Federal Deposit Insurance Corporation Chairman Martin Gruenberg was in San Francisco today to help launch a program that helps low-income residents across the country access safe and affordable bank accounts.
Bank On San Francisco, the first comprehensive program in the U.S. dedicated to helping people get accounts at partner bank and credit unions, became a model for similar programs across the nation when it launched in 2006.
In 2005, city officials found that roughly 50,000 households in San Francisco didn’t have bank accounts, including roughly half of all adult blacks and Latinos in the city.
A coalition, which would later become Bank On San Francisco, emerged with the goals of changing policies, modifying existing bank products, raising awareness and providing financial education to those without bank accounts.
Almost 10 years later, more than 10,000 San Franciscans have opened bank accounts each year through the program, according to the San Francisco Office of Financial Empowerment.
Soon San Francisco was helping dozens of cities make their own Bank On programs and today a national model has launched with several major financial institutions stepping up as partners.
The Cities for Financial Empowerment Fund’s Bank On National Account Standards program, informed by the FDIC’s Model Safe Accounts template, lays out for the first time minimum account standards to support banking access across the U.S.
Jonathan Mintz, president and chief executive officer of the CFE Fund, said the program is designed to support local Bank On coalition efforts.
Mintz said those who can least afford it are cumulatively spending billions of dollars each year on routine transactions such as paying bills, depositing and accessing paychecks.
The FDIC made the model safe account template that allows users to maintain a low minimum balance, pay low or no fees and prevent them from overdrawing on their account.
According to a 2013 FDIC national survey of data collected in partnership with the U.S. Census Bureau, roughly 10 million U.S. households were not banking with an FDIC-insured institution, while many millions more were using a mix of non-FDIC, fringe financial services and FDIC institutions.
Minority groups and low-income populations were much more likely not to have a bank account, according to the FDIC’s findings.
Upon learning of the large population that was not banking, the FDIC stated its commitment to increasing the participation of “unbanked” and “underbanked” households in the financial mainstream.
“It was encouraging to us that a number of major financial institutions around the country … actually developed and started offering accounts that are consistent with the (FDIC’s) model safe account template,” Gruenberg said.
San Francisco Mayor Ed Lee recalled opening his first bank account and the sense of independence that came with it.
Lee noted that with the city experiencing a very low unemployment rate, a lot of people are making money and need to learn how to bank, and how to plan “for unannounced adventures or challenges.”
The mayor said that while check-cashing and payday lender establishments still exist, especially in the city’s Mid-Market area, residents need to know that they have more affordable alternatives.
And that’s now true across the country, he said.
According to Jacob DuMez, policy and programs manager with the city’s Office of Financial Empowerment, in 2013 there were 123 permits for check cashing establishments and 29 permits for payday lending establishments in San Francisco.
DuMez said the payday lenders levy around 400 percent interest rates.
Chase, Citi, and Bank of America now offer low-cost, low-fee, no-overdraft financial products nationwide that meet the new account standards. Wells Fargo has committed to do the same by June 2016.
Hannah Albarazi, Bay City News