FDIC Reports Blacks, Latinos Lead Way in Lacking Safe Banking Alterantives

The Federal Deposit Insurance Corporation's (FDIC) recent report highlights the disparity in banking options for minorities.  In it, the FDIC reports some grim statistics:

• Minorities more likely to be unbanked include blacks (an estimated 21.7 percent of black households are unbanked), Hispanics (19.3 percent), and American Indian/Alaskans (15.6 percent).  This means they have no access to a checking or savings account.
• Minorities more likely to be underbanked include blacks (an estimated 31.6 percent), American Indian/ Alaskans (28.9 percent), and Hispanics (24.0 percent).   This means that although these households have access to checking or savings accounts, they rely on alternative financial services. Specifically, underbanked households have used non-bank money orders, non-bank 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.

In a release emailed to the Greater Sacramento Urban League, Lawrence Koen of the FDIC noted:

The results also addressed why consumers who had never used a bank - or had previously used a bank - do not maintain an account now. Among the top reasons were that they lacked enough money to need banking services, did not see the value in a bank account, found that service charges and minimum balances were too high and did not write enough checks. Among underbanked consumers, respondents cited convenience, speed and cost as reasons they use nonbanks for check-cashing and money order services.


In a conference call with reporters, FDIC Chairman Sheila Bair said the study shows many consumers are finding nonbank institutions to be more cost-efficient for their needs. "This gives us a better understanding ... of why folks do and do not use banks," she said. "One of my key takeaways ... is that a lot of this is a product of rational economic decision-making. A lot of the folks who do not use banks now ... found it not to be cost-effective for them.

"Our challenge is to make sure banks have the appropriate range of products and services that meet the needs of all low-income communities and have the right fee mix that is cost-effective, and that we can find that intersection of the products that are also cost-effective for the banks."


In December 2008, the National Urban League Policy Institute issued its Minority and Banking Access factsheet offering analysis and solutions to the difficult issue of banking options for underserved populations.  Among these, the NUL offered:

• Continued expansion of the Community Reinvestment Act, which encourages financial investment in low income communities.
• Expand and continue financial literacy education, which can dispell many of the myths contributing to the lack of trust many minorities and the underserved have about banks.
• Increase hiring of minority banking profesionals at every level of the financial services sector.
• Develop additional disclosures about 'hidden' fees and alternative ways to warn the consumer before they overdraw their account or reached a balance threshold.

Action on these and other recommendations is needed immediately.