The FDIC – an independent agency of the federal government -- says it is committed to ensuring that all U.S. households have access to safe and affordable banking services.
With that goal in mind, the FDIC is looking for insured institutions that are willing to take part in a "Model Safe Accounts" pilot project. The project will see if it’s feasible for banks to offer low-cost checking and savings accounts that respond to the needs of “underserved customers," the FDIC says on its Web site.
The FDIC’s Board of Directors approved the model project on Monday, Aug. 10.
The move comes at a time when fees are expected to go up for many established banking customers, given new government regulations that will cut into financial institutions’ profits. (See related story)
According to an FDIC survey, more than 25 percent of U.S. households are "underserved," 7.7 percent are "unbanked," meaning they lack a bank account, and around 18 percent are "underbanked," meaning they have bank accounts but also rely on non-bank alternative financial services.
Minority and lower-income households are much more likely to be underserved, the FDIC says. The survey also found that one in five households earning under $30,000 is “unbanked.”
Banks that volunteer for the Model Safe Accounts project must follow the following guidelines:
-- Accounts will be mostly electronic with limited acquisition and maintenance costs;
-- Accounts will be FDIC-insured, "have reasonable rates and fees that are proportional to their cost," and be subject to applicable consumer protection laws;
-- The transactional accounts will be "checkless," allowing withdrawals only through automated teller machines, point-of-sale terminals, and other automated means.
-- There will be no overdraft or insufficient-fund fees for these checkless accounts.
-- Savings accounts will have "autosave" features such as preauthorized periodic electronic transfers from other accounts.
-- Both types of accounts may feature electronic statements in lieu of paper statements.
-- Standard customer identification rules apply, including verification through the use of driver’s licenses, passports, and alien identification cards.
Participating banks are encouraged to offer auxiliary services such as “delivery of financial education,” money transfers, bill payment, linked-savings to cover overdrafts, and “reasonably priced” overdraft lines of credit or small-dollar loans.
The FDIC says access to mainstream financial services provides consumers with a safe place to save, conduct basic financial transactions affordably, build a credit history and obtain credit on favorable terms, and achieve financial security.
The FDIC Model Safe Accounts Pilot is expected to run for one year, and it will be evaluated quarterly. “Information collection will focus on the volume, use, success, and profitability of the accounts,” the FDIC says. And it says individual reports submitted by banks will remain confidential.
Insured institutions wishing to volunteer have until Sept. 15 to apply for the Model Safe Accounts project.
As an inducement, the FDIC says participation will allow banks to “reach out to new consumers or increase usage of bank products by existing customers. Moreover, participation in the pilot can result in an increase in community goodwill as it could demonstrate an institution's commitment to serve all income levels and help the FDIC provide a roadmap for others in the industry.”
Although the FDIC does not endorse products or institutions, it notes that the pilot project “will be discussed at meetings open to the public and the press.” The FDIC also said it will issue press releases and reports “that will likely include the names of participating institutions.”
‘Safe, sustainable banks’
A liberal think tank, the New America Foundation, is encouraging banks to participate in the pilot project.
"Consumers should not have to guess what basic banking will cost them; nor should they have to sacrifice their hard earned money just to cash a check, withdraw cash, or pay a bill," said Anne Stuhldreher, a senior research fellow at the New America Foundation. "This pilot is an important step to ensure all Americans have access to safe and secure bank accounts, which serve as on-ramps to economic stability and upward mobility."
The New America Foundation also advocates “autosave” accounts, which encourage employees to save money through automatic payroll deductions.
"Products that help families build wealth and security are a critical alternative to the wealth-stripping options that many families currently rely upon," said Alejandra Lopez-Fernandini, a senior policy analyst at the New America Foundation. "While this pilot is a good step forward, it requires financial institutions to step up to the plate in order for it to succeed."
FDIC employs 6,500 people
According to its Web site, the Federal Deposit Insurance Corporation "preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions for at least $250,000; by identifying, monitoring and addressing risks to the deposit insurance funds; and by limiting the effect on the economy and the financial system when a bank or thrift institution fails."
The FDIC was created in 1933 following thousands of bank failures. The FDIC receives no taxpayer money. It is funded by premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities.
The FDIC employs more than 6,500 people. It is headquartered in Washington, D.C., and is managed by a five-person board of directors, all of whom are appointed by the President and confirmed by the Senate, with no more than three being from the same political party.