For immediate release: September 6, 2018
Contact: Barbara Van Kerkhove, 585-295-5815; Ruhi Maker, 585-295-5808
Report Finds Affordable Bank and Credit Union Products Out of Reach to Working Families
Empire Justice Center Report on Financial Products and Services Finds Entry-Level Checking Accounts Have Several Affordable Features, But Most Are Not Marketed to Reach Low- and Moderate-Income Consumers
Rochester, NY—Today Empire Justice Center released its most recent report, showing that many traditional bank products are out of reach to Rochester NY area working families. The report, “Too Big to Fail…Too Poor to Bank: How Mainstream Financial Services Can Help Low-Income Working Families Succeed,” is a review of traditional bank products and services, as well as those provided by alternative financial services, like check cashers. The report found that Rochester area banks and credit unions do offer checking and transaction (debit card, no checks) accounts with affordable features.
“Our review of select accounts found that eight of the top Rochester NY area banks and credit unions have at least one entry-level checking or transaction account with six or more consumer-friendly, affordable features,” said Barbara Van Kerkhove, Researcher/Policy Analyst at Empire Justice Center and coauthor of the report.
“My checking account is very consumer friendly. For example, if I happen to overdraw my account, the bank gives me a chance to settle it before issuing the overdraft fee. Plus, I get several free money orders every month. These are just a couple of the reasons why I stay with this institution,” said city of Rochester resident Dorothy King, a participant in the report’s consumer focus group.
“The lack of marketing of these affordable, entry-level accounts, however, makes it difficult for consumers to learn about them. They are often hidden on bank websites or in marketing materials. And when you do find the information, it can be difficult to compare across products or institutions,” noted Ruhi Maker, Senior Attorney at Empire Justice and report coauthor.
Other key findings include:
- Lower income consumers know of a range of options when it comes to financial products and services from traditional banks or credit unions and alternative providers, and understand most of the costs and benefits of the various choices.
- Most consumers do not understand the various overdraft options and overdraft/insufficient funds (NSF) fees related to their accounts. They often only learn about them through a direct negative experience, which impacts how they interact with their bank or credit union going forward. The language about overdrafts and overdraft/NSF fees on many bank and credit union websites is wordy and complex, contributing to this lack of understanding.
- Financial education is not enough for lower income consumers; they simply do not have enough income. Forty-one percent of households in Monroe County do not have enough income to afford basic necessities. They need safe and affordable small dollar loans to build assets.
“It’s unlikely our country will have a living wage or universal health care anytime soon. Low-income working families need to get out of the debt-trap and build some savings as a cushion for emergencies. That’s why it’s critical that credit unions and banks offer and market affordable, consumer-friendly products and services,” stated Melissa Marquez, CEO of Genesee Co-op Federal Credit Union and founding member of the Greater Rochester Community Reinvestment Coalition.
The report recommends that all banks:
- Have at least one entry-level checking or transaction account with several consumer-friendly, affordable features, including no or limited overdraft fees that are described in plain language and in plain sight;
- Have emergency and non-emergency small dollar loans for their customers that take into account the borrower’s ability to repay;
- Have safe and affordable prepaid cards;
- Use a uniform format and language, like food nutrition labels, for marketing and comparing of accounts;
- Work with local consumer advocates to understand the concentration of poverty, the volatility of incomes, and how to design financial education initiatives that best meet the needs of low-income consumers.
“All of these recommendations are not likely to happen unless we have a strong, consumer-oriented CFPB (Consumer Financial Protection Bureau) and a reinvigorated, modernized Community Reinvestment Act. Congress must act to address the weakening of the consumer financial protection laws and regulations that has happened during the current administration,” added Ms. Maker.
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Empire Justice Center is a statewide, multi-issue, multi-strategy, public interest law firm focused on changing the “systems” within which poor and low-income families live. Empire Justice protects and strengthens the legal rights of people in New York State who are poor, disabled or disenfranchised through: systems change advocacy, training and support to other advocates and organizations, and high quality direct civil legal representation. Empire Justice has four offices in Albany, Rochester, Yonkers, White Plains and Central Islip on Long Island.