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Perlmutter Leads Subcommittee in Efforts to Improve Banking Access for Unbanked, Underbanked Americans
Washington, D.C. – Today U.S. Rep. Ed Perlmutter (CO-07), chair of the Subcommittee on Consumer Protection and Financial Institutions, led a hearing on improving and expanding access to the financial system for unbanked and underbanked Americans. As of 2019, more than one in five Americans was unbanked or underbanked, according to a report from the Federal Reserve System. Approximately 7.1 million U.S. households were “unbanked”, meaning that no one in the household had a checking or savings account at a bank or credit union. The same report found that lower income households and people of color were disproportionately likely to lack access to traditional banking services, with Hispanic and African-American households two and three times as likely (respectively) to be unbanked or underbanked compared to White households. The COVID-19 pandemic also highlighted the importance of having bank accounts during a national emergency. A recent report estimated CARES Act Economic Impact Payment recipients spent $66 million just to cash the first round of checks.
“Equal and affordable access to traditional banking services was a problem for too many Americans prior to the COVID-19 pandemic, but the public health emergency exacerbated the issue for many. For example, the first round of Economic Impact Payments went to Americans with a bank account on file with the IRS while folks without a bank account had to wait for a check and were then forced to pay a fee to cash the check,” said Perlmutter. “This is unacceptable. Ensuring every American has access to a safe and affordable bank account will protect vulnerable consumers and ensure our economic recovery is inclusive and reaches every community.”
Unbanked and underbanked consumers often rely on alternative non-bank financial products such as check cashing, money orders, bill payment, or other services, which typically come with higher costs and may not be as reliable as traditional banking services. An additional 53 million Americans have access to a bank account but also rely on alternative financial services in place of traditional banking. According to a 2019 FDIC survey of U.S. households, the top reason reported by households for not having a bank account was because they did not have enough money to meet a bank account’s minimum balance requirements. Other reasons cited were a lack of trust in banks, privacy concerns, inconvenience, and fees.
“While banking access has improved for more Americans in recent years, the impact of the COVID-19 pandemic on this trend has yet to be seen. The pandemic also brought to light the need for consumers to be able to interact with banks through the internet and smart phone access, both of which are traditionally lower among unbanked households,” continued Perlmutter.
Cannabis businesses are an example of an entire industry that remains significantly unbanked and underbanked. Cannabis with over 0.3% THC is not legalized under federal law and most financial institutions are unwilling to provide services to the industry out of fear of criminal prosecution or regulatory risk. Perlmutter’s bipartisan SAFE Banking Act, which has passed the U.S. of Representatives four times, would create a safe harbor for financial institutions serving state-legal cannabis businesses.
One of the key areas of jurisdiction for the Subcommittee is overseeing consumer access to financial services. This hearing served as an important step in better understanding current trends in unbanked and underbanked households – particularly following the COVID-19 pandemic, challenges to access of mainstream financial services, and current initiatives and proposals to better expand affordable banking and financial services for all Americans.