraft protection may have reduced overdraft fees paid by consumers who did not opt-in.
It is important to note that the actions by some of the selected regulators reviewed by GAO with relations to unbanked and underbanked households focused on research, education, and oversight. However, some regulators did not have outcome-oriented measures of their efforts to increase banking access or their measures do not cover all their key initiatives. Several initiatives have been launched including FDIC’s public awareness campaign on the various benefits of owning a bank account. However, its measures only indicate whether the task was completed and do not incorporate information on the outcomes. Also, the National Credit Union Administration (NCUA) measures how long it takes to process credit union charters which helps timelines but does not provide information to assess agency performance in facilitating access to credit union services. Lastly, an initiative by the Office of Comptroller of Currency looked at ways to increase access to credit, including small dollar loans. But the OCC never incorporated performance measures for a key initiative to enhance banking access. By using outcome-oriented performance measures for their efforts to increase access to banking services, FDIC, NCUA, and OCC could better identify opportunities for improvement across all key initiatives and set priorities accordingly.
The U.S. Government Accountability Office recommends that the regulators establish outcome-based performance metrics to reflect the full scope of their efforts to achieve strategic objectives related to access to banking services.
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