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FDIC Advisory Committee on Economic Inclusion (ComE-IN)
FDIC Advisory Committee on Economic Inclusion (ComE-IN)
ADOPTED APRIL 1, 2010
FDIC ADVISORY COMMITTEE ON ECONOMIC INCLUSION
Upon the approval of the FDIC’s Board of Directors, the Chairman
established the FDIC Advisory Committee on Economic Inclusion (“ComE-IN”
or the Committee”) in 2006 and extended its two-year charter in 2008. The
purpose of the Committee is to provide advice and recommendations to the
FDIC regarding expanding access to banking services by underserved
populations. This Strategic Plan describes program areas in which the
Committee can focus its work, particularly related to safety and
affordability for consumers and feasibility for banks.
BACKGROUND INFORMATION REGARDING UNBANKED AND UNDERBANKED
purposes of this Strategic Plan, “underserved” refers to households that
are either “unbanked” or “underbanked.” According to the FDIC Survey of
Unbanked and Underbanked Households (“Household Survey”), “unbanked” means
that no one in the household has a checking or savings account.
“Underbanked” is defined as those households that have a checking or
savings account, but rely on non-bank, alternative financial services and
providers, such as money orders, check cashing services, payday loans,
rent-to-own agreements, pawn shops, or refund anticipation loans.
least 25.6 percent of U.S. households, close to 30 million households with
60 million adults residing in them, are underserved.
An estimated 7.7 percent of U.S. households are unbanked. This
represents approximately 9 million households with about 17 million
adults residing within.
An estimated 17.9 percent of U.S. households are underbanked. This
represents about 21 million households with about 43 million adults
Certain racial and ethnic groups are more likely to be underserved than
the population as a whole. Almost 54 percent of black households, 44.5
percent of American Indian/Alaskan households, and 43.3 percent of
Hispanic households are underserved.
Nearly 20 percent of lower-income households, those earning below
$30,000, do not currently have a bank account. These households account
for at least 71 percent of all unbanked households.
The underbanked rate is more evenly distributed across income groups in
that middle-income households, those with annual income between $30,000
and $50,000, are about as likely as lower-income households to be
the surface, it would appear that banks have a strong incentive for
pursuing underserved consumers, given the sheer size of the alternative
financial services industry. The annual dollar volume of alternative
financial service provider transactions is estimated at more than $320
However, according to the FDIC Survey of Banks’ Efforts to Serve the
Unbanked and Underbanked (“Bank Survey”), while 73 percent of banks are
aware of significant underserved populations in their market area, less
than 18 percent identify expanding services to these consumers as a
priority in their business strategy.
Common reasons banks provided in the Bank Survey for not pursuing these
customers include profitability issues, regulatory barriers, and fraud
concerns. The following are some specific findings of the Bank Survey
regarding the extent to which banks provide services targeted to
62 percent of banks report offering a basic, starter transaction
account, but only 1 percent of banks do not permit overdrafts on basic
Only 7 percent of banks offer workplace-based savings and 3 percent
participate in the Internal Revenue Service’s Volunteer Income Tax
49 percent of banks offer check cashing services and 41 percent offer
money orders, while 12 percent offer prepaid cards, 18 percent offer
bill paying services, and 6 percent offer remittances.
53 percent of banks report teaching financial literacy and 58 percent
conduct financial literacy outreach.
With respect to offering alternate forms of identification, 27 percent
accept Matricula Consular and 38 percent accept Individual Taxpayer
From a consumer perspective, having access to appropriate mainstream
financial institution services confers two primary benefits. First, banks
provide a safe place for consumer savings. Basic, FDIC-insured savings
accounts, with low or no minimum balances and fees, are easy to understand
and use, provide a safe way to earn at least a modicum of return, and,
unlike more sophisticated investment options, are accessible to consumers
regardless of income level.
Additionally, mainstream financial institution services are often less
costly than alternative financial services. For example, the Brookings
Institution estimated that an employed consumer could save as much as
$40,000 over his or her career by relying on a lower-cost checking account
instead of check cashing services.
In another example, the FDIC’s Small-Dollar Loan Pilot Program has
demonstrated that banks can feasibly offer affordable small dollar loan
products as an alternative to high-cost credit products, like payday loans
and fee-based overdraft protection. Banks operating under the pilot offer
small-dollar credit products below a 36 percent annual percentage rate
(APR) versus the 400 percent APR or higher typically charged by payday
However, not all bank products and services are beneficial to consumers
from a cost perspective. For example, a consumer who is unfamiliar with
or unable to manage a traditional checking account could potentially incur
costly and unforeseen overdraft fees for misuse of the account.
There are also costs and other feasibility issues associated with banks
providing products and services to underserved consumers, particularly for
low-balance accounts and products.
Committee provides advice and recommendations to the FDIC on initiatives
to expand access to banking services by underserved populations.
Initiatives are concentrated in, but are not limited to, the following
ComE-IN’s vision is to support research, demonstration projects and
pilots, and sound supervisory and public policies intended to improve
appropriate engagement with mainstream financial institutions through its
advice and recommendations. “Appropriate engagement” means that
households are using financial products and services that are affordable,
easy to understand, and not subject to unfair or unforeseen fees.
Committee believes there are certain program areas in which the Committee
can focus its work as set forth in this Strategic Plan in order to
facilitate progress on improving appropriate engagement with mainstream
financial institutions. The Committee recognizes that specific measures
of improvement it may recommend to the FDIC in appropriate engagement are
national goals that would require participation and cooperation of
multiple stakeholders, including the FDIC, other government agencies,
Federal, state and local policymakers, the financial services industry,
nonprofit and philanthropic groups, consumer groups and consumers.
Committee’s objectives for study and possible recommendations to the FDIC
are in two relatively straightforward and complementary areas. The
Committee hopes to accomplish these objectives through the initiatives as
set forth in this Strategic Plan.
1)Lowering the Level Of Underserved Households:
The Committee’s efforts could prioritize economic inclusion activities
towards certain racial and ethnic households that are most likely to be
underserved, and on lower-income households that are most likely to be
Accordingly, achievement of this objective could also be monitored in
terms of reductions in the levels of underserved households among those
groups. Assessment of achievement of this goal could also be measured in
terms of appropriate engagement with the financial mainstream, ensuring
that households are using financial products and services that are
affordable, easy to understand, and not subject to unfair or unforeseen
2)Increasing the Supply of Financial Products and Services Targeted to
The Committee’s efforts could focus on encouraging the supply of
appropriate bank products and services that are specifically tailored to
the needs of underserved households. Achievement of this objective could
be tied to the completion of the initiatives in the five program areas and
could be monitored in terms of increases in the percentages of banks
offering products and services targeted to underserved households in as
many categories as possible. Assessment of this objective could be made in
the context of prices charged by banks for such services and demonstration
that prices are competitive with those charged by alternative service
providers and do not involve opaque, unfair, or otherwise inappropriate
fees or other charges.
Ongoing progress on these objectives could be tracked through the ongoing
Household and Bank
PROGRAM AREA INITIATIVES
achieve its objectives, the Committee believes there are certain program
areas in which the Committee can focus its work. The following
descriptions of program area initiatives delineate programmatic goals and
estimated completion dates for each initiative. As initiatives progress,
they may change and new or revised initiatives may be considered.
Identify safe, affordable, and innovative transactional accounts for low-
to moderate-income (LMI) consumers and develop methods of stimulating bank
offering of such products. Identify ways to encourage banks to provide
products that support saving as well as handle financial transactions.
Discuss and Gain External Feedback on Innovations in Safe Transactional
Products and Sustainable Delivery Strategy Options for Underserved
Consumers (Estimated Completion Date: March/April 2010) – Gather
practitioners, bankers, policy makers, and experts on safe financial
products to discuss ways to identify suitable products and sustainable
delivery strategy options. Discussion could include understanding the
cost implications of these products and identifying ways to promote
adoption on a sustainable basis among banks. Discussion could help in
the development of an action plan to recommend to the FDIC to stimulate
bank offering of safe transactional accounts for underserved
households. This initiative could consider recommending FDIC
sponsorship of a symposium.
Develop a Prototype “Suite” of Safe Transactional Products and
Sustainable Delivery Strategies (Estimated Completion Date: June/July
2010 – This effort could include identifying specific products and
product features that provide underserved consumers with safe,
convenient, and low-cost ways to: cash checks, store and save funds,
gain access to cash when needed, pay bills, purchase money orders, and
make account-to-account funds transfers. These products could consider
traditional checking accounts, possibly linked to savings accounts, as
well as employer-provided network branded payroll cardholder accounts,
network branded prepaid cardholder accounts, and innovations like
“savings pockets” embedded in prepaid accounts. Development of these
product prototypes could also consider: account opening policies, bank
personnel training, and the use of electronic payment platforms and
innovative technologies that may lower product costs.
Identify Broad-Based Initiatives and Potential Collaborations to
Encourage Banks to Offer the Suite of Products and Achieve Scale
(Estimated Completion Date: Late 2010 – The Committee could study ways
to leverage existing local and regional programs or collaborations,
including specific initiatives that it could recommend that the FDIC
undertake on its own or jointly with other agencies, that encourage
banks to offer transactional products and adopt sustainable delivery
practices (e.g., coalitions and Financial Institution Letters). This
effort could also assess the effectiveness of mandatory laws and
regulations (e.g., state lifeline account laws) and explore ways to
improve the effectiveness of the Community Reinvestment Act (CRA)
services test or provide other, possibly more effective, incentives for
banks to offer underserved consumers safe, low-cost products through the
Savings: Identify ways to provide underserved consumers with safe and convenient
ways to save, focusing on the short to medium-term horizon, that are also
attractive to and feasible for mainstream financial institutions to
Study Whether a “Base Level” of Savings Can Be Set Forth, Particularly
for Low- and Moderate-Income (LMI) Households, and Ways These Households
May Currently Be Saving. (Estimated Completion Date: December 2010)
Recognizing that increasing savings can be a double edged sword with
respect to economic growth, the Committee could study what is a
desirable level of emergency savings for households, how much is
currently there, and what ways LMI consumers are saving, beyond
mainstream financial institution accounts. The Committee also could
consider access to funds through formal and informal credit and other
channels to meet emergency needs. Also, the Committee could study the
merits of various public policy initiatives to encourage saving, such as
proposals that suggest using public and private funds for seeding
savings accounts for all children. This initiative could consider
recommending FDIC participation in a research project.
Define a Template and Delivery Options for Safe and Effective Savings
Products for Underserved Consumers (Estimated Completion Date:
March/April 2010) – See Transactional Accounts Description above.
Develop a Prototype for Safe Savings Products and Sustainable Delivery
Strategies (Estimated Completion Date: June/July 2010) – See
Transactional Accounts Description above.
Identify Broad-Based Initiatives and Potential Collaborations to
Encourage Banks To Offer The Safe Savings Prototype and Achieve Scale
(Estimated Completion Date: Late 2010) – See Transactional Accounts
Identify ways to stimulate the availability of safe, affordable,
responsible credit to underserved consumers that is also feasible and
profitable for financial institutions to offer.
Consider Recommending a “Branding Effort” That Emphasizes the
Small-Dollar Loan Pilot as a Safe Alternative to Payday Lending,
Fee-Based Overdraft Protection, and Other High-Cost, Short-Term Credit
Options (Estimated Completion Date: May/June 2010) – The product
features identified in the pilot could be “branded” as a template for
safe, affordable, feasible, small-dollar loan programs. This initiative
could consider recommending FDIC participation in making the template
easily available through websites, FDIC.gov, Economicinclusion.gov, and
speeches and outreach. This initiative also could consider whether
support for the template could be garnered through a network of other
organizations that recognize the merits of the template. Specific
emphasis in the branding effort could be placed on encouraging banks to
offer small-dollar loans as alternatives to fee-based overdraft
Highlight Findings of Small-Dollar Loan Pilot (Estimated Completion
Date: June/July 2010) – This initiative could consider recommending
FDIC sponsorship of a close-out symposium and publication of an article
to highlight final pilot findings, summarize technology and other
innovations in small dollar loans, and address progress on incentives to
scale safe, small-dollar loans across the financial mainstream. Both
the symposium and the article could also emphasize and promote the
Small-Dollar Loan Pilot “branding effort.”
Study Creation of Pools of Nonprofit Funds or Government Operating Funds
to Serve as “Guarantees” for Safe Small-Dollar Loan Programs (Estimated
Completion Date: March/April 2011) - Several existing small-dollar loan
programs feature “guarantees” in the form of loan loss reserves or
linked, low-cost deposits provided by government bodies or philanthropic
groups. These guarantees provide important assurances to banks
interested in providing loan funds and other support to the programs.
To encourage more institutions to offer small-dollar loan programs, the
Committee could study whether larger pools could be created and report
its findings to the FDIC.
Study Feasibility of a Pilot Using Federal Workforces to Test Safe,
Innovative Small-Dollar Loan Business Models (Estimated Completion
Date: June/July 2011) – The dominant model in the small dollar loan
pilot is the “high-touch” relationship building model. Peer-to-peer
technology and employer-based lending are promising technologies to
reduce handling costs, and with employer-based models, potentially
credit losses. The Committee could consider whether to recommend that
the FDIC or other Federal workforces explore serving as pilots for
testing innovative small-dollar loan business models, to the extent
Study Small Business Lending and Microfinance (Estimated Completion
Date: September/October 2010) and Other Credit Topics as Appropriate
Examine current financial education delivery and research efforts, and
consider recommendations to improve the dissemination of existing
financial education resources and strategies.
Consider Recommendations on How the FDIC Can Enhance Efforts to Promote
Youth Financial Education (Estimated Completion Date: April 2010) –
Explore additional ways that the FDIC could integrate financial
education into the K-12 classroom. For example, the Committee could
explore potential synergies between the FDIC and the Department of
Education, teachers’ unions, state officials, and others.
Study the Development of a Certification Program for Third-Party
Organizations (or Educators) that Provide General Financial Education
(Estimated Completion Date: July 2010) – Consider a framework for a
certification program and strategy for its implementation and
management. A certification program for financial educators could help
assure financial institutions and others that support financial
education that their dollars are channeled into reputable
organizations. It could also help consumers identify potential sources
to receive quality, objective financial education training. This
initiative could consider a recommendation to the FDIC.
Explore Whether There Are Regulatory or Other Impediments to Making
Changes to Promote Outcome-Based Financial Education (Estimated
Completion Date: July 2010) – As an example, in September of 2008, the
FDIC amended its regulations to make it easier for FDIC-supervised banks
to offer deposit and lending services as part of school financial
education programs without having to file a branch application. The
Committee could explore whether there are additional regulatory
incentives, or potential regulatory impediments, to further encourage
the delivery of financial education (and banking services tied to the
financial education workshops).
Examine Education Efforts Over the Past 25 Years and Determine What Has
Worked Well and What Has Not, and Consider How Financial Education Best
Practices Observed by the Government/ Regulators Can Be More Broadly
Disseminated to Practitioners (Estimated Completion Date: September
2010) - The Committee could develop a white paper or literature review
for the FDIC that summarizes existing knowledge for
practitioners/funders and identifies areas for future study for
researchers. The Committee could offer recommendations to the FDIC on
how practitioners and other stakeholders can better access/receive
financial education best practices from the federal banking regulators.
Study ways to encourage banks to lend and invest in LMI communities, and
to offer responsible loan and deposit products to LMI and underserved
individuals and families by offering stronger CRA incentives and visible
demonstrations of support from the FDIC Chairman.
Consider Ways to Encourage Banks to Offer Affordable and Responsible
Products and that Small-Dollar Loan Programs Receive Positive Community
Reinvestment Act (CRA) Consideration (Estimated Completion Date: Late
2010) – Consider
standards to ensure that CRA credit is given only for products that are
beneficial and that harmful products are adversely considered. The
Committee could consider recommendations such as guidance that
specifically allows examiners to give small-dollar loan programs heavy
weight as a “game changer,” even if the program is relatively small.
More generally, to continue to ensure that small dollar loan programs
receive positive consideration under the Community Reinvestment Act (CRA)
examination process, the Committee could consider recommending further
guidelines for bankers and examiners.
Consider Ways to Focus More CRA Attention on Promoting Bank Services,
Community Development and Helping LMI Consumers Build Assets (Estimated
Completion Date: Late 2010) – The Committee could recommend to the FDIC
further guidance that focuses more attention on asset building,
transaction services, and partnerships with nonprofits and less on
merely providing alternative systems (e.g., Internet banking) for
delivering services. The Committee could consider recommending that the
small bank rating criteria be changed to consider asset building and
savings products for LMI consumers. The Committee also could recommend
changes that allow examiners to give heavy weight to “game changing”
savings programs, like IDAs or low-cost savings accounts, even if the
program is relatively small.
Consider Ways to Support Community Development Financial Institutions (CDFIs)
from banks (Estimated Completion Date: Late 2010) – The Committee could
consider how to encourage banks to provide more support for CDFIs,
possibly through increased CRA credit, and make appropriate
recommendations to the FDIC. In addition, the Committee could consider
how to encourage banks to
“adopt” CDFIs by providing funding, lending expertise, and strategic and
Chairman’s Award for Outreach to LMI Consumers (Estimated Completion
Date: Mid 2011) – The Committee could consider recommending the FDIC
create a high profile FDIC Chairman’s award that provides positive
publicity for programs that creatively reach out to underserved LMI
consumers. The Committee could consider a sufficient number of awards for
the development of programs or increase in services where they do not
currently exist. For example, individuals at an institution who
spearheaded a program could be the recipient of the award. The awards
could rest on demonstrated results (such as behavioral change), not just
on product offerings or financial education.
The recession that started in December 2007 has been the longest and
deepest since the 1930s. Moreover, with an unemployment rate at 10
percent, continuing problems in residential and commercial real estate
markets, and household and business balance sheets still in need of
repair, recovery is likely to proceed more slowly than following more
recent declines. The Committee is concerned that prevailing economic
conditions will force more consumers to leave the mainstream financial
Additionally, these economic conditions, combined with sweeping changes in
financial services supervision and regulation that are drastically
reshaping our financial system, could distract and discourage some
financial institutions from reaching out to underserved consumers.
The Committee recognizes that the FDIC may not have the ability to
directly implement or influence all of the Committee’s recommendations
that arise from these initiatives intended to improve appropriate
engagement with the financial mainstream.
Similarly, there are challenges to measuring whether and to what extent
execution of the Committee’s initiatives can be linked to decreasing the
national level of underserved households.
All data regarding unbanked and underbanked households referenced in
this Strategic Plan were obtained from the “FDIC National Survey of
Unbanked and Underbanked Households,” December 2009.
http://www.fdic.gov/householdsurvey/ The data were collected
through an FDIC-sponsored Unbanked/Underbanked Supplement to the Current
Population Survey conducted by the U.S. Census Bureau in January 2009.
The extent to which banks offer small dollar loans is uncertain based on
the Bank Survey. This was due to widespread apparent misinterpretation
of a question by banks regarding offering small dollar loans to include
overdraft lines of credit that distorted the results. This question
will be clarified in subsequent survey efforts.
The Matricula Consular is an identification card issued
by the government of Mexico through its consulate offices to Mexican
nationals residing outside of Mexico regardless of their emigration
status. An Individual Taxpayer Identification Number (ITIN) is a
tax processing number issued by the Internal Revenue Service (IRS) to
individuals who are required to have a U.S. taxpayer identification
number but who do not have, and are not eligible to obtain a Social
Security Number (SSN) from the Social Security Administration. IRS
issues ITINs to foreign nationals and others who have federal tax
reporting or filing requirements and do not qualify for SSNs.
Matt Fellowes and Mia Mabanta, “Banking on Wealth: America’s New Retail
Banking Infrastructure and Its Wealth-Building Potential,” A Research
Brief for the Metropolitan Policy Program at Brookings, January 2008.
For example, the Household Survey reported that 54 percent of black
households, 43.3 percent of Hispanic households, and 44.5 percent of
American Indian/Alaskan households are unbanked or underbanked. In
addition, 46 percent of households with less than $15,000 annual income
and 25 percent of households with annual income between $15,000 and
$30,000 are unbanked.
The Household Survey and the Bank Survey are expected to be
re-administered in 2011.
The 2005 “Joint Guidance on Overdraft
Protection Programs,” supra, footnote 8, already provides
encouragement for banks to offer alternatives to fee-based overdraft
protection. The Guidance suggests
“monitoring excessive consumer usage, which may indicate a need for
alternative credit arrangements or other services, and inform consumers
of these available options.” These options could include small-dollar