Helping the 'Unbanked'

Perhaps 34 million Americans are "unbanked." They don't have a checking or savings account. Either they don't need one, can't afford one, or don't like dealing with banks.

Consumers Union and other consumer organizations have been hoping to get a provision in the banking reform bill moving through Congress that would require banks to provide basic, low-cost accounts. But amendments for that purpose were defeated in the banking committees of both the Senate and the House.

Bankers, naturally reluctant to see more regulation, opposed the amendments. And they suspect the accounts will cost money, not add to profits.

That could be.

Nonetheless, New York State requires banks to offer such accounts - $3 a month fee with a $25 minimum balance, seven free withdrawals per month, and unlimited free ATM access at their own bank branches.

If the accounts lose money, the banks can petition for a higher monthly service fee. But they haven't, notes CU's Frank Torres.

Fees have become a highly important source of income for banks in recent years. Yet surely bankers' concept of community is broad enough that they will want to serve not only the prosperous who can afford to keep, say, $1,000 balances to avoid $12 a month, and sometimes more, in fees, but also those with meager incomes.

Indeed, some banks voluntarily provide inexpensive no-frills checking accounts. More should.

Legislators and regulators have given the industry a much freer hand in recent years. Restrictions on branching and interstate banking have largely disappeared. Banks can offer mutual funds. They own securities firms. Bank regulators have allowed a wave of bank mergers. The number of banks is shrinking rapidly.

But the big, merged banks generally charge higher fees than the remaining small independent ones. Even those lower fees are steep for the nation's many poor families.

HR10, the bank reform bill, would remove many of the remaining impediments to one-stop financial institutions that will be able to provide commercial banking, investment banking, insurance, and other financial services.

In return, the banks have a moral, if not yet a legal, obligation to offer low-cost accounts.