WASHINGTON (Reuters) - The U.S. bureau charged with protecting consumers on Wednesday pressed the 25 largest retail banks to make checking and saving accounts accessible to millions of “unbanked” Americans.
In a letter, it encouraged them to help depositors avoid overdrafts and ongoing negative balances with special accounts.
Checking accounts or prepaid reloadable accounts make it easier for consumers to receive wages and benefits, make payments and manage their day-to-day lives, the Consumer Financial Protection Bureau said in the letter.
“Unfortunately, however, many consumers, including those with limited or irregular incomes, struggle to manage their spending, avoid unwanted fees, repay overdrawn balances, and maintain these critical accounts.”
It added that a person who has an account closed for a negative balance can struggle to open future accounts and ultimately be shut out of the banking system.
According to the CFPB an estimated 10 million Americans do not have deposit accounts.
It added that in recent years, a number of institutions have introduced “no-overdraft” accounts ensuring consumers cannot spend beyond their balances, but lack of marketing “has lessened their visibility and undermined their rate of uptake.”
The letter was released as part of a broader push, with the bureau’s Director Richard Cordray set to attend a field hearing on retail banking in Louisville, Kentucky, on Wednesday.
“Overdraft programs have become a significant source of industry revenues,” Cordray was slated to say, according to a text of his prepared remarks.
“Living outside the banking system can be costly and time-consuming, especially for those who are the most financially vulnerable,” he said. “They often come to rely on expensive nonbank money services that can take a big bite out of their earnings.”
The bureau is pressing banks and credit unions to ensure account closure records are accurate, so that incorrect information does not prohibit a person from opening an account.
Reporting by Lisa Lambert