Washington State

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Washington State

• Department of
• Financial Institutions

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Definitions

• Un-banked Individuals with no banking
  relationship (checking or savings), although they
  may have had a checking account in the past.
• Under-banked Individuals with a banking account
  and, typically, a low FICO score that impedes
  their access to incremental credit.

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Definitions

• Median family income is
• Low-income
• Moderate income at least 50 and median income.
• Middle income at least 80 and median income.
• Upper income 120 or more than area median
  income.

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Examples of Median Income

• King County 55,969
• Snohomish County 54,584
• Pierce County 49,790
• Spokane County 40,526
• Yakima County 35,787
• In terms of 2004 dollars
• Source US. Census Bureau

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Reaching the Un-Banked Under-banked

• 28 million un-banked
• 12 million under-banked
• 11 billion in fees and charges
• Savings in U.S. was a NEGATIVE 1.2 in 2006

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Survey by Center for Financial Services Innovation

• 40 black, 33 Latino, 20 white
• 50 had some college education, 20 were college
  graduates
• 50 working and remainder retired, disabled, or
  unemployed
• 31 owned own homes remainder rent.

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Un-Banked

• No asset accumulation
• Cycle of poverty
• Lose what cash they have if its kept in unsafe
  locations
• Vulnerable to scams
• Pay more for financial services

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Under-Banked

• Very diverse demographics with low-to-moderate
  income
• Willing to pay more for financial services in
  exchange for convenience and friendliness of
  financial service provider
• If bad experience with banking, may need to build
  trust

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Fringe Financial Service Providers
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Why are they Un-bankedand Under-Banked?
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Lack of Financial Education

• Lack of role models
• Unfamiliarity with banking systems in this
  Country
• Difficult to understand terms conditions

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Barriers

• Tele-Check, CheckRite, ChexSystems
• Language
• ID requirements
• Location of offices
• Hours of operation
• Dont physically feel comfortable
• Membership deposit
• Co-signer requirement

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Strategies toSupport Efforts to Reachthe
Un-banked
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Opportunities

• IDA
• Develop payday loan alternatives
• Tax return preparation
• Complement other asset building programs
• Create opportunities for outreach and education
• Low / No fee accounts

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Strategies toSupport Efforts to Reachthe
Under-banked
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Opportunities

• Prepaid or payroll card
• Wire transfer or remittance services
• Bill payment
• Check cashing
• Checking/savings account
• Consumer or auto loan
• Mortgage

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What Examiners Want to See
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Safety Soundness

• Commitment to program for long term
• Strong emphasis on education and F2F interaction
• Partnership with trusted community partner
• Acceptance at highest management levels that
  results will NOT be immediate
• Refine as program matures and constant training
  of Board, management staff
• Goals and strategies

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Other Expectations

• Be Flexible
• allow for inconsistent rules and treatment
• allow for alternative documentation of ID, income
  verification, credit worthiness
• Dont focus on cost / benefit analysis in short
  term
• Require strong collection procedures that allow
  for generous forbearance practices

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Resources

• NCUA Letter to CUs 05-CU-01
• DCU Bulletin B-07-11

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More Resources

• National Federation of Community Development
  Credit Unions
• Center for Financial Service Innovation (multiple
  articles and survey)
• Fannie May Foundation Article on Case Studies on
  the Unbanked
• National Community Investment Fund A guide to
  building products and strategies for underbanked
  markets
• Woodstock Institute Financial Services for
  People of Modest Means

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Questions?

• Linda Jekel
• WA State Director of Credit Unions, Division of
  Credit Unions
• Ljekel_at_dfi.wa.gov
• [phone]