By Sarah Oliver, CRCM
Last week the CFPB sent a letter to the 25 largest retail banks encouraging them to make available and widely market lower-risk deposit accounts that not only prevent overdrafting, but give otherwise ineligible consumers access to the banking system. Your CEO may not have received this letter, but if your institution offers FDIC insured deposit accounts, it applies to you too. Don’t hesitate to start the conversation.
The banking system offers protections that the shadow ‘financial assistance’ companies do not (we’re talking pawn shops, prepaid cards, and payday loans though nonbanks). While some of these otherwise ineligible consumers may have dug their own hole so to speak, can’t we help them out of an otherwise dark place that only cycles for the worst? The CFPB seems to think so; and frankly, it’s worth consideration. Not only can bank’s prove their commitment to bettering the economy and the lives of America’s citizens, the CFPB points out that it also makes good business sense in the way of establishing new markets.
The agency’s press release offers more detail as to how and why banks and credit unions who offer these lower-risk products should also boldly feature such products in their marketing efforts, their online and in-store checking account menus and during sales consultations. Furthermore the interplay between credit reporting and consumer misunderstanding is discussed. And here too, as we’ve come to expect, the CFPB takes another opportunity to remind bankers and reporters of the importance of accurate reporting.
One last note; make sure your lower-risk accounts don’t have features that could unnecessarily adversely affect a vulnerable population. For example, account maintenance fees should not be disproportionally higher on a low risk account compared to your traditional checking or savings accounts. Minimum balance requirements should be reasonable and obtainable for your target population; and terms should be clearly defined and should not change after account opening in ways which could adversely affect those consumers trying to rebuild their financial integrity. Think fair banking.