Wells Fargo, Bank of America, JPMorgan Chase, Citibank, and US Bank are making it too hard for the average Californian to afford basic banking services. California household income, like most of America, has shrunk since the banks nearly brought down the nation’s economy in 2008. Unlike the top banks, the average household did not receive a tremendous federal bail-out. Yet the banks that did now charge households that are struggling to make ends meet as much as $144 a year plus as much as they can in overdraft fees just to access basic banking services.
The banks assert the higher prices are necessary due to Dodd-Frank and other reforms aimed at curbing overdraft excesses and limiting the fees that banks charge merchants for accepting debit and credit cards known as interchange fees. However, the reductions in overdraft and interchange fee revenue have not brought down corporate profits, which are higher now than before the regulations were adopted. In fact, banks made over $61.6 billion in profits in the first six months after the interchange limits took effect.
The banks are raising account costs knowing that doing so will push customers struggling households out of full service bank accounts. That is because the banks would rather steer those customers into prepaid cards which are exempt from recently enacted interchange fee limits. Despite the hype, prepaid cards are part of a secondary tier of limited service financial products. They provide extremely limited functionality at high prices. They do not offer the consumer protections available to bank issued debit cards. They do not provide all of the opportunities that bank account holders get to participate and advance economically.
Households that are pushed out of bank accounts lose their ability to fully participate in the financial mainstream. Bank accounts, not prepaid cards, are universally recognized assets. They provide a long-term financial identity as important to accessing quality financial opportunities as a person’s medical history is to receiving quality health care. Bank accounts are heavily regulated and protected by laws that guarantee federal deposit insurance, rights to price and fee disclosures, guarantees of availability of funds after deposit, and the right to have electronic transactions errors swiftly corrected.
The California Reinvestment Coalition believes that every California household should have access to an affordable, full service bank account regardless, and especially, if they are struggling with insufficient income or family financial responsibilities. We have designed the SafeMoney™ account as a model for what large banks and others should provide.
A SafeMoney™ account would provide a debit card, bill pay, money orders, and remittances. It excludes overdrafts. It provides customers with accurate balance information to make money management reliable. And unlike prepaid cards, it provides maximum consumer protections from liability for theft, fraud or unauthorized use. We call on the largest banks to lead – and return the service provided them by taxpayers- by investing in the profitability of the average household by offering the SafeMoney™ account.
For more information, read CRC's report: Checking Out: How Big Banks Are Pushing Consumers Out of Basic Bank Accounts The nation's biggest banks have been increasing the cost of these bank accounts so that now the most basic banking account can cost a consumer anywhere from $84-144/year. Fee exclusions are only available to their wealthy customers, and their less fortunate customers are increasingly being pushed out of banking and towards prepaid card programs. CRC has developed a model bank account that is safe, reliable, and affordable-- the SafeMoney™ account-- that banks should adopt and offer to their customers.
You can also visit our SafeMoney™ page that explains the importance of these standards and provides a comparison of bank accounts currently offered in California..
Nearly 3 million California households do not have access to a basic checking account.