Banking Bill for the Poor

Twenty percent of American families do not have a bank account largely because they cannot afford to pay bank fees. Most of these families, particularly in urban areas, are at the mercy of usurious commercial check-cashing services, which generally charge extravagant fees.

My office recently completed a field study which finds that families dependent on check-cashing services pay $65 to $300 more per year than they would pay should the government mandate “lifeline” banking based on the cost of service plus a 10% profit.

In effect, these Americans are paying extra for the privilege of being poor.

Now, partly in response to requests from a diverse coalition of Los Angeles community organizations and elected officials, Rep. Esteban Torres (D-Los Angeles) has introduced legislation (HR 2250) to help deal with this problem.

This bill provides that federally insured banks offer a lifeline basic banking account which can be opened for $25, allow 10 checks per month and other benefits at a low fee. In addition, the bill requires banks to offer a government check-cashing service for no more than 10% over actual costs, a service likely to save government check recipients hundreds of dollars per year.

On one side are the beneficiaries of this legislation--some of our country’s most dispossessed people--they tend not to contribute to political campaigns, disproportionately they do not vote, nor do they fall among the favored demographics of television or newspaper advertisers. In the past, opposition to this legislation has been led by one of our nation’s most powerful lobbies--the American Bankers Assn.

Through his appointments, his visits to poor neighborhoods and his many town hall meetings and conclaves, President Clinton has shown a concern for emphasis on the material well-being of all Americans. Hopefully, he will join in the effort to pass this legislation that will help end the “rip-offs” of many of America’s poorest residents.

Lifeline banking is an opportunity for the President and Congress to significantly improve the financial well-being of low-income Americans without having to raise one penny. It is an opportunity we should not miss to help significantly millions of Americans and hundreds of thousands of Los Angeles residents.

RICK TUTTLE

Los Angeles Controller