Bet On Bank On Chicago
Underbanked. Unbanked. These terms, collectively, refer to individuals in our society who have limited or no relationship with a traditional bank. Yet, because banking transactions—money transfers, paycheck cashing, non-cash payments, and small loans—are an essential part of modern life, those without banking relationships regularly take their business to predatory, costly nontraditional financial service providers, such as payday lenders and check cashing stations. Using its political and economic clout, the City of Chicago is sponsoring Bank On Chicago, an effort to move these individuals into the financial mainstream.
200,000 Chicagoans are unbanked, and another 380,000 are underbanked. People are without banking relationships for a variety of reasons: distrust or fear of traditional banks, unfamiliarity with the traditional banking system, unattractive account offerings, lack of banks in certain neighborhoods, and more. Regardless of their reasons for using nontraditional financial service providers, each of these individuals pays these providers an estimated $30,000 in fees over the course of his lifetime. Bank On Chicago aims to fix that.
Bank On Chicago, which the City will formally unveil early this year, persuades area banks and credit unions to offer low-cost, easy to understand checking accounts intended for the more than half million Chicagoans who have limited or no banking relationship. In exchange for an offering a Bank On account, participating banks and credit unions will be promoted by the City on the Internet and in 16 communities identified as having the highest rate of unbanked and underbanked individuals. Bank On participants will also have an identifying decal in their front window, so that interested customers can ask for the account with confidence.
In developing a Bank On program, Chicago will be following the lead of several other cities. San Francisco created the inaugural Bank On program in 2006, and now has over 170 banks and credit unions offering affordable, transparent “starter” checking and savings accounts. Chicago also has the backing of the FDIC, which has conducted extensive research on unbanked and underbanked populations in the United States, and published the results in an interactive site: http://www.economicinclusion.gov/.
Chicago Appleseed applauds the City of Chicago (and Treasurer Stephanie D. Neely, in particular), the Alliance for Economic Inclusion, the United Way of Metro Chicago, the FDIC, and the Illinois Asset Building Group for collaborating on this critical issue of financial access. Appleseed has long advocated for financial education and access, as well as bank accountability. Recently, Appleseed joined the Illinois Asset Building Group in arguing for the profitability of small dollar loans (a non-predatory alternative to so-called payday loans) for financial institutions interested in enhancing their income while serving their communities.