FDIC SAFE BANKING TEMPLATES Jean Ann Fox Director of Financial Services Consumer Federation of America

Unbanked and Underbanked Consumers 9 million US Households are unbanked (17 million adults) 17.9% are underbanked (43 million adults) Total: Over a quarter of US HHs (60 million adults) Minorities more likely to be unbanked/underbanked Low Income Single Head of Household Less than high school diploma Younger Southerners Source: FDIC National Survey of Unbanked and Underbanked Households, December 2009

Barriers to Bank Account Ownership Don’t feel they have enough money to need one (FDIC) Cost of overdrafts Uncertainty of fees and expenses for account Disputes related to recordkeeping Difficulty in getting problems solved Source: Study of the Unbanked & Underbanked Consumer in the Tenth Federal Reserve District, Federal Reserve Bank of Kansas City Paid in cash (more likely to be banked if paid by direct deposit or checks) Bank not conveniently located Source: Pew Trusts, “Unbanked by Choice.”

Why Bank Account Ownership is a Good Thing Avoid steep fees for check cashing, bill payment Higher savings rate Safety of funds in insured account Benefit from speed of direct deposit of wages, tax refunds, federal benefits – Treasury going paperless Get protections of the Electronic Fund Transfer Act for liability limits on debit transactions, dispute rights, control over making payments electronically Less risk of theft, fraud loss inherent to cash Ticket to financial mainstream

And the downside of being banked Eligible to use payday loans and deposit cash advance loans from some banks Steep fees for bounced checks and overdrafts Aggressive marketing to opt in to debit overdraft fees Holds on deposited checks Escalating fees, higher minimum balances to avoid fees make accounts expensive for LMI consumers May not offer convenient money transmitter services Checks not accepted by some landlords Money orders may be expensive

AFS Products Used by Unbanked and (Underbanked) 66% use one or more transaction or credit products 54% buy money orders (81% of underbanked) 38% paid for non-bank check cashing (30% underbanked) 12% use prepaid debit card, 3% use payroll card 6.6% use payday loans (11.4% of previously banked and 16% of underbanked) 14% use pawn shops (15.8% of underbanked) 11.9% use rent-to-own (13% underbanked) 7.8% use refund anticipation loans (13% underbanked) Source: FDIC Unbanked/Underbanked Study

FDIC Model Safe Accounts Template Features for transactional account Card-based electronic account No overdraft or NSF fees Free direct deposit Free automatic savings feature Free online and mobile banking and bill pay Free electronic statements, with customer consent Opening balance $10 to $25 Monthly minimum balance $1 Monthly maintenance fee up to $3 2 free money orders per month, additional for reasonable fee Check cashing free on-us check, reasonable fee Funds available same or next day with exceptions

Basic Savings Account Features Card-based electronic account Interest bearing Free direct deposit Free automatic savings feature Free online and mobile banking/bill pay Free electronic statements, with customer consent $5 opening balance $5 minimum monthly balance No monthly maintenance fee if minimum balance is met Free check cashing if on-us check, reasonable fee Funds availability same day or next day from established cust.

Auxiliary Services and Fees Financial education free Reasonable and proportional fees for: Linked savings account Line of credit Kiosk bill payment Domestic and international wire transfers Loans up to $2,500 meet FDIC’s Safe, Affordable, and Feasible Template for Small-Dollar Loans

Pilot Banks and Areas Bath Savings Institution, Maine Citibank, NYC with Grameen America Cross Country Federal Savings Bank, New York First State Bank, Tennessee ING DIRECT, in four areas (Baltimore, Atlanta, Philadelphia/Camden/Wilmington, Seattle/Tacoma) Liberty Bank and Trust Co., New Orleans, LA Pinnacle Bank, Nebraska, Kansas, Missouri South Central Bank, Kentucky Webster Five Cents Savings Bank, MA