EDITORIAL: During these perilous economic times, we must protect the 'unbanked'

York Dispatch Editorial Board
In this April 24, 2020, photo, people wearing face masks due to COVID-19 concerns gather outside a check cashing service center in the Brooklyn borough of New York. (AP Photo/Bebeto Matthews)
  • Approximately 8.4 million U.S. households were considered “unbanked” in 2017.
  • That means no one in the household had a checking or savings account.
  • Those figures are according to the Federal Deposit Insurance Corp.
  • "Unbanked" folks often must use check-cashing services, which charge high fees.

Everyone knows these are tough times.

For the poorest among us, however, the suffering inflicted by the COVID-19 pandemic is exponentially more painful.

For those folks, the recently approved $2.2 trillion economic rescue package can be a vital lifeline for survival.

About 30 million American workers have filed for unemployment insurance in the six weeks since the pandemic shut down much of the U.S. economy.

Under the recently approved economic rescue package, the government began sending $1,200 for each individual, $2,400 for each married couple and another $500 for each dependent child to poor and middle-class families across the United States.

To smooth the delivery of the payments, which started in April, the government launched an online portal for people to provide their banking information for direct deposit. Those folks got their payments much more quickly.

No bank account, no quick relief from mounting bills

That system, however, offered nothing to people without savings or checking accounts, who are disproportionately low-income. 

Those folks had to wait for paper checks. As a result, those most in need could wait many weeks for their payments.

The “unbanked” are at risk: To add insult to injury, once those folks finally get their checks, many of those “unbanked” citizens will have to resort to check-cashing services that charge absolutely outrageous fees to those who can least afford them. A $1,200 check, for instance, can cost more than $25 to cash at such services.

That may not sound like all that much, but for people living on an economic razor's edge, it’s money they desperately need. That money can feed a family of four for a day, and when your family is living day to day, that is critical.

The reasons that people are “unbanked” vary.

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Some can’t pass a standard background check to open a checking account because the banking system views them as too risky. Others are reluctant to open bank accounts because they feel like they’ve been burned by the system in the past and are leery of trusting any institutions with their cash.

Millions impacted: Regardless of the reasons, the fact of the matter is that millions are impacted.

Approximately 8.4 million U.S. households were considered “unbanked” in 2017, meaning no one in the household had an account, according to the Federal Deposit Insurance Corp. Another 24.2 million households were “underbanked,” meaning they might have a bank account but members of the household also used an alternative financial service for money orders, check cashing, international remittances, payday loans and pawn shop loans, usually at exorbitant costs.

Those services have been rightly criticized for being highly predatory and marketing disproportionately to people of color. Roughly 17% of black households and 14% of Hispanic households were without a bank account in 2017, compared with just 3% of white households and 2.5% of Asian American households, the FDIC said.

Bring more folks into banking system: We wholeheartedly agree with the advocates who say the federal government should use the pandemic payments as an opportunity to bring more people into the banking system via Bank On accounts, which are FDIC insured, cost $5 or less a month and do not allow overdrafts or charge insufficient-fund fees. The accounts can be used for direct deposit, purchases and paying bills.

Otherwise, long lines at check-cashing stores could stretch into the fall and pose serious dangers to our public health.

Our legislators at both the state and national level should also consider bills that would make it harder to take advantage of the “unbanked.”

The COVID-19 pandemic has revealed to all of us the large number of our neighbors who are living paycheck to paycheck. The economic rescue package was drafted to help just those folks.

Now, we need to do everything we can to make sure they receive all of the money to which they are entitled.