Congressman John Delaney (MD-6) introduced the Equal Access to Banking Act this month, legislation to give Americans in underserved communities access to banking services. Delaney’s Equal Access to Banking Act is designed to help the over 60 million Americans who are un-banked or underbanked, meaning they must rely upon higher cost alternatives. Without access to a checking or savings account, many must use check cashing services and other products just to access and spend their own money.
Innovative new approaches, such as philanthropic non-profit financial institutions can expand access to financial services to underserved communities by removing the profit motive and combining traditional revenue sources, government grants and philanthropic donations. Delaney’s bill removes the barriers that are preventing these new institutions from expanding into the communities that need them.
Delaney’s legislation updates Federal Deposit Insurance Corporation (FDIC) standards to allow philanthropic non-profit banks to receive deposit insurance. This necessary update would allow these new enterprises to serve consumers and bring access to checking accounts, credit and small business loans to underserved communities. Because they are not allowed to make a profit, these targeted non-profit banks will be able to offer customers lower-fee financial products.
By having access to philanthropic non-profit banks, underbanked Americans could potentially save thousands of dollars a year and have access to a financial system that works for them. These new banks would allows the unbanked and underbanked to avoid predatory high interest, high fee services like pay-day loans and expensive check-cashing transactions and expand their disposable income, while creating new pathways to encourage increases in saving. This is essentially a pay raise for millions of low-income Americans, while encouraging economic development in distressed communities.