Louisville, KY: Field Hearing on Checking Account Access 02/03/16
Welcome to the Consumer Financial Protection
Bureau’s field hearing in Louisville, Kentucky, at the Muhammad Ali Center. At today’s field
hearing, you will hear from Director Richard Cordray and a panel of distinguished experts
who will discuss issues related to access to checking accounts.
The Consumer Financial Protection Bureau, or the CFPB, is an independent federal agency
whose mission is to help consumer finance markets work by making rules more effective
by consistently and fairly enforcing those rules and by empowering consumers to take
more control over their economic lives. My name is Zixta Martinez. I am the Associate
Director for the External Affairs Division at the CFPB. Our audience today includes consumer
advocates, industry representatives, academics, state and local officials, and, of course,
consumers. We are especially pleased to have in the audience, Charles Vice, Commissioner
of the Kentucky Department of Financial Institutes. We are delighted that you are here. Let me spend just a few minutes telling you
about what you can expect at today’s field hearing. First, you will hear from the CFPB
Director Cordray who will provide remarks about the Bureau’s efforts to improve access
to lower-risk deposit accounts. Following the Director’s remarks, David Silberman, the
Acting Deputy Director for the Bureau and the Associate Director for the Bureau’s Research,
Markets, and Regulations Division, will frame a discussion with a panel of experts. After
the discussion, there will be an opportunity to hear from members of the public.
Today’s field hearing is being live-streamed at consumerfinance.gov, and you can follow
CFPB on Facebook and Twitter. So let’s get started. I am now pleased to
introduce Richard Cordray. Prior to his current role as the CFPB’s first Director, he led
the CFPB’s Enforcement Office. Before that, he served on the front liens of consumer protection
as Ohio’s Attorney General. In this role, he recovered more than $2 billion for Ohio’s
retirees, investors, and business owners, and took major steps to protect its consumers
from fraudulent foreclosures and financial predators. Before serving as Attorney General,
he also served as an Ohio State Representative, Ohio Treasurer, and Franklin County Treasurer.
Director Cordray? Thank you, Zixta, and welcome, everyone, today.
I was saying to Zixta that our visit to Kentucky today polishes off the four Commonwealths
around the country for us, so we’re really pleased to be here, and thank you for joining
us here today in Louisville to talk about individual checking and savings accounts.
When I think about these deposit accounts, I am reminded of my dad, now 97 years old—God
willing, he’ll turn 98 next week—who lost all his paper route money in a bank failure
during the Depression. Of course, banking today has little in common with the banking
of my dad’s boyhood. In his day, consumer finances were transacted primarily in cash,
and financial panics frequently caused liquidity crises that did severe damage to the economy.
Today, people can rely on the security of federally insured accounts, and how we use
deposit accounts has changed profoundly, with much greater access to our money and more
convenient ways of paying without cash. At the time my parents helped me open my first
passbook account as a child, the deposit account experience was still pretty simple and straightforward.
Banks accepted people’s money with the promise of holding onto it safely. When consumers
went in person to withdraw funds, they either had the money in their account or they did
not, and the bank would only provide as much money as was available in the account. But
a few decades ago, all of this changed dramatically when people began to be able to overdraw their
accounts as a more routine matter. Today, for a wide variety of reasons, there
are nearly 10 million unbanked households that have no checking or savings account.
Some consumers may have been rejected when they tried to open an account before, or they
might have lost an account after it became overdrawn and they were unable to recover.
Others might simply choose not to participate in the banking system, perhaps because they
are uncomfortable with the costs or risks they believe it poses for them.
At the Consumer Bureau, we believe that people who want the benefits and conveniences of
some kind of deposit account deserve a fair opportunity to have one. We are concerned
that some people are being inappropriately sidelined by two things. The first is the
lack of account options that fit their financial needs and situations. The second is inaccurate
information used to screen some potential customers.
Today, the Bureau is taking three steps to address these concerns. First, we are encouraging
banks and credit unions to make lower-risk accounts more accessible to more consumers.
Second, we are pressing the banks and credit unions as well as the consumer reporting companies
to improve the accuracy of the checking account reporting system. Third, we are providing
new resources to help consumers better understand how to navigate their options. If we can make
it a point to do all of these things, consumers will benefit by having more choices and more
predictable costs. On the first point, today we are urging banks
and credit unions to make more product choices available to consumers. After all, a healthy
market thrives when people have multiple options that can better fit their needs.
In the 1980s, as automated teller machines and electronic payment channels emerged, banking
changed in important ways. Many banks and credit unions began to authorize overdraft
transactions on a more regular basis, both for electronic transactions and for checks.
This willingness to advance funds helped people avoid bouncing checks or having debits returned
unpaid, but it also allowed the institutions to collect more fees. Over the years, overdraft
programs have become a significant source of industry revenues and a significant reason
why many consumers incur negative balances. Too many problems with overdrafts can cause
people to give up on the banking system or force them out of it altogether.
To ensure that people have account options that meet their needs, the Consumer Bureau
is encouraging banks and credit unions to offer them the choice to enroll in deposit
accounts that are designed to help consumers manage their spending and avoid overdraft
and fees. Although a majority of customers seem to be well served by the deposit accounts
now offered at virtually all financial institutions, others struggle to deal with certain riskier
aspects of those accounts. Rather than ending up stuck outside the banking system or incurring
costs they can ill afford, these consumers can better manage their money and avoid financial
distress by signing up for accounts designed to prevent overdrafts and overdraft fees.
By simply offering consumers a bit more choice, banks and credit unions could help more people
enjoy the many benefits of a banking relationship. In particular, we support the FDIC’s efforts
to encourage financial providers to offer lower-risk account options on a broader basis.
We also applaud the work being done nationally by the Bank On movement and specifically by
Bank On Louisville, which is a coalition that includes Louisville Metro, a number of banks
and credit unions, and nonprofit partners. The national account standards established
by Bank On exemplify the kind of lower-risk products that could be offered as an option
for consumers. Thus far, too few of our financial institutions have developed such products
or marketed them as much as they do their other products.
Who is the audience for these products? One substantial group of potential customers gets
screened out right now when their past history shows they may have trouble handling the risks
posed by traditional deposit accounts, yet if these customers are matched with accounts
that have more fitting terms, then they need not be excluded from the banking system. Instead,
they can become depository customers with the potential to develop healthier financial
lives as they find success and grow into other banking products and services.
A second potential audience is consumers who have chosen to drop out of the banking system
because they found themselves paying high fees they did not anticipate or, in hindsight,
wanted to avoid. In the FDIC’s latest survey of unbanked households, almost one-third identified
the unpredictability of fees as a reason for not having a bank account. Lower-risk accounts
could minimize or eliminate their exposure to such fees.
A third potential audience is consumers who are new to checking accounts, including young
adults just entering the banking system, some of whom experience more risk of losing control
of their spending and, hence, their accounts. Some banks that have added lower-risk accounts
to their offerings have expressed surprise at the strong uptake they have seen from millennials
in particular with these accounts. Finally, many other consumers who have shown
themselves to be perfectly capable of managing their account successfully might prefer to
have a choice between a traditional deposit account and a lower-risk account that helps
them avoid overspending, stay on a budget, and not be subject to unforeseen fees.
The existence of these several audiences seems to offer a powerful response to the financial
institutions that have implicitly or explicitly rejected these safe banking products as idealism
or mere charity. By unnecessarily limiting their product choices, these institutions
have missed a substantial segment of the population rather than finding a way to include them
and help develop their economic potential. Among young people just entering the financial
system, banks and credit unions may be missing an opportunity to build loyalty and to dispel
prevailing mistrust of the banking system. That is not charity at all. Instead, it is
a hard-headed business judgment that takes the longer view and seizes opportunities to
build sustainable customer relationships. To this end, I sent letters today to the CEOs
of the top financial institutions in this country urging them to consider how to address
these issues more effectively. We recently reviewed the websites of the top 25 retail
banks, and we found that only eight of them marketed a no-overdraft product option on
the same page as their traditional checking account options. We also found that seven
others offered a product with no authorized overdrafts but did not feature it on their
main menu of checking account offerings, and 10 of the institutions did not appear to offer
any options at all to allow consumers to open a lower-risk account designed to prevent overdrafts.
We encourage institutions to offer such products and, if they already do so, to feature them
more prominently in their online and in-store checking account menus and as part of their
sales consultations. What is clear enough is that if consumers do not even know about
a product, even one well fitted to their needs, they cannot be expected to sign up for it.
These safer products do not even have to be checking accounts as we typically know them.
Many general purpose reloadable prepaid cards are specifically designed to help consumers
manage their spending while limiting their transactional costs and risks. While prepaid
cards were developed by entrepreneurs as an alternative to banking, the funds in these
accounts are almost always held by a bank or credit union and enjoy federal deposit
insurance. Moreover, some prepaid cards are made available right now by banks and credit
unions to their existing customer base. The Bureau will finalize a rule this spring
to ensure, among other things, that prepaid card customers have error correction and dispute
resolution rights comparable to those for checking accounts. Prepaid cards may not be
the first choice for every consumer, but everyone deserves the opportunity to choose what is
best for him or her. Let me also take a moment to acknowledge another
positive development, which is the decision some banks and credit unions are making to
provide consumers with real-time information about the funds in their accounts available
to be spent. They are doing this through various means, including online banking and text and
e-mail alerts, which can reduce the risks that consumers inadvertently overspend their
accounts. Still, we encourage the banks and credit unions to press harder as they think
about how they can tailor their products more effectively for a larger base of potential
customers, which includes making funds available as early as they can.
All these steps will help ensure consumers have more ways to take control of their financial
lives. Wider use of safer account features will also enable financial providers to relax
their screening criteria without increasing their risk. By expanding access, they can
create more successful and sustainable customers. The second step we are taking today is to
improve checking account access, is to remind banks and credit unions of their obligations
with respect to the accuracy of the information they report about consumer use of checking
accounts. In addition, the consumer reporting companies also have an obligation to ensure
accuracy when they sell this information to others.
Banks and credit unions have obligations to foster accuracy when they submit information
to the specialty consumer reporting companies about accounts that were closed for fraud
or unpaid balances. Those companies, in turn, assemble or evaluate all of the information
provided, then sell it to third parties. All of this information is clearly related to
preventing fraud and screening for credit risk, but because many banks and credit unions
use this information to make decisions about whether to offer account products to consumers
and on what terms, the accuracy of the information is crucial. If it is not accurate, then consumers
will be inappropriately shut out of the banking system, with little or no effective recourse.
Indeed, accuracy is expressly required by the Fair Credit Reporting Act, so we are concerned
about the levels of accuracy in the information furnished to the consumer reporting companies
that serve the deposit account market. Through our supervisory work, we have found that some
of the largest banks lack the appropriate systems and procedures necessary to furnish
accurate information on millions of accounts. Today, we are issuing a bulletin warning banks
and credit unions that they must meet their legal obligation to have appropriate systems
in place with respect to accuracy when they report information, such as negative account
histories, to the consumer reporting companies. More effort and rigor are needed to make sure
that the risk consumers actually pose to potential financial providers can be evaluated correctly.
Of course, the specialty consumer reporting companies that track deposit accounts also
merit our scrutiny as we work on these issues. They have important legal obligations with
respect to the accuracy of the information they sell, as specified in the Fair Credit
Reporting Act. Ensuring that they are adopting and implementing reasonable procedures to
assure maximum possible accuracy of the credit reporting information they provide, as the
law explicitly requires, is an important area for regulatory oversight.
The Consumer Bureau will continue to insist through its oversight authority that banks
and credit unions furnishing information, as well as the consumer reporting companies
collecting information and selling reports, must comply with their respective duties under
the law. When we see this is not being done, we will take appropriate supervisory and enforcement
actions. Living outside the banking system can be costly
and time-consuming, especially for those who are the most financially vulnerable. They
come to often rely on expensive nonbank money services that can take a big bite out of their
earnings. So the third step we are taking today is to help pull back the curtain on
the checking account options available to consumers and point out the rights they have
if they are denied access to a checking account or if misinformation is reported about them.
We are issuing a consumer advisory and additional resources on choosing, managing, and reopening
an account. All are available on our website at consumerfinance.gov.
We are releasing a consumer advisory to alert people that lower-risk accounts do exist in
the marketplace and can help them take more control of their spending. These accounts
may serve as a gateway for more consumers to enter the banking system, even those who
have struggled to maintain an account in the past, because the accounts pose less risk
and, hence, less reason to screen those consumers out.
Many consumers who had an account closed and later seek to open a new one do not understand
how their application will be judged. The qualification process can be confusing and
opaque. Until they are rejected for a bank account, people often do not even know that
their prior account usage has been recorded and shared with other institutions. Some consumers
find that the information being attributed to them and preventing them from getting a
new account is inaccurate. Others are entirely unaware that they would be likely to qualify
for a lower-risk account where such accounts are offered.
Today’s advisory also helps people know what to do if they have been denied a deposit account
or had one closed involuntarily. In most cases, the denial would be based on information supplied
by a checking account reporting company. Our advisory explains how to get a copy of your
checking account history from the company if you are blocked from opening an account.
In addition, you also have a right to dispute any inaccurate information contained in these
reports, and the consumer reporting company is required to investigate it and correct
any inaccuracies. To help consumers pursue any such disputes,
the Bureau is issuing two sample letters, one to dispute the accuracy of the information
with the consumer reporting company and the other to dispute it with the financial institution
that furnished the information in the first place. Under federal law, negative information
can remain in a credit report for 7 years or more, so it is clear that inaccurate information
can damage a consumer’s reporting profile for a long time and cause enormous harm. Consumers
need to understand how they can participate more actively in this system so they can take
more control of their financial lives. The bottom line is that we are working steadily
to ensure that the banking system is open to all consumers who want a banking relationship
and will not engage in fraudulent conduct. This requires that the information banks use
to screen customers is reliable and that the information is used to match consumers with
deposit account products that fit their needs and promote their successful use of the banking
system. The Consumer Financial Protection Bureau is
in a unique position to make a difference in improving how the checking account reporting
system actually works. We are the only federal financial regulator with the authority to
supervise both the larger depository institutions and the larger consumer reporting agencies
for compliance with federal consumer financial law. Thus, we can consider and address these
issues comprehensively, engaging directly with both sets of industry participants.
We have already released several groundbreaking reports on the credit reporting system. We
have also worked with consumers to expand their knowledge and awareness of the importance
of credit reporting to their lives through consumer advisories and by championing the
Open Credit Score initiative, but as we can see from the discussion today, we need to
devote more attention to improving the checking account reporting system as well. And we are
committed to doing just that. One key point we need to grasp is how hard
it is to live in this country without having someplace to store your money safely and access
it promptly and easily. Those who would like to have a traditional checking account but
are unable to get one should be given a fair opportunity to manage their day-to-day finances
effectively and affordably by other means, such as a lower-risk checking account or prepaid
card. And so we envision a system that recognizes and responds to consumer needs by providing
checking accounts and prepaid accounts that better fit their personal financial circumstances.
This is good for consumers, it is good for responsible businesses, and it is good for
the economy as a whole. Thank you. Thank you, Director Cordray. At this time,
I would like to invite the panelists to take the stage, and while they are doing so, I
will briefly introduce CFPB and guest panelists. David Silberman serves as the Bureau’s Acting
Deputy Director and Associate Director for the Bureau’s Division of Research, Markets,
and Regulations. Cheryl Parker Rose serves as the Bureau’s Assistant Director for the
Office of Intergovernmental Affairs. Daniel Dodd-Ramirez serves as the Bureau’s Assistant
Director for the Office of Empowerment. John Nevitt is Senior Manager of Family Stability
with Metro United Way. Christie McCravy is the Director of Center for Housing and Financial
Empowerment with Louisville Urban League. Jonathan Mintz is President of Cities for
Financial Empowerment. Sandy Gogan is Senior Vice President of Retail Operations with Park
Community Credit Union, Louisville. Ben Joergens is Financial Empowerment Officer with Old
National Bank, and Lewis Goodwin is the President and CEO of Green Dot Bank. David, you have
the floor. Thank you, Zixta. Good morning, everyone.
As Zixta indicated, I am the Acting Deputy Director of the Bureau as well as the Associate
Director for Research, Markets, and Regulations, and it’s my pleasure to chair this portion
of our field hearing on access to checking accounts. We’re going to hear from a number
of respected panelists who were just introduced, including consumer experts and advocates representing
communities from across the country and representatives from various financial institutions.
Each panelist will give us some background and provide their perspective on checking
account screening process and opportunities to improve access for consumers, either seeking
to enter or seeking to reenter the banking system. After our discussion with the panelists,
we’ll then proceed with the public testimony component of the hearing, and we’ll hear from
audience members who have signed up to provide comment.
So the Director, Director Cordray, has already summarized the Bureau’s report on access to
checking accounts. I’m not going to take additional time doing that. Rather, I want to turn it
over so we can hear from our distinguished panelists who will talk about different strategies
to improve access for consumers while protecting financial institutions from fraud and credit
risk. Before we start the panel discussion, let
me just note that you can access the report that the Bureau has issued today by visiting
our website, www.consumerfinance.gov. So, with that, let me turn it over to the
panelists, and we are going to start from my left with John Nevitt, Senior Manager of
Family Stability at Metro United Way. The floor is yours, John.
Thank you very much for the opportunity to be here, and I would just like to share a
few thoughts that I have in terms of the importance of this work today. At United Way, we serve
a vision of everyone reaching their highest potential, and we know that for kids to be
successful, but with entering school and graduating from high school on time and being prepared
for college and work and life, that only happens if they’re a part of a strong, stable family.
And for a family to be strong, they need to be part of a strong, stable community.
So one of the very important aspects of family stability to promote success in our community
is around financial stability, and I subscribe to a model that’s very simple but I think
really underscores the importance of this conversation today, and that is, if families
have adequate income, which can come from a variety of sources—earned income, credits,
benefit programs—once they have adequate income, do they have a vehicle to begin to
save? And then finally, that saving is a bridge to gaining and sustaining assets for the rest
of their life, and we know that income allows families to meet their needs, and the savings
and assets allows them to plan for their future and the success of their children. So underscoring
those three pillars, if you would, for me is financial education, how we manage our
finances personally, and then also access to mainstream financial products and services.
And that’s what we’re talking about today. I am delighted to be co-chair of the Bank
On Louisville efforts. My fearless co-leader is here, Tina Lentz with the City, who’s done
such a great job of pulling partners together and keeping momentum, getting people into
the financial mainstream. You know, when we started Bank On, the thing for me that really
got my attention was, over a working lifetime, that an individual can spend as much as $40,000
using other types of financial services and products, such as money orders, check cashing,
expensive payday lending, things of that nature. And if someone is already starting out on
the lower income of the financial spectrum and is being leached by all these other difficult
products and services, they are never going to get ahead, and so we have an opportunity
to improve that in our community. And we’re already doing that, thanks to all the financial
institutions who are around the table and many of whom are here today. So we think this
is a fundamental piece for that longer-term stability that promotes family stability.
I’d also like to say that we also talk about, in Bank On, a win-win-win for our community.
It’s a win for the individuals and families who are gaining access to mainstream financial
services and using that to their advantage. It’s a win for the neighborhoods and the broader
community that are often underserved and underinvested because there aren’t traceable expenditures
in those communities. This helps get those communities on the maps. And then finally,
it’s a win for the financial institutions and all the partners we have around the table.
It’s an opportunity for us to provide better products and services.
So I really appreciate the opportunity to be here today. Thank you.
Thank you, John. Christie? Christie McCravy, the Director of the Center for Housing and
Financial Empowerment with Louisville Urban League.
Well, good morning, and thank you for having me and the ability to represent all the participants
that come into the Louisville Urban League every day. And one of the things that at the
Urban Louisville League we see is probably more than 80 percent of our clientele is categorized
as low to moderate income. They are trying to stabilize their households, thus, seeking
our assistance in the beginning. However, many of their experiences and stories translate
to why we are so excited about this announcement today.
On my staff, I have a counselor who was previously a manager of one of our banks in town, and
her bank, her branch happened to be in a low- to moderate-income area. However, her branch
was one of the leaders in the entire system for generating fee income from overdrafts
and NSFs. Tens of thousands of dollars had been stripped from the community because persons
really did not understand how to reconcile their account. They didn’t understand that
when you call the bank and get a balance, that’s not a true balance. So our goals at
the Louisville Urban League had been to educate our clientele, and we are a Bank On member
and a partner. And we’ve put on numerous workshops to help persons to understand how to just
reconcile their accounts. It’s not taught in school. It’s not taught at home because
many of the families may not have had that experience as well. And in this day and age
when the banks are downsizing and cutting back on expenditures, it’s no longer as friendly
to many people in the low- to moderate-income areas to walk into a branch to ask for assistance
by sitting down at that desk and saying, “Can you help me to understand how to reconcile
my account?” We feel that this announcement today will
help our consumers to be able to hold some of their wealth, to be able to retain that
income, instead of feeling like they are being driven into the payday lending industry. It’s
amazing that we see a lot of clientele say, “I know the expense there,” even though they
really don’t understand this as the payday lending as they roll over their checks over
and over and over again that the expenses is growing astronomically. But they feel safer.
They feel safer buying money orders, and a lot of our clients are not just unbanked,
but many of them are underbanked. They will receive that direct deposit and take every
dime out after every payday because they are going to buy money orders and do all of those
things or even pay in cash in order to make sure that they do not have the initial experience
of mounting fees that result from having rollover transactions.
So thank you on behalf of the Louisville Urban League and on behalf of our clientele.
Thank you. Jonathan Mintz, President of Cities for Financial.
Jonathan Mintz, the President of Cities for Financial Empowerment. Thank you. I am really
delighted to be here and appreciate not only the substance of why we’re here, but also
the excuse to come back and visit Louisville, so I’m delighted.
I lead the Cities for Financial Empowerment Fund, which is an organization that works
with mayors across the country to provide funding and technical assistance to help them
build out financial empowerment programs and policies. This is an issue that is deeply
important to the dozens and dozens of cities that we work with across the country, and
what you’re doing today is hugely important to the municipal financial empowerment field
at large, as you just heard. Today is an important move. Banking access
is a particular concern. As you noted, Mr. Chairman, there really must be real solutions
when tens of millions of people who can least afford it are spending billions of dollars
to do what probably the rest of us in this room do for free without even thinking about
it, to be able to pay bills, make purchases with the strike of a pen or the swipe of a
card or a few clicks online, to safely, usually automatically, deposit our income and then
access it for free, and even to create regular and free savings transfers.
This is particularly important for local governments. When residents are forced to turn to alternative,
often predatory financial services, they pay more, and these are fees that they can’t afford,
and they are, as you’ve just heard, draining money from not only families’ pockets, but
from communities. Worse, the lack of a checking account, which
is the most basic financial tool, can derail other municipally led financial empowerment
efforts. It’s like the whole at the bottom of a funnel, and from the municipal consumer
protection lens, people are more susceptible, of course, to predatory practices and predatory
industries when they can’t or aren’t in the—enter the mainstream banking relationship.
Fortunately, I believe there is much to be hopeful about in local banking access efforts.
First, there is renewed attention to these issues on the parts of regulators—obviously,
that is what we’re doing here—and even in the financial services industry itself. This
is exemplified, of course, by your leadership, and I still go back to your forum not too
long ago on checking account access. And I’m so happy to see that next step today. I think
it was a real turning point in this conversation, as today’s announcement underscores.
In addition, we are now happily at a critical point where the financial services sector
is really putting forth better products that are truly starting to meet consumer needs
and draw people into and keep them in the financial mainstream, and cities themselves
have really taken on local leadership roles in banking access, pioneering local-led partnerships
between public officials; city, state, and federal government agencies; financial institutions;
community organizations that are working together in Bank On coalitions like here in Louisville
to improve the financial stability of their residents.
They’re even starting to augment city services and social service programs, like, for example,
Summer Youth Employment Program, into large-scale banking access opportunities. The CFE fund
works through our National Bank on Leadership to facilitate in advance these happily coalescing
forces, and I’m really excited to talk a little bit more this morning about them and grateful,
very grateful to see the CFPB’s strong support for banking access priorities. Thank you.
Thank you. So now we will move to my right, and Sandy Gogan, the Senior Vice President
of Retail Operations at Park Community Credit Union.
Thank you so much. I’d like to first thank CFPB for inviting us to be here today to represent
the credit union industry, and particularly to the Director, we appreciated your comments
earlier. I’m proud to say that I’ve been with Park
Community Credit Union for 27 years now, and one of the things that I get to see every
day is the incredible difference that credit unions make in the lives of the members that
we take care of. We’ve been at Park Community—and other credit unions across the state, I know
have provided accounts just like the ones that we’re talking about today that have access
to member accounts through an account with no courtesy overdraft. We do give members
access to debit card transactions, unlimited debit card transactions, transactions at ATM
machines all across our network. We started an account called Fresh Start several
years ago, very similar to the time when Bank On first came to the community, and we put
this together as a way to offer those accounts for those underbanked community members that
you talked about. We worked with the community on financial literacy. We talked to people
about how important it is to establish a good relationship, and one of the things that we’ve
done as well—and credit unions in general are really good about—is educating the members
on ways to avoid fees, on ways to not have fees, and in most cases, credit unions are
already offering these type of accounts. I do think the courtesy overdraft has a place
in the financial services industry, and we offer those as well. But the accounts that
we offer, particularly for the underbanked, is just a part of the overall credit union
philosophy of people helping people, which we’ve been doing ever since credit unions
started. So I just want to thank you all for having
us here and allowing the credit union industry to be a part of this. I think that you will
see more and more credit unions stepping forward with these type of programs, and we’re happy
to be here and to be a part of that. Thank you.
Thank you. Ben Joergens, Financial Empowerment Office for Old National Bank.
Good morning, and once again, thanks for having us here today. Old National Bank is headquartered
out of Evansville, Indiana, and we have a large presence here in Louisville as well.
We are a $12 billion community bank, and being the bank’s Financial Empowerment Officer,
I spend the majority of my time working with our at-risk population and also our student
population to really help give them sound advice, to prevent things from happening to
them in the future in the example of predatory lending and high-priced banking.
I focus a lot of time in energy with them creating programs to deliver education, to
empower individuals, allowing individuals I work with to help me really understand the
products that are best suited for them. For example, we did create a program at Old National
called the 12 Steps of Financial Success. This was primarily targeted to at-risk populations,
specifically those that are incarcerated for nonviolent offenses, and we really encouraged
them to help take control of their future and to achieve financial success over a 12-week
financial education program. We also encouraged them to really empower others when they leave
and reenter society. It was nationally recognized just last year
through the ABA’s Community Commitment Awards for Financial Education, and a big portion
of the population that we reached through this are individuals that have had negative
items in the past due to overdrafts or what may be. Individuals may have never used a
bank before and really struggled to understand how mainstream banking operates.
During these classes, we actually poll our audience and ask them, “What is it that you
want to see in products and services that banks have to offer and credit unions have
to offer?” We find out what features of a checking account would be most beneficial
for them. In essence, we really used their answers to develop our future products.
At Old National, we believe in dedicating our resources to utilize their expertise not
only to drive education, but to utilize to develop the products and services to best
suit their needs, and I look forward to talking about some of the products that we have to
offer here very shortly. Thank you. Thank you. Finally, Lewis Goodwin, President
and CEO of Green Dot Bank. Thank you, Dave, and thank you for the opportunity
to be here today at this CFPB field hearing. As background, Green Dot Corporation is a
bank-holding company and is the owner of Green Dot Bank. Green Dot Bank is a state member
bank, and it’s regulated by the Federal Reserve in the State of Utah. And Green Dot is a company
that is headquartered in Pasadena, California, with over 600 employees. Our core product
is the Green Dot card. That’s a reloadable prepaid debit card, and these cards can be
used to make purchases, pay bills, get cash, and access funds. And it’s just like any other
traditional debit care. Our prepaid products typically appeal to lower-income
Americans, the unbanked and underserved, and usually with income levels under $50,000.
Green Dot cards can be reloaded and purchased at 100,000 retail locations across the country
and online, and today, Green Dot is the largest provider of this space, the prepaid space.
We are also into mobile banking. GoBank is our mobile bank account, and GoBank is really
the first account that is designed and opened to be used totally on the mobile device. Each
GoBank account is a checking account with a linked debit card and also an account called
the Money Vault, which his another linked account, which helps our customers save their
money. We also offer a free large ATM network, user friendly interface, budgeting tools,
P2P payments, mobile bill pay and paper checks, and remote deposit capture. All are accessed
through the mobile phone. With all Green Dot products, we have a customer
covenant, and that is that we have clear disclosures, no minimum balances, no penalty fees, and
no overdraft fees. We simply don’t pay and authorize the customer to spend into the overdraft.
In addition, all cards are FDIC-insured and carry Reg E protections, and they all require
customer identification through the U.S. Patriot Act, and direct deposit is free and immediately
available to the customer. We do not rely on credit checks or services like that, and
these accounts do not feed into those reporting systems.
Green Dot’s mission is to reinvent banking for the masses, and it’s designed to be as
simple, inexpensive, and feature-rich account with true value and utility. We believe that
all Americans should be able to access and benefit from the security and convenience
of a low-cost, safe, and regulated FDIC-insured account so that they can manage their money,
and we believe that this is fundamental to the growth of the overall community, to the
consumers, and the banking system. Thank you for letting me participate today.
Thank you. I want to thank all the panelists for their thoughtful remarks and also for
staying within a 3-minute time limit. That may be a historic first not only for
the Bureau, perhaps for the history of the world. So we are now going to have some opportunity
to engage the panel in a discussion, and my colleagues, Cheryl Parker Rose and Daniel
Dodd-Ramirez will join me in that. But I get to ask the first question. And we’ll go back
to you, John. It’s been a long time since you’ve had a chance to talk. So let me just
ask you to elaborate on what you see as the consequences for people who don’t have a checking
account or lose a checking account and the role of nonprofit organizations on the ground
in helping consumers identify and manage products that are right for them.
Well, thank you for that question. To me, it all comes down to access, convenience,
and cost. We have already talked about some of the cost factors, and certainly, one of
the driving motivations for forming the Bank On Louisville effort in terms of transactional
costs. But just the time, access, convenience factors are huge in and of themselves, and
I’ll just give an example. Particularly, if we’re talking about the part of our community
that tends to be most underrepresented with the mainstream financial products and services,
if you’re talking lower income and minority populations, often if there is a single-parent
household—and I am an example of that. I have two teenage children. My daughter just
started driving, so a little bit of the pressure is off in one way, but it’s gaining in other
others, if you understand. But, you know, I can only imagine. My schedule,
running my kids back and forth, taking care of when medical issues come up, if paying
bills were so much more of a struggle for me, how difficult that would be. I am very
fortunate because I have a good job. I work for a flexible employer. I have reliable transportation,
but if I didn’t have the access to a good checking account, access to my money immediately,
online banking, all those things that I have taken for granted, I can only imagine how
much more difficult my life would be. So I think those very simple things are just
magnified in particularly different segments of our community. So to be able to have that
fundamental piece, it’s just critical for a family’s stability, let alone just the emotional
aspect of not having to deal with the stress of running around, check cashing to pay bills,
money orders, et cetera. In terms of the role of the nonprofit sector—and
I’m sitting next to a great person here that works with clients directly every day—nonprofits
are trusted organizations within communities. We have some very strong nonprofits here in
the Louisville community. When people access those services in our community, it’s a very
teachable moment. It’s an opportunity. They’re coming to us because they have a challenge.
They’re looking for us to support them. So the better we can connect them with mainstream
products and tools, the better equipped they’re going to be to handle those issues as they
come up in their lives. When a trusted person says, “Yes, you can
trust these financial institutions. We vetted and screened these products. They’re part
of this Bank On movement,” it means a lot to them, and particularly when we have those
relationships, which this has allowed us to forge with individuals within those financial
institutions. We can make those direct, what I would consider warm referrals that really
tend to make a difference for folks who are not accustomed to different processes and
systems. It becomes much more friendly and an opportunity for us to really ultimately
service those families and then create that stability that we all look for. Thank you.
And offline, you and Director Cordray can have a conversation about the joys of having
a newly minted teenage driver or, in the Director’s case, actually two newly minted teenage drivers. And the joys of insurance bills yet to come,
right? Let me now turn to Daniel Dodd-Ramirez for
the next question. Thank you for your earlier comment, Sandy.
You talk about Fresh Start, the Fresh Start product and financial literacy. What other
options—you can feel free to talk about those as well, but what options including
product choices and other services can financial institutions offer to help consumers manage
their spending? Thank you, Daniel. I keep forgetting my microphone.
Well, first, I do think that education of our members is the very first step. I think
that you have to start with just the basics of what is a savings account, how do you save
your money, what is the best method to do that. I think credit unions at our core, that
that’s kind of what we’ve already been good at. We think that promoting thrift is where
we started, and even as young as—we send our teams out into the communities, and hopefully,
those of you from Louisville have seen us out and about. And we talk to—even at kindergarten
age and talk about saving money and giving piggy banks to them and talking to them about
bringing those to the credit union and “We’ll count those for you, and we’ll put those in
your account. And we’ll give you prizes for doing that.” Those kind of things, while they
seem so small, really do—it’s where that foundation starts. It’s where it all begins.
From that point, we offer products that are savings vehicles for children certificate
accounts, and we work with them, and we talk about those. And we celebrate those when the
kids come in and open those types of accounts. We spend a lot of time in our community, and
we offer our services to all different groups. We’re happy to come out and do financial literacy
programs, and, Christie, you had mentioned that people don’t—we don’t teach in our
schools how to balance a checkbook, which it is appalling. It is such a basic and fundamental
thing, and where all of us in here probably don’t think a whole lot about it or we’re
online and we balance our accounts every day or know where our balance is every day and
understand that, the average kid in high school does not understand how to do that. And we
make that available as just a part of our package or programs that we put together.
We also talk about—we’ve also been asked even to go at the college level to do sessions
in different classes and just to be a part of it and to explain how important good credit
is and not overspending your account and how that’s going to follow you, to your point,
Director, for 7 years on their credit bureau, and how important it is to keep your credit
clean, as clean as you can. You know, some other things that we’ve looked
at are the prepaid debit cards, and at this point, we’ve opted not to go with those simply
because the checking accounts that we offer, we feel are a better way for members to use
it. They have access to debit cards or to checks, online banking, and all of those types
of things that we really try to promote. Some other things that I think that we’ve
kind of looked at is—and the consumers have available to them and maybe they can use to
help keep them on track is looking at their credit bureau and getting their credit bureau
scores and always trying to make sure that they keep that credit score clean, if they
can. And to your point, looking for ways, if there is something on there, how do they
get that off of there? I think that—well, I know that our credit
union, we look for ways to help members. We’ll help them walk through that process. If they
have a hit on ChexSystems, if they have something on their credit bureau that they’re disputing,
we can walk them through how to do that, and I think credit unions in general do that.
So, hopefully, that answers your question. Thanks. Cheryl?
Thanks, David. Christie, I have a question for you. What are some of the challenges that
your clients have faced accessing checking accounts? And in answering, Sandy has done
a wonderful job talking about the kinds of services and educational opportunities that
they provide, but I was wondering if you could also in answering that question tell us what
the Urban League has done to help navigate those challenges.
Thank you, Cheryl. As far as access to the checking accounts, we’ve seen the challenge
because—well, we’ve seen the challenge of having a bad history, and that is primarily,
number one, some persons—of course, their incomes are very low, and they don’t have
the room to—when you have a multiple rollover of fees, they don’t have the room to necessarily
pay their bills and go back and take care of the banking account, so, thus, they get
into the ChexSystem, which is the system that prevents them from opening another account.
At that point, if they seek help—and that’s a big “if”—if they know about Bank On—and
we’ve tried to make it well known across the community about what we do, but, of course,
nonprofits and government don’t have a lot of advertising dollars. So, if they know and
if they come in, we can help them navigate that system. We do financial education workshops
that when they get a certificate for completing, they will have access to another account with
one of the member organizations. We also hope that we explain enough to them.
Many of them come in wanting to buy a home, but they don’t understand how the checking
account correlates into additional banking services like access to credit. And one of
the things that is really hard for some to understand is that the money that is going
to be used for down payments and things like that must be in a bank. It can’t necessarily
be in a prepaid card. They want to see statements. We like to help them to understand that it
must be in the bank, but there is a real distrust of some of our clients. And so we have to—just
as John mentioned, we have to really hand-hold and help them to feel that there is—there
are trusted members, trusted partners. They sought help from us. There are people that
they can work with and that really understand that behind the account number, there is a
real family. There is a real situation of, just like all of us, trying to get our kids
through school, trying to pay your bills. Most people want to pay their bills and live
comfortably. It is more of a struggle for the clients that we see. They are not being
deadbeats. Something happened, and it rolled over and had a domino effect, and now they
have another costly bill. So just like maybe a medical bill, because the lights and gas
are more expensive, it’s put on the back burner, and someone has to go back and look at it
later. And they don’t realize that this is going to impact them for a number of years.
So the main thing that we want people to realize and we want our banks to realize is that people
don’t really set out to just overdraft their accounts intentionally, most people, but they
really have made a mistake, and that we feel that it is our role to help them to get back
into the system but to understand how the system works, so that they can navigate in
the future. The other big thing is that they didn’t understand
that the big check that they wrote was going to clear first and the little checks that
were there all went into insufficient funds and therefore also caused a lot of significant
fees. So we help them to understand that and to hopefully to avoid those things in the
future, thus, giving them access to future accounts like a credit card or the home or
the car loan. Thank you. So we’ll switch this. Ben, assume you have
a consumer who comes in and wants to open a checking account, and you pull a screening
report, and the screening report comes back with negative history. And let’s assume for
purposes of this question that the report is accurate, that, in fact, there is a consumer
who has had difficulty in the past. What kind of alternative financial products can financial
institutions, can banks offer to that kind of customer?
Great question. First of all, what I would do is recommend financial institutions in
general just to have an inclusive product suite, a variety of products that will help
those that have been impacted with a negative screening report.
First of all, I think that having a basic checking and savings account is essential.
It’s really the first step in getting someone’s finances in professional order. For those
who do have the negative screening report, I recommend and encourage banks and credit
unions to have an account, in my mind, one that offers something like a checkless account,
which is what we have done recently and a lot of the banks are starting to do as well.
Many with an unfavorable history with banks through educational outreach and discussions
is checks have been the one instrument that have gotten a lot of people in trouble, not
understanding when they clear and at what point does that leave their account, et cetera.
And then they start to receive additional fees and charges that further negatively impact
their history. So being able to offer an account that virtually eliminates any chance of overdrafts
is one that we recommend and a lot of banks are starting to do.
Being able to offer this type of account is one that will have no overdraft fees, period,
one that does offer online banking and mobile banking. Mobile banking is one avenue that
we see a lot of our unbanked and underbanked families really use that smartphone as a platform
for their everyday use, so that is highly encouraged as well, offering an alternative
to checks. We do have to pay bills, and we need to offer a way to do that. And what we’ve
done and what I recommend or encourage would be to offer another avenue to make those payments,
whether it be through bill pay, whether it be giving free money orders to each individual
that opens the account, and also offering a no minimum balance requirement, very low
cost to start the account, and most importantly having no monthly fee.
In my opinion, it’s extremely important to tie financial education when opening these
products. As I drive education throughout our entire footprint day in and day out, I
see that the education is very, very important, utilizing programs like Bank On, working with
our schools and our colleges, spend a lot of time just teaching them the very basics.
What I have been accustomed to be second nature, I realize that a lot of individuals that go
through these and have rough histories with previous checking accounts, they really just
didn’t understand the basics, so it’s taking the time to make sure that they do understand
how the product works and how it operates prior to opening.
Create products coupled with coaching to help change habits in a positive aspect is very
important. I think of the products that could be offered in this inclusive suite would be
those—you know, check cashing services, getting them to the bank at an affordable
rate, not having them pay the high price that they may be doing elsewhere, to really get
them comfortable with coming into a financial institution, also looking at the opportunity
to do small-dollar loans at a very affordable interest rate to help get individuals out
of the payday lending cycle that they may be in, and then also products that help individuals
build credit. Credit is one thing that is needed every day.
As we grow older, we come to find out that it’s not just getting the loan at a low interest
rate, but we’re talking about getting your first house, getting a cell phone, getting
an apartment, helping them understanding through educational outreach the importance to do
that and having products that do that; for example, a first-time borrowers program.
So those are some of the products that I would recommend for financial institutions to look
at that we’ve seen having great success with reaching that particular audience.
Great. Thanks. Daniel? So, Jonathan, you spoke a little bit about
this earlier. Could you describe more work, the work that Cities for Financial Empowerment
has done while working with banks to develop products geared to help consumers, including
those first entering or regaining access to the banking system?
Thank you, Daniel. I think good intentions and great partnerships are the right starting
point, but it’s the standards, I think, and the details that matter. So, in October, we
released the Bank On National Account Standards for 2015 and 2016. These standards were forged
over many, many months working with a bunch of key partners, including Federal Deposit
Insurance Corporation, financial institutions, local government leaders, consumer advocates
and more. These standards specifically call for and enumerate low cost, low fees, and
most importantly, no overdraft, but at the same time also call for critical functionality
of being able to make purchases and pay bills. We see these standards as a realistic high
bar, as a starting point for Bank On priorities and partnerships.
We are really delighted that three national banks now offer accounts that meet these standards.
JPMorgan Chase’s Liquid account, Citi’s Access account, and Bank of America’s Safe Balance
Banking account are available today in close to 11,000 branches across 41 states and the
District of Columbia. Wells Fargo also announced in October at our release of the standards,
their commitment to bring the EasyPay Card to their 6,200 branches nationwide by June
of this year in response to the Bank On standards. In addition, our Bank On coalition partners
are now working with regional and local institutions, like those in the room today, across the country
to encourage them to create or to grow or improve products that will similarly meet
these standards. Federal regulators, like yourselves, have
been showing their support in addition to the welcome attention today and particularly
to the consumer reporting agency concerns that you’ve brought to bear. The Bank On movement
is also working with regulators around Community Reinvestment Act opportunities, which we think
can help incentivize account opening on the part of financial institutions as just one
example. I think that the progress of these efforts
is exciting but also potentially threatened by a number of issues that are relevant today.
Overdraft in particular, we’ve talked about, and you’ll hear more about the fees associated
with overdraft as a key reason that consumers avoid the mainstream banking system or exit
the mainstream banking system or get stopped from returning into the mainstream banking
system. We are really delighted to have partnered
with the four national banks on robust accounts that eschew overdraft altogether. We are hopeful
that the CFPB’s steps today to help sustain and spread that important progress will continue.
But locally, we continue to hear on-the-ground concerns, as I think you’ve started to hear
in the panel and may hear more about regarding opt-in engagement oversight, fee proportionality,
clearance, sequencing issues, like Christie just mentioned.
Our primary overdraft focus is on the outsized role it plays in negative reports in the accounts
screening consumer reporting agencies, as the Director has mentioned. We just recently
released a report at the CFE fund along with the National Consumer Law Center that highlighted
a number of troubling issues with these systems. You’ve laid out some of these pressing concerns.
We believe they systematically include what you focused on most today, I think, which
is the accuracy of the information they contain and how they resolve those inaccuracies, but
we also think it’s important to be taking about and making progress on the lack of consistent
definitions across and even within financial institutions, the lack of proportionality
between consumer behavior and the financial institution response, and the absence of or
the lack of transparency in how financial institutions both report information on the
one hand and then use the information on the other.
Of course, from my lens, each of these issues matter not only so that consumers who are
entering or reentering the banking system can do so easily, but also so that local governments
who can wield the power of payment streams in social system delivery can responsibly
connect people into accounts that meet these standards and to do so with comfort at scale.
Particularly, as the Director mentioned, with the market moving towards products that exclude
the possibility of overdraft, the consumer reporting agency overdraft overlay really
needs to be improved. Thank you. Thank you. Cheryl.
Yes. Lewis, how do you see financial institutions modifying their products and practices in
the future to enhance account access? Great question. So Green Dot is virtual. We
have one bank branch, and we don’t really do the nationwide business out of there. So
I think it’s a critical question to understand and help financial institutions understand
what practices could be changed. I think that many people go into the bank
branch, as was said earlier; they don’t know what their position is. They don’t know if
they’re good or bad in the check reporting systems, and when they would go there, they
would find out that they did not qualify. And it was simply a no. There was no other
option, and they didn’t feel welcome. And not only did they not feel welcome, but they
didn’t want to go back there at all, and they would spread that to other people in the community
to say, “Boy, they’re not friendly to the needs of me and probably not you.” So I think
one of the key elements that I would encourage financial institutions to do—and you’ve
heard it around this room in several ways—is that if there is an element that comes up
in those reporting systems, there has to be another product that can allow them back into
the banking system. We certainly provide that to customers where they feel comfortable going
into retail locations. They shop there. They’re comfortable with the clerk. They know that
that’s their comfort level, and that will continue to be something that we market through
our retailers. But banks really need to be able to concentrate on being able to say yes
and help through education that Ben brought up and allowing the customer to say, “Yes.
This is a place that I should be and that I belong and that I can advance, if necessary,
through the various steps.” I mean, a bank certainly has to be able to
protect themselves against fraud, but that really has to happen really in the customer
identification process. You really have to make sure that you know your customer, and
you help your customer. You help them achieve what they want to do and put them in a product
that makes sense for them to be in, so that would be my encouraging thoughts for banks,
to make sure that they have products available when normal products do not fit.
Thanks. So I want to give all the panelists one last opportunity for any closing comments
or observations they have on strategies that can be employed either to improve the checking
account screening process or, more broadly, to enhance access to consumers to these kinds
of products in a way that is safe for them and safe for the financial institutions as
well, and why don’t we go in the same order, which we started. And we’ll start with you,
John. Well, I think we fit on a lot of the things
already, but I think of ensuring adequacy—excuse me—accuracy of the reporting and screening
processes, having something that’s consistent and transparent, that’s all part of both individuals
and us as community-serving organizations, an opportunity for us to learn so we can help
education the public. I also think about products, and we’ve already
talked about Start Fresh, but a vetted financial education curriculum that’s really teaching
folks the most important aspects of having and managing an account effectively, and the
financial partners who are around the table who are fully participating in that is a great
opportunity for us to say, “Hey, look, if you’ve made a mistake in the past, you didn’t
really understand how it worked, you do have a second-chance opportunity here.” And this
is a tool that we can use in our community and share with others who have an interest.
Thank you. I’ll just build on what John said. I think
one of the main things that we would encourage the banks to think about is that when someone
comes into that branch, they are a potential customer for life, and this could just be
one of the stepping stones to access to many additional products if it is done correctly.
But the impact of the clearance process, the impact of delaying the availability of funds,
those impacts can have a lasting effect. It’s not only the effect on the family, but it
is stripping the wealth from that community in order to stabilize. So I would just encourage
that we look at those impacts, we educate our customers and our client base, and we
encourage our personnel to—someone said it down there—find a way sometimes to say
“yes” or “not now” instead of just “no.” I think that there are two key interrelated
and equally important sets of strategies. One is regulatory reforms, and the other is
industry self-reform that account screening, consumer reporting agencies, and financial
institutions can take, and in some cases are beginning to undertake. Through either/or
both route, financial institutions need to speak the same language, and they need to
use the same criteria for when and how negative events get reported. Consistent narrow definitions
and reporting standards reporting in an industry-adopted data dictionary would go really far I think
in making this a reality. Regulators could also create and enforce clear,
transparent standards for how financial institutions respond to negative events, including stronger
regulatory guidance on accuracy and error resolution, as the Director mentioned earlier,
which I think is a real critical first step. The account screening agencies and the financial
institutions that use them also have a significant role to play. Account screening agencies can
work with their clients, the financial institutions, to invest in reasonable investigations in
response to consumer complaints and to correct those errors when they are found to have occurred,
and financial institutions themselves, many of whom genuinely want and are working toward
a better account screening process can play a critical role. They can limit account denials
only to consumers with an actual narrowly defined history of fraud, which is really
the basis for the program in the first place, and they can make better usage of products
that they have to support expanded banking access.
As you’ve emphasized today, for accounts like those that meet the Bank On National Account
Standards, with no ability to overdraft, then a history of overdraft frankly shouldn’t matter.
The bottom line is expanding banking access will take a concerted effort on the part,
I think, of multiple players, the regulators, the institutions themselves, financial institutions,
advocates, nonprofit leaders, and the account screening agencies. And I really just have
to say that I think opportunities like today’s steps in this hearing point to a real groundswell
of momentum that gives me lots of hope and encouragement. Thank you.
Thank you. Sandy? I think that one of the things, too, that
we can look at in terms of checking account screening process and the access to checking
accounts is balancing the factors at a financial institutions. We look at should we screen,
should we not. How do we offer accounts and mitigate our risk so that we can continue
to offer those? And I think that balancing these factors can sometimes be difficult,
but it becomes easier—it’s not as easy to just weigh the factors towards reducing the
risk, but what we think makes us different is the mission that we have to make sure that
our members are successful. So, in using that to drive all of our decisions,
how do we improve the screening process? Well, first off, it’s to provide the accounts that
we’ve talked about by not using these screening mechanisms to determine account opening, and
as financial institutions, we have to offer accounts that don’t utilize the third party
reporting systems at all. And using our Fresh Start accounts, we use these as temporary
accounts. These aren’t an account that are designed to keep people in for long periods
of time. It’s an account where they can establish some history with us where they can use the
account for 6 months. They move to another account that allows them more access to just
the normal account that you and I use every day. And these accounts are not designed to
earn income for the financial institution. They come with risk. As I mentioned earlier,
our Fresh Start account, we have limits of not allowing the overdrafts and helping the
consumer to become more successful. Another area, I think, is to market these
products. We have them, and someone on the panel mentioned that—I think it was you,
Director, who said that out of all of the 25 that you looked at, that 8 put it on theirs
and 7 were hidden someplace else. You know, we’re kind of proud of this account. We use
this as a way to help somebody start their banking relationship and to get into the mainstream
that Ben talked about. It’s one thing to have them, but if you’re not marketing them, who
is going to use them, and how do they even know?
So, in the products that we’ve used, what have we experienced with these? We have placed
more people in these accounts than move them forward into other relationships with us,
the lending suites that we offer, and to make them more financially independent. I think
that we can take for granted that a checking account is so easy for us to use, but for
people who have had an issue in the past, getting through all that red tape is very
difficult. And having access to financial services shouldn’t be something that’s considered
a privilege for the everyday person and just for the middle class and above. It needs to
be for all consumers, and I think that the end result of it, that the one thing that
I would suggest is that the main thing that is going to impact this is the desires of
the financial institutions to help and to get on board on some of the things that we’re
talking about, and that the CFPB is doing, I think, is helping to channel that and make
that move forward, so thank you. I think one of the biggest things that we
can do—and I’ve talked a lot about education, but in this answer, I’m going to talk a little
bit about a different form of education, and that’s the education of our financial institution’s
employees. I think it’s really essential to make sure putting the clients in the right
products that are right for them, teaching our front-line employees what to look for,
key questions to ask, and once again, recommending the products that’s best for them, educating
the client on how the account actually operates and how to avoid fees and being proactive
in that essence. So continuing to educate on a regular basis
to the front line is essential. Financial institutions may have some turnover on the
front line, as that is one of the positions where we see that most often, and I think
that continual outreach to make sure that they’re aware of the products that are—all
the product suites that are out there, and making sure that they’re giving the client
the best one that’s fit for them. Our financial empowerment philosophy is to
attempt to provide financial education prior to an individual developing poor banking habits,
and it’s essential, in my mind, to be proactive in this case instead of reactive.
We also want to provide suggestions and recommendations on how to rebuild an unfavorable banking history.
We want to do this by partnering with nonprofit organizations that have programs to assist
those that may be un-bankable. Last thing that I would suggest we do is to
put individuals—the last thing that we want to do is put individuals in the wrong product
type. We really want to limit the opportunity to set them up to fail in the future. We want
to give them the right account first and foremost. It reduces risk for them and reduces risk
for the financial institutions as well. And then as you mentioned, Sandy, along the
lines of marketing the product, I think it’s really essential through educational and community
outreach and marketing to let the public and the community know the products that are out
there, and then when we can get them in to educate on how to best use those, to set them
up for success in the future rather than to possibly fail.
On a completely non-precedent basis, Lew, you get the last word.
Excellent! Certainly, listening to the panel and the
comments around the room, one size does not fit all. We understand that. That there are
various products. There are various ways that we as an industry should be able to provide
this access to the customer. I look at financial institutions as a bank
or a credit union and to be able to have FDIC insurance of NCUA insurance behind your name,
that’s a responsibility for us as bankers and credit union leaders to allow access to
all consumers that need that comfort and that surety that their money is safe, and so we
shouldn’t be withholding from the general consumer in that way.
And what we should always provide and strive for is a fair and transparent view to the
customer so that they understand the account that they have, that they understand the fees
and how they will interact with this account going forward, and to provide real-time information
as was brought up earlier to be able to help that customer know right now “how much money
I have in my account, what’s my balance.” And real time is just critical, especially
in this area. Banking is certainly changing. How people
access banking is very different. We are a total virtual bank in the fact that they can
come online to us and from their mobile device open an account. That changes the interactions.
that changes how you look and how you deal with your customer, and I think that it’s
a challenge that we should look forward to and see how we can bring more people into
the banking system and provide the education needed to fill that.
Before we move on with other pieces, just in listening to this discussion, I wanted
to make a point, which is, as I listened to this panel, pretty unanimously of the view
that opening up more product, more tailored product potential to more consumers is good
for everyone, I am reminded that for a number of years, it may be the case. It seems to
be the case that there were many financial institutions that were quite content and complacent
to settle for the system that we had I think on the thinking that this marginal customer—was
not important to serve that marginal customer because they were and always would be just
a marginal customer, and it wasn’t really economic or necessary to dig deeper.
First of all, I think I hear people here saying that that may well just be wrong, that there
are plenty of so-called marginal customers ,that if they could get into the banking system
and have the advantages of that and not be whittled away at all the time in terms of
how they manage their money may have much more opportunity to succeed. So the marginal
customer judged as such maybe was never as marginal as they needed to be if they could
be within the banking system. The other thing that occurs to me is there
was a statistic I saw the other day that was rather startling, which suggested that in
the next, you know, foreseeable number of years, something like $30 trillion will be
intergenerationally transferred through inheritances, from older Americans to younger Americans.
So the judgment that’s being made now about who is a marginal customer, if you can get
those people in the banking system and earn their loyalty, they may well become faster
than you think, much more than marginal customers, let alone what they may be able to accomplish
through the fruits of their own merits as they prosper and benefit economically.
Thank you. So this concludes the panel portion of our field hearing this morning, and I want
to ask you to join me in thanking all of our panelists for their thoughtful and thought-provoking
comments. Now I would invite the panelists to resume
their seats in the audience, and I’ll turn the program back over to my colleagues Zixta
Martinez, our Associate Director for External Affairs.
Thank you, David. Please join me in another round of applause for our terrific panel. An important part of how the Bureau helps
consumer finance markets work is to hear directly from consumers, from industry, from our state
and local partners, and from community advocates across the U.S. One of the ways the Bureau
gathers public feedback is through events such as these. We have held field hearings,
town halls, and other events across the U.S., from Miami, Florida, to Itta Bena, Mississippi,
to Seattle, Washington. At these events, we not only hear from experts in the field; we
also invite the public to participate. But before I open the floor for comments,
I want to remind folks that there are several ways that you can communicate your observations,
your concerns, or your complaints to the CFPB. You can file a consumer complaint with the
CFPB through our website at consumerfinance.gov. Our website will walk you through the process
for filing a consumer complaint about a financial product or service. The CFPB takes complaints
about mortgages, car loans, payday loans, student loans, or other consumer loans. We
take complaints about credit cards, prepaid cards, credit reporting, debt collection,
money transfers, bank accounts and services, and other financial services.
If you don’t have a specific complaint but would like to share your story with us, we
have a feature on our website called Tell Us Your Story, where you can tell us your
story, good or bad, with a consumer financial product or service. Your story will help inform
the work that we do to protect consumers and create a fair marketplace.
We also have another feature called Ask CFPB where you can find answers to over a thousand
frequently asked questions about consumer financial issues as well as additional resources.
I encourage you to visit consumerfinance.gov to learn more about the resources and tools
that the Bureau has developed to help consumers make the best decisions for themselves and
their family. Now it’s time to hear from members of the
public that are here today. A number of you have signed up to share comments and observations
about today’s discussion. The public comment portion of the field hearing is also an important
opportunity for the CFPB to hear about what’s happening in consumer finance markets in your
community. Each person who signed up to provide testimony will have 2 minutes to do so, and
what we hear from you is invaluable. We want to hear from as many of you as possible, so
I encourage you to try to observe the 2-minute limit, so that as many folks as signed up
to provide comments have the opportunity to do so.
Our first commenter is Heather Clooney. Ms. Clooney, if you will just wait. Either Chris
or Gary will bring a microphone to you. Okay. Benita Freeman.
Hello. Again, my name is Benita Freeman, and I just wanted to make a comment about the
overdrafts. One thing I’ve learned, since I come from banking—and you have clients
that been with you for 5 years or more, and they’re not getting approved for overdraft
protection due to maybe slow credit or something like that, but they’ve been banking with you
for more than 5 years or more with good income coming in, and then you have NSF points, where
they will still pay up to 2- to 3- to a $1,000 worth of bills for you but charge you overdraft
fee for everything that comes through your account. If you’re allowing them to get NSF
points and charge these fees for overdrafts, especially in low- to moderate-income family
areas, why wouldn’t you extend them the overdraft protection? You’re already paying these bills.
Just from experience, mom-and-pop store, been in business for years. Just because I know
this, I know a client that’s been in business for years. They paid over $17,000 in overdraft
fees within a year. What had happened was they had good government contracts, but their
funds wasn’t available. Well, every Friday, this client would pay his employees, 6 to
10 employees, like $150 to $200 every week because that’s what they made, and instead
of them giving him this overdraft protection to pay this fee, well, they got 6 to 10 overdraft
fees of $36 until those funds became available, which I think is ridiculous.
So, if you have people that have this money come in your account and you’re giving them
NSF points and paying up to $1,000 worth of bills, but you won’t extend them overdraft
protection, that’s where the money is being lost. And that’s money that the family is
losing that they could have, and then that’s why they go out to these payday lending places
because they’d rather get an extra 2- or $300 to pay their house note or their electric
bill and get that one fee and go back instead of getting this $36 fee, and then you pay
$7 a day every day until you get paid again. That’s too much, and then you can’t recover.
So they really need to look at how long people have been with them. They’re extending these
NSF points. Why can’t you extend overdraft protection also?
Thank you very much for your comments, Ms. Freeman. May Bixner? May Bixner? Anne Marie Regan.
My name is Anne Marie Regan. I’m an attorney with the Kentucky Equal Justice Center. We’re
a statewide advocacy group for low-income Kentuckians, and I also worked for many years
at the Legal Aid Society in Louisville, so I’ve seen the whole gamut of consumer issues,
including inability to access a bank account, mortgage foreclosures, and the whole bit.
But it’s very true, what you all have talked about, that we do not teach our children how
to deal with their financial issues. It’s a very important point. All of us—none of
us are taught that information, and so people don’t understand how their—even if they
have a bank account, they don’t understand how it works. They don’t understand the overdrafts.
They don’t understand how their credit report works or how they can fix something on their
credit report, and so all of the steps that you’re outlining today, I think are really
terrific, and I’m very supportive of what you’re trying to do to increase access to
low-risk accounts that people can use and not get into this continuing cycle of trouble.
And also, it’s very important to ensure accuracy of credit reports.
I find it very encouraging also by what the Bank On Louisville folks have done here in
our community to allow people to access bank accounts and also what the financial institutions
that were here today talking about the very positive steps that they’re taking to increase
access to bank accounts. Thank you. Thank you, Ms. Regan, and thank you for the
work you do in your community to help consumers. Jimmy Mills?
Good afternoon. My name is Jimmy Mills. I’m a co-president of an organization here in
Louisville called CLOUD, Citizens of Louisville Organized and United Together. Our mission
is to bring about change in unfair justice system, to bring justice to the people who
can’t bring justice to themselves. A few years ago, when we discovered the problems
of predatory payday lending, we launched a campaign to bring about a cap to payday lending,
but before we got to that point, we also discovered that there was a product called Bank On in
other places that we felt would be working well here in Louisville. And I’m glad to say
that Bank On Louisville is alive and well. I commend all the banks and credit unions
for their efforts, and I encourage them to go forward and let the public know that the
products is available. And it’s just a pleasure to hear that so many people are involved in
the Bank On program, and it is bringing about change for thousands of people here in the
Louisville community. Thank you. Thank you, Mr. Mills. Debbie Painter? This a shy group. Sharon Felton?
Thank you. My name is Sharon Felton, and I am with the Cooperative Baptist Fellowship,
and I am a minister at a church in Georgetown, Kentucky. And we are very thankful for the
work that you’ve been doing, and we’re working with pastors and congregations in collecting
stories and preparing people for the comment period for when you produce your ruling.
I want to tell you about a family in our church who had multiple loans, had to take out the
payday loans. They could not pay the loans every week, so they were rolled over and rolled
over. They had direct access to their bank accounts. They eventually had to close their
bank account, checking accounts, and change banks so that they could control how the money
came out and who got paid first. So I appreciate the work that you’re doing
and all the things that you’ve brought today because I think the overdraft charges are
one of the problems that they had, and so the work that you are doing will help them
and will help other people who are caught in payday loans. So we are anxious for the
rulings to come out, and we will support you in any way that we can, so we appreciate your
work. Thank you, Ms. Felton. Joy Boyd?
Hi. My name is Joy Boyd, and I work for the illustrious Tina Lentz and Eric Freidlander
with Louisville Metro Community Services, and I go around to communities and I teach
financial literacy as well as Start Fresh classes. And the one thing that I love doing
is going out to the community because there is a lack of knowledge around low- to moderate-income
individuals about the banking products that are out there. I enjoy teaching the classes
because I teach them that banks are different. So the big banks may not be the one for you.
So you want to shop around for your bank to make sure that it fits you like a glove instead
of being in a bank that you really don’t need to be at because they don’t offer the products
that you need. A lot of clients have difficulty opening checking
accounts because they’re in check systems. They’re in check systems from when they were
18 years old. They haven’t done anything else since then because they can’t get a bank account,
but they’re getting their paychecks on these pay cards, and every time they swipe, they’re
getting a charge. They get a charge to check their account. They get a charge for spending
it at the store. I don’t get a charge to check my banking account. I don’t get a charge every
time I swipe at the store. So I talk to clients really about our partnerships
with the banks that we have so that they can get in a banking system, and I let them know
to talk with their bankers, to talk to them and get to be their friend, so they can learn
about products that come out, and also don’t be ashamed to talk to them about what you
don’t know because a lot of families, children, adults came from single parents who are more
into trying to take care of the household than to teach them about savings and banking
and checking account and how to do all that. So now with the Start Fresh class, I enjoy
doing that because the products that I use and that we use with Bank On, not only can
they just help the adult, but it can help the whole entire family. So now some of the
families are starting to teach their kids now on different ways on how to save money
and how to avoid bad credit. And they also are working on their credit.
It’s wonderful partnerships we’ve had where they’ve had the opportunity to have their
credit reports, all three of them, taken. They went over it with them, taught them how
to dispute to bring their credit reports up. I’ve had people that now they’re in homes
because of the education that we’re going around.
So I’m proud to be a member of Louisville Metro Community Services and Bank On Louisville,
and the next person that’s coming up is going to verify what we say on what we do at Start
Fresh because they actually went through some of the things, so thank you.
Thank you, Ms. Boyd, for the work that you do here in Louisville. Derrick Mitchell?
Good afternoon. I will accept the baton since it’s so close near me. My name is Derrick
Mitchell. I work with Louisville Metro Government within the Micro Business Program. I help
those start and expand existing businesses. When I came to Louisville Metro, I was down
on myself because I felt that I was viewed as a marginal customer because of some of
my practices and mistakes that I had made that caused some different fees and caused
an inability for me to have a bank account at that time. I was very frustrated because
I had finally landed a great career, but I couldn’t open up a bank account anywhere.
I got the opportunity to open up a foundational account, and with a foundational account,
I began to speak with Mr. Joseph Cecil, who is over Bank On Louisville. And he encouraged
me with Start Fresh and the opportunity that was in place, so I began to go to these courses,
and it engaged my understanding of behavior economics. And I understood where I wanted
to go to, and from that standpoint, I was able to not only open up a bank account that
stems from foundational, but I later opened up another bank account with Fifth Third because
it was one of the bank accounts that I had on a list to select. Not only from that standpoint,
now I received in the mail from different bank institutions like Chase for the opportunity
to bank. So I ran with that opportunity, and I go meet
this Thursday with a representative from Northwestern Mutual to start looking into investing in
stocks and shareholders and different things about IRAs.
It was just like a flower being in a dark room, and when the opportunity of the sunlight
finally hit me, next thing you know, you would see the exposure from the light with a financial-lasting
effect that one of the panelists was talking about. This is a teachable moment that helped
me reinvent myself, and not only with that, I went on to get a Level 2 certification of
financial empowerment by going through the classes. I went on also to now work on my
financial social work certification, and I utilize this component to illustrate to all
my clients that come to the Micro Business Program because if they can see that I am
a product of the environment that I am trying to convey to them and it worked for me, it
can work for them as well. And that’s why I wanted to stand up and say
that through financial empowerment, it created a hunger for financial success. Thank you, Mr. Mitchell. Thank you for taking
the time from your busy day to make sure we have an opportunity to learn from you. It
inspires us to keep our nose to the grindstone to keep doing our work. Thank you. Debbie
Belt? Hello. I promise we did not plan this. We
just happened to come in together, but I do work with Joy and Derrick, and you can hear
how passionate they are in their work. My role is I’m with the Department of Community
Services, and I also am on the Bank On Louisville Executive Committee, so I’m going to take
this opportunity, since we were talking about how there are little marketing dollars available
in local government and we got this captive crowd here. I know that most of you are partners
with Bank On Louisville, and that’s what makes it work. That’s what makes it strong as we
get people from the public and private, nonprofit sectors together, but if you are not a partner—and
by that, I mean just someone that can help spread word. There’s many roles that can be
taken. Please do look at bankonlouisville.org, and if you are interested in some of the financial
education to Start Fresh that Joy teachers, call our office. Call 574-5156, which can
also be found on bankonlouisville.org, but feel free to teach out. Thank you very much.
Thank you, Ms. Belt. I want to thank everyone that took the time
to be here today, provided thoughtful comments. I want to thank the audience, the panelists,
and all those watching via live stream at consumerfinance.gov. This concludes the CFPB’s
field hearing. Can I interrupt one more time?
Certainly. I’m getting a little revved up as I hear people
talk here. I want to say that a few minutes ago, what
I argued about the marginal customer was kind of a business case for why banks and credit
unions should not see the marginal customer as marginal, but see them as an opportunity.
And you have reinforced the business case. I think I also just want to say what I’m sure
is in many people’s minds here, which is that a system in which 10 percent of Americans
are marginalized simply because they lack the means and we’re not willing, even though
we’re obviously able to find products that can serve them and serve them reasonable well,
is not the right thing to do. It’s un-American that 10 percent of people should be left behind
and the banking system should be comfortable with that because it doesn’t feel economical
to dig in and serve that customer base when, in fact, we now know that we can do so.
So I just wanted to say that as well. There’s not a universal service requirement in the
consumer finance statutes, as there is in telecom statutes and other places, but people
should feel this sense of obligation if they’re in the banking industry, let alone that there’s
a pretty good business case, as we’re seeing, to be made for this. Thanks.
Thank you, Director Cordray. This concludes the CFPB’s field hearing in Louisville, Kentucky.
Thank you for joining us to talk about this important issue. Have a great afternoon.