Why Janet Yellen wants more Americans to have a bank account (video)

Treasury Secretary Janet Yellen on Tuesday unveiled a plan aimed at giving more Americans access to bank accounts and affordable credit, results she says will create a stronger and fairer economy.

The initiative is part of the Treasury Department’s first-ever strategy to increase financial access for Americans, as requested by Congress in 2023.

“For the first time, the Treasury Department’s strategy provides a national road map for expanding access to essential financial tools, such as credit and investments, that are key to building wealth,” Yellen said. “Implementing these recommendations will help more families build financial security and move forward.”

First on the list of her goals, laid out in a 35-page “National Strategy for Financial Inclusion in the United States,” is to find ways that governments and financial institutions can encourage people to open transaction accounts at banks covered by federal deposit insurance. This is a strategy aimed at reducing the number of “unbanked”.

An estimated 6 million U.S. households did not have a bank or credit union account, according to the Federal Deposit Insurance Corporation’s latest national survey of unbanked and underbanked households in 2021.

Owning a bank account depends significantly on household demographics, including race, income, and gender.

While only 2.1% of white households did not have a bank account in 2021, according to the FDIC survey, 11.3% of black households, 9.3% of Hispanic households and 6.9% of American Indian or Alaska Native households did. was not

The Treasury is suggesting the federal government work with local governments to encourage people to open accounts when they get a new job, receive government benefits or receive tax refunds.

When the federal government made payments to consumers during the pandemic, those without IRS bank account information, including some of the most economically vulnerable, had to wait for a paper check rather than the faster and safer direct deposit.

The Treasury Department is also asking banks to expand the availability of bank accounts that are affordable and tailored to meet the needs of underserved communities, avoiding high fees, overdrafts and minimum balance requirements.

One example Yellen cited is Reading Cooperative Bank in Massachusetts, which is chaired by former American Bankers Association chairwoman Julie Thurlow.

It opened a new branch staffed by bilingual bankers in an immigrant community in Lawrence, Massachusetts, providing loans to finance new financial products for home renovations.

The largest US bank JPMorgan Chase (JPM), also recently announced that it is opening nearly 100 new locations in underserved areas across the country, including American cities and rural towns.

The Treasury plan released Tuesday also suggests ways to make it easier for people with no or limited credit to be able to borrow money.

The Treasury is recommending that banks, consumer reporting agencies and the government work together to use alternative ways to show that a potential borrower will repay loans on time, using utility payment history and bank account movements to help build a credit score so more can access loans .

Another action item identified by the Treasury on Tuesday is to increase opportunities for retirement and emergency savings. It emphasizes the importance of educating Americans on how to save for retirement, and that employers are the bridge to doing so.

Employers should offer incentives to save and increase access to retirement savings accounts, as well as tools to make it easier for people to access emergency savings to better cope with short-term financial shocks without jeopardizing their long-term retirement goals, the Treasury Department said. .

Overall, the report emphasizes the importance of financial education and the need for plain language disclosure of product information, consumer rights and redress options.

The Ministry of Finance recognizes that the success of this strategy depends on the active participation of banks, governments and employers.

“(This plan) focuses not only on expanding access to the financial system, but also on using that access to achieve better outcomes for consumers, such as increased financial stability, well-being and wealth,” Secretary Yellen said.

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