Few Budget Services Despite Legislative Pressure, Survey Shows : Low-Cost Checking Accounts Still Rare in State

Despite continuing consumer and legislative pressure on California savings institutions to offer free or low-cost checking accounts, the number of institutions statewide doing so has not grown in the past year, according to a survey to be released today.

However, nearly nine in 10 of the institutions surveyed continue to offer at least one free account--usually checking--to senior citizens, although few actively publicize such accounts, said Consumer Action, a San Francisco-based consumer group that regularly surveys financial institutions in the state.

The survey is the latest evidence of the continuing erosion of basic low-cost banking services that had been taken for granted before banking deregulation began in the late 1970s. Since deregulation, institutions have increasingly passed along to consumers the costs of administering such accounts.

“Our concern is that many low-income people feel that they simply can’t afford a checking account because of high service charges and high minimum balance requirements,” survey director Sheila Kolenc said.

The survey also indicates that pressure from some legislators for so-called lifeline or baseline accounts for low-income consumers is likely to continue, Consumer Action Executive Director Ken McEldowney said. Lawmakers in California and other states have sought legislation requiring low-cost services but have generally failed against strong lobbying by banking industry officials.

“But even though the industry said legislation is not needed because it would create these accounts on its own, this has not been the case,” McEldowney said. “There’s not been an appreciable increase in such accounts.”

The survey in fact shows that the number of such accounts has declined since a similar survey was conducted last year, although such a comparison may not be fair because not all of the same institutions responded to both years’ surveys.

This year’s survey, conducted as of Oct. 20, showed that only five of the 80 banks and savings and loan associations surveyed had a low-cost checking account, compared to eight last year. Consumer Action defined a low-cost account as one that carries monthly service fees of $1 or less per month, allows up to eight checks per month, requires minimum opening balances of no more than $300 and allows the minimum balance to fall to zero during the month without incurring an additional fee.

The five institutions offering such low-cost accounts are Barbary Coast Savings Bank, Homestead Savings, San Francisco Federal Savings, Santa Barbara Savings and Sears Savings Bank. Institutions charging between $1 and $3 include Sanwa Bank, Gibraltar Savings, Valley Federal Savings, Bank of America, Western Federal Savings and Coast Savings. Some of them, however, place restrictions on the accounts or do not automatically return canceled checks.

Require Minimum Balance

More institutions, such as Security Pacific National Bank, offer free or low-cost checking but require that a minimum balance, usually at least $100, be maintained at all times to avoid higher charges. Consumer Action’s McEldowney contended that such minimum balances may make these accounts less accessible for low-income consumers.

Seventy-one of the 80 banks and S&Ls; surveyed continue to offer free accounts for senior citizens, making them one of last free banking services to survive deregulation, McEldowney said. Minimum ages to qualify for such accounts generally range from 55 to 65, the survey shows.

However, many institutions fail to adequately publicize such accounts and may not tell account holders who pass the minimum age that they are eligible for the accounts, McEldowney charged. Institutions continue to offer such accounts partly because seniors often keep high balances, making the accounts profitable, he said.