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April 27
WASHINGTON — Several large banks have already embraced standards released Tuesday by a consumer advocacy group laying out how institutions can offer safe, entry-level financial services.
The Cities of Financial Empowerment Fund's standards include provisions such as an initial deposit of $25 or less, capping of monthly maintenance fees at $5 and limiting out-of-network ATM charges to $2.50. The group also called for banks to drop any overdraft iand recommended including mobile deposit as a feature. JPMorgan Chase, Citigroup and Bank of America have all designed programs that broadly reflect the group's standards.
They have also been praised by regulators, who said increasing access to the underbanked is vital.
"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," Federal Deposit Insurance Corp. Chairman Martin Gruenberg said in prepared remarks Tuesday at an event in San Francisco announcing the standards.
The group said using these standards would provide a real opportunity for banks.
"You have financial institutions realizing that there is a huge market out there already spending billions of dollars a year for banking services," said Jonathan Mintz, director of the CFE Fund, in an interview.
According to a 2013 conducted by the FDIC and the Census Bureau, 7.7% of U.S. households do not have a savings or checking account and 20% are underbanked, often relying on nonbanks for transactions and credit products.
In his remarks, Greunberg said the industry would be better off by reaching underserved customers because "confidence in the banking system grows when more consumers benefit from a banking relationship."
Mintz said some banks already offer accounts that meet the standards set out by the CFE Fund but "the banks to date have varied in how much they have invested in marketing these accounts."
But he hopes that the release of the standards and products already being offered by Citi, JPMorgan Chase and Bank of America will encourage further adoption by other financial institutions.
"There has been a real evolution in the marketplace of bank products that puts us on the cusp of meeting the needs of potentially millions of new customers who, for whatever reason, might be operating outside the mainstream banking system," said Naomi Camper, head of JPMorgan Chase's office of nonprofit engagement, in an interview. "It is really expensive to be un- or under-banked, but at the same time, it is also important to be matched to the right banking products."
Bob Annibale, global director of inclusive finance at Citi, said in a statement that "investing in safe and affordable financial products that advance the financial capability and economic opportunities of the underbanked is mission critical."
Wells Fargo has also been piloting its own safe account product and is committed to doing a national roll-out by June 2016.
The CFE Fund bank account standards build on an FDIC pilot program that included nine banks of varying sizes that tested offering safe, low-cost transactional and savings account.
"They found that these accounts had costs and risks that are no greater than other transaction account products," Gruenberg said. "Bringing accounts that meet these standards into more communities, including to low- and moderate-income people, will benefit families, communities, and financial institutions."
The CFE Fund said that it will use its local partnerships across the country through its Bank On program 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."
"At the end of the day, these standards are really tools to be used at the local level," Mintz said. "This is the guide that can be used to set those partnership parameters."
But Mintz said regulators could also be doing more to promote banking access, including giving institutions Community Reinvestment Act credits for offering accounts that meet the guidelines and reforming some Know-Your-Customer requirements.
"If you are really going to talk about scale…there needs to be some reforms or some guidance around the Know-Your-Customer regulations…so that [banks] can do the account opening remotely with their customers," Mintz said. "We have been advocating Washington for clarity on the CRA guidelines to give banks more specific credit for opening these accounts."
