Efforts to court the 'unbanked' mixed

WASHINGTON — A majority of U.S. banks say they have made their branches more welcoming and convenient for people who shun the banking system, but less than 10 percent of the institutions offer special savings accounts geared toward those people, a new survey shows.

The survey was released Thursday by the Federal Deposit Insurance Corp., which has been leading a project to help bring the so-called "unbanked" into the financial mainstream.

An estimated 28 million people in the U.S. don't have bank accounts - often because of mistrust, cultural and language barriers or a belief that by the time the bills are paid nothing will be left for an account. About 44 million are considered "underbanked," having an account but tending to rely on nonbank service providers, according to the FDIC.

Unbanked people, many of whom are African Americans, Hispanics or immigrants, often turn to high-cost check cashers or payday lenders that can put them into a cycle of indebtedness, regulators and consumer advocates say.

The survey showed that "more can be done to reach out to this significant market," FDIC Vice Chairman Martin Gruenberg said in a statement. "Government and industry need to work together to increase these individuals' access to the mainstream banking system."

Banks see an opportunity to expand their customer base and revenue.

"Banks are driven by profit, and there's a lot of profit there," Diana Taylor, a former state bank regulator who heads the FDIC's advisory committee on economic inclusion, said at a meeting of the panel Thursday.

But less than 18 percent of the 685 banks and thrifts of various sizes responding in the survey have identified expanding services to unbanked and underbanked people as a priority in their business strategy.

Less than 10 percent of the banks offer savings accounts targeted to unbanked or underbanked people, such as accounts set up through people's employers. Only 25 percent offer "second-chance" accounts, for people with blemished credit histories, which avoid overdraft fees but offer no protection if a check bounces.

Thirty-eight percent of banks require a minimum balance on their most basic deposit and checking accounts, and nearly all charge a per-item overdraft fee on their most basic transaction account, the survey found.

Seventy-three percent of banks did report modifying their branch operations to lure the unbanked by offering Internet or mobile banking, while 44 percent extended their banking hours. But only one-in-five have established new branches in low-income areas and 13 percent have put them in nontraditional locations like supermarkets and community centers.

The survey "indicates some of the challenges that banks have ... in reaching this community in its entirety," said James Ballentine, a senior vice president at the American Bankers Association. "There is no one way to reach this community."

Under the inclusion project, banks and community groups are partnering in nine markets - including Chicago, Los Angeles and Wilmington, Del. - to provide services including low-interest small loans, check cashing, savings and financial education, and for wiring money outside the U.S.

Among members of the advisory committee on economic inclusion are: Ronald Grzywinski, chairman of ShoreBank Corp. of Chicago; Alden J. McDonald, Jr., president and CEO of New Orleans-based Liberty Bank and Trust Co.; and Deborah Wright, chairman and CEO of Carver Federal Savings Bank of New York.