Bankers Fight Plan to Aid Poor, Elderly : Senate Panel Studies Low-Cost Accounts, Free Check Cashing

Banking groups lined up today to oppose legislation that would require financial institutions to cash government checks for non-customers and offer low-cost savings or checking accounts.

The bankers told the Senate Banking subcommittee on consumer and regulatory affairs that banks have been doing a good job of voluntarily meeting the needs of the poor and elderly and should not have new government requirements imposed on them as proposed by Sen. Howard M. Metzenbaum (D-Ohio).

“How can it make sense for Washington to mandate one rigid approach which is supposed to meet the needs of all our diverse communities?” asked American Bankers Assn. representative Robert L. Stevens, president of the Bryn Mawr Trust Co. in Pennsylvania.

But officials of organizations representing consumers and the elderly told the panel that financial institutions ought to be ashamed to argue against government involvement at a time when Congress is considering a $300-billion rescue of the savings and loan industry.

‘Astronomical Costs’

“Banking lobbyists have often stated that the banking industry is a private enterprise and should not be looked on as having to fill any given public purpose,” said Peggy Miller of the Consumer Federation of America. “Such an assumption made in the face of the astronomical costs to the public of the S&L; bailout is indefensible.”

Metzenbaum had originally tried to enact his proposals by attaching them to the S&L; bailout bill passed by the Senate on April 19, but he backed off after Sen. Alan J. Dixon (D-Ill.), chairman of the subcommittee, promised him a hearing.

Dixon said he is keeping an open mind on the proposals and will decide “in a month or so” whether to begin moving them through the legislative process.

One of Metzenbaum’s bills would require banks and S&Ls; to cash such government checks as welfare and Social Security payments of up to $1,500 for non-customers with proper identification. The institutions would be permitted to cover their costs through a low fee set by the Federal Reserve.

The second measure would require financial institutions to offer low-cost accounts with a minimum balance of $25 and a maximum balance of $1,000. The institutions would have to provide monthly statements and permit up to 10 checks or withdrawals a month.

“This is not drastic or Draconian legislation. It’s a very modest proposal,” he said.

However, banking groups complained that they would suffer losses from fraud if denied the right to refuse to cash a check.

The bankers’ association said a survey showed that more than half of banks and three-quarters of large banks already offer low-cost basic accounts and that 80% cash government checks for non-customers.