PROTECT CONSUMER JUSTICE.ORG

A survey by the Federal Deposit Insurance Corporation shows more than two-thirds of families with annual earnings of less than $30,000 don’t use banks.  The agency estimates about 17 million American adults are “unbanked” and another 43 million are “underbanked.”  From the report:

Households were identified as unbanked if they answered “no” to the question, “Do you or does anyone in your household currently have a checking or savings account?”  Underbanked households were defined as those that have a checking or savings account but rely on alternative financial services.  Specifically, underbanked households have used nonbank money orders, nonbank check-cashing services, payday loans, rent-to-own agreements, or pawn shops at least once or twice a year or refund anticipation loans at least once in the past five years.

Minority families are far more likely not to use banks.  Only 3.3% of white families surveyed were “unbanked,” compared to 19.3% of Latino families and 21.7% of African-American families.  The FDIC has details of the results broken down by region, state and metropolitan area online.

Senator Herb Kohl (D-Wis.) has introduced legislation that would encourage banks to provide small, short-term loans to compete with predatory lenders such as the “payday loan” companies.  But Kohl’s bill would allow interest rates as high as 36% for such loans.

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