[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



 
                  SERVING THE UNDERSERVED: INITIATIVES
                   TO BROADEN ACCESS TO THE FINANCIAL
                               MAINSTREAM

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
               FINANCIAL INSTITUTIONS AND CONSUMER CREDIT

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 26, 2003

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 108-45



91-773              U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2003
____________________________________________________________________________
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa                 BARNEY FRANK, Massachusetts
DOUG BEREUTER, Nebraska              PAUL E. KANJORSKI, Pennsylvania
RICHARD H. BAKER, Louisiana          MAXINE WATERS, California
SPENCER BACHUS, Alabama              CAROLYN B. MALONEY, New York
MICHAEL N. CASTLE, Delaware          LUIS V. GUTIERREZ, Illinois
PETER T. KING, New York              NYDIA M. VELAZQUEZ, New York
EDWARD R. ROYCE, California          MELVIN L. WATT, North Carolina
FRANK D. LUCAS, Oklahoma             GARY L. ACKERMAN, New York
ROBERT W. NEY, Ohio                  DARLENE HOOLEY, Oregon
SUE W. KELLY, New York, Vice Chair   JULIA CARSON, Indiana
RON PAUL, Texas                      BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio                GREGORY W. MEEKS, New York
JIM RYUN, Kansas                     BARBARA LEE, California
STEVEN C. LaTOURETTE, Ohio           JAY INSLEE, Washington
DONALD A. MANZULLO, Illinois         DENNIS MOORE, Kansas
WALTER B. JONES, Jr., North          CHARLES A. GONZALEZ, Texas
    Carolina                         MICHAEL E. CAPUANO, Massachusetts
DOUG OSE, California                 HAROLD E. FORD, Jr., Tennessee
JUDY BIGGERT, Illinois               RUBEN HINOJOSA, Texas
MARK GREEN, Wisconsin                KEN LUCAS, Kentucky
PATRICK J. TOOMEY, Pennsylvania      JOSEPH CROWLEY, New York
CHRISTOPHER SHAYS, Connecticut       WM. LACY CLAY, Missouri
JOHN B. SHADEGG, Arizona             STEVE ISRAEL, New York
VITO FOSSELLA, New York              MIKE ROSS, Arkansas
GARY G. MILLER, California           CAROLYN McCARTHY, New York
MELISSA A. HART, Pennsylvania        JOE BACA, California
SHELLEY MOORE CAPITO, West Virginia  JIM MATHESON, Utah
PATRICK J. TIBERI, Ohio              STEPHEN F. LYNCH, Massachusetts
MARK R. KENNEDY, Minnesota           ARTUR DAVIS, Alabama
TOM FEENEY, Florida                  RAHM EMANUEL, Illinois
JEB HENSARLING, Texas                BRAD MILLER, North Carolina
SCOTT GARRETT, New Jersey            DAVID SCOTT, Georgia
TIM MURPHY, Pennsylvania              
GINNY BROWN-WAITE, Florida           BERNARD SANDERS, Vermont
J. GRESHAM BARRETT, South Carolina
KATHERINE HARRIS, Florida
RICK RENZI, Arizona

                 Robert U. Foster, III, Staff Director

       Subcommittee on Financial Institutions and Consumer Credit

                   SPENCER BACHUS, Alabama, Chairman

STEVEN C. LaTOURETTE, Ohio, Vice     BERNARD SANDERS, Vermont
    Chairman                         CAROLYN B. MALONEY, New York
DOUG BEREUTER, Nebraska              MELVIN L. WATT, North Carolina
RICHARD H. BAKER, Louisiana          GARY L. ACKERMAN, New York
MICHAEL N. CASTLE, Delaware          BRAD SHERMAN, California
EDWARD R. ROYCE, California          GREGORY W. MEEKS, New York
FRANK D. LUCAS, Oklahoma             LUIS V. GUTIERREZ, Illinois
SUE W. KELLY, New York               DENNIS MOORE, Kansas
PAUL E. GILLMOR, Ohio                CHARLES A. GONZALEZ, Texas
JIM RYUN, Kansas                     PAUL E. KANJORSKI, Pennsylvania
WALTER B. JONES, Jr, North Carolina  MAXINE WATERS, California
JUDY BIGGERT, Illinois               DARLENE HOOLEY, Oregon
PATRICK J. TOOMEY, Pennsylvania      JULIA CARSON, Indiana
VITO FOSSELLA, New York              HAROLD E. FORD, Jr., Tennessee
MELISSA A. HART, Pennsylvania        RUBEN HINOJOSA, Texas
SHELLEY MOORE CAPITO, West Virginia  KEN LUCAS, Kentucky
PATRICK J. TIBERI, Ohio              JOSEPH CROWLEY, New York
MARK R. KENNEDY, Minnesota           STEVE ISRAEL, New York
TOM FEENEY, Florida                  MIKE ROSS, Arkansas
JEB HENSARLING, Texas                CAROLYN McCARTHY, New York
SCOTT GARRETT, New Jersey            ARTUR DAVIS, Alabama
TIM MURPHY, Pennsylvania
GINNY BROWN-WAITE, Florida
J. GRESHAM BARRETT, South Carolina
RICK RENZI, Arizona


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 26, 2003................................................     1
Appendix:
    June 26, 2003................................................    49

                               WITNESSES
                        Thursday, June 26, 2003

Abernathy, Hon. Wayne, Assistant Secretary Financial 
  Institutions, Department of the Treasury.......................     6
Bair, Sheila, Dean's Professor of Financial Regulatory Policy, 
  University of Massachusetts....................................    36
Beltran, Al, President and Chief Executive Officer, Security 
  First Hidalgo Federal Credit Union, McAllen, Texas, on behalf 
  of the Credit Union National Association.......................    28
Bryant, John, Founder, Chairman and CEO, Operation Hope..........    30
Dollar, Hon. Dennis, Chairman, National Credit Union 
  Administration.................................................     8
Manjarrez, Gabriel, Senior Vice President, Hispanic Marketing 
  Executive, Bank of America.....................................    34
Satisky, Brian, President, Maryland Association of Financial 
  Service Centers, Inc., on behalf of the Financial Service 
  Centers of America.............................................    38
Young, James E., President and CEO, Citizens Trust Bank, Atlanta, 
  Georgia........................................................    24

                                APPENDIX

Prepared statements:
    Bachus, Hon. Spencer.........................................    50
    Barrett, Hon. J. Gresham.....................................    54
    Gillmor, Paul E..............................................    55
    Hinojosa, Hon. Ruben.........................................    56
    Scott, Hon. David............................................    59
    Abernathy, Hon. Wayne........................................    60
    Bair, Sheila.................................................    66
    Beltran, Al..................................................    72
    Bryant, John.................................................    85
    Dollar, Hon. Dennis..........................................   104
    Manjarrez, Gabriel...........................................   116
    Satisky, Brian...............................................   121
    Young, James E...............................................   130

              Additional Material Submitted for the Record

Hinojosa, Hon. Ruben:
    Acceptance of Mexican Consular IDs is Not Only Legal It 
      Improves Public Safety and Enhances the Economy............   137
    Citigroup Efforts on Banking the Unbanked and Financial 
      Literacy...................................................   155
    Embassy of Mexico-USA, Invisible Security Features...........   159
    List of Several Financial Literacy Programs, America's 
      Community Bankers..........................................   165
    The Role of Matricula Consular at Financial Institutions, 
      National Council of La Raza................................   177


                  SERVING THE UNDERSERVED: INITIATIVES
                   TO BROADEN ACCESS TO THE FINANCIAL
                               MAINSTREAM

                              ----------                              


                        Thursday, June 26, 2003

             U.S. House of Representatives,
            Subcommittee on Financial Institutions,
                                And Consumer Credit
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 10:05 a.m., in 
Room 2128, Rayburn House Office Building, Hon. Spencer Bachus 
[Chairman of the subcommittee] presiding.
    Present: Representatives Bachus, Gillmor, Hensarling, 
Barrett, Maloney, Sherman, Waters, Velazquez, Hinojosa, Lucas 
of Kentucky and Davis. Also present were Representatives Baca 
and Scott.
    Chairman Bachus. [Presiding.] Good morning. The 
subcommittee will come to order.
    Today, we are holding a hearing entitled Serving the 
Underserved: Initiatives to Broaden Access to the Financial 
Mainstream. This hearing was requested by Mr. Hinojosa to 
address issues relating to the un-banked, including the use of 
international remittances and the acceptance of Consular 
identification cards. I applaud him for requesting this 
hearing. I think it is going to be an exciting hearing, a 
hearing that has tremendous potential to improve both citizens' 
abilities to benefit from financial prosperity from the banking 
system and also be of great benefit to our economy when all our 
citizens are given the opportunity to contribute.
    The witnesses on the first panel will include Mr. Wayne 
Abernathy from the Treasury Department, and Mr. Dennis Dollar.
    Our second panel is going to be made up of representatives 
from some of our minority-owned banks, representatives from the 
academic world. Those witnesses, as well as our witnesses from 
the first panel, will talk about innovative ways that we are 
now attracting the un-banked. There are as many as 10 million 
households or 60 million Americans who for one reason or 
another do not avail themselves of banking services. When they 
either do not have an opportunity to use Federal Deposit 
Insurance institutions or because of suspicions that they may 
have, choose not to avail themselves of these institutions, we 
find that they are prejudiced and handicapped financially. They 
normally end up paying more for remittances, check cashing 
privileges, than they would if they chose to avail themselves 
of a credit union or a bank.
    We also find the importance of educational programs, of 
financial literacy programs. When citizens avail themselves of 
those and banking services, we find that financially they are 
better able to manage their finances. It is an indication of 
their ability to keep and retain property, wealth, 
homeownership. So oftentimes, becoming associated with a 
Federally Deposited Insurance financial institution leads to 
more success on their part.
    One debate that is going on in the Congress today does 
involve the use of Matricula Consular cards. There is a bill 
before the Congress to actually prohibit a federally insured 
institution from accepting those cards as identification. There 
is another bill before the Congress by Mr. Hinojosa which would 
on the other hand require federally insured deposit 
institutions to accept those cards. Mr. Abernathy will testify, 
and I agree with his approach to it, that we should basically 
allow each financial institution to determine what they believe 
is proper identification, and neither prohibit nor require 
certain forms of identification. Several of our banks--we are 
going to have a witness from Bank of America--but several of 
our large banks have very much increased their services and 
outreach to the un-banked. We are going to hear some of those 
success stories.
    Furthermore, we have several government initiatives. The 
FDIC MoneySmart program, the Federal Reserve has just announced 
an initiative. The National Credit Union Administration, we 
will hear from Administrator Dollar about Access Across 
America. The Treasury First Accounts program--we will hear 
about those from Under Secretary Abernathy.
    I think there are a lot of great things happening. There 
are some very aggressive campaigns underway by both the 
government and by large banks, and by minority-owned banks. We 
are going to hear from minority-owned banks, many of whom have 
several programs and offer tellers who speak the language of 
the people seeking the service. That is a big help.
    I think my time has about expired, but I do want to commend 
Bank of America, Wells Fargo and Citigroup, three of our 
largest institutions, for their increase in making remittance 
services available to the un-banked.
    At this time, I am going to recognize Mr. Hinojosa for an 
opening statement.
    [The prepared statement of Hon. Spencer Bachus can be found 
on page 50 in the appendix.]
    Mr. Hinojosa. Thank you, Mr. Chairman.
    Chairman Bachus, thank you for your leadership as Chairman 
on this very important issue. I am grateful that you and my 
friend, Ranking Member Sanders, have agreed to hold this 
hearing today as a result of our colloquy on my amendment to 
H.R. 1375, the Financial Services Regulatory Relief Act of 
2003, considered in the Financial Institutions Subcommittee on 
April 9, 2003. My amendment would have deemed Consular ID cards 
issued by the Embassy of Mexico, which refers to them as 
Matricula Consular cards as a valid form of identification 
under Section 326 of the USA PATRIOT Act.
    I appreciate Chairman Bachus's efforts and those of his 
staff and of the staff of Ranking Member Barney Frank in 
pulling together this hearing. This issue is extremely 
important to me, to my constituents, to all my state of Texas, 
and to the un-banked throughout the United States. Opening an 
account at a financial institution is often impossible for 
foreign nationals who lack the generally required two forms of 
identification. As a consequence, they are often forced to use 
expensive check cashing services to cash payroll checks and 
wire services to send money to relatives back home.
    In addition, these same un-banked foreign nationals have 
had to carry large sums of cash, which has increasingly made 
them targets of crime. The Mexican government has attempted to 
resolve this problem by issuing their own Consular ID cards. I 
want to say that they have been doing this not for a year or 
two, but for close to 132 years. They have through the years 
gone through three stages of improving this identity card that 
I will be showing you later on during this presentation that is 
going to be made by our panelists. I want you to know that when 
I compared the present Consular card that Mexico is issuing 
with my own identification card that I carry for a driver's 
license, it is equal to, or superior to, the identification 
card that I use to identify myself wherever I bank or cash a 
check or conduct other financial services activities.
    I should stress again that these cards are over 130 years 
old and have been accepted in the United States for quite some 
time. In March 2002, the Mexican government significantly 
improved the ID card by adding several security features, 
including those that are invisible except when exposed to 
infrared light. Acceptance of the Consular ID card by local 
U.S. authorities and governments does not encourage illegal 
immigration. The Consular ID card serves as proof of Consular 
registration as established by the Vienna Consular Convention. 
Thus, the mere acceptance of this document as a means of 
identification does not constitute a violation of federal 
immigration laws because it is not intended to aid nor give 
foreign nationals in the United States the understanding that 
they can continue to reside without documents in the United 
States. Moreover, Mexican consulates clearly explain the nature 
of the documents to assure that Mexican nationals know that it 
does not regularize their immigration status.
    To address the un-banked issue, I introduced on February 
13, 2003, H.R. 773, the ``21st Century Access to Banking Act.'' 
This legislation will make several key reforms to the USA 
PATRIOT Act of 2001, which was enacted to safeguard our U.S. 
banking system against terrorism. The key reforms include: (1), 
authorizing U.S. financial institutions to accept these 
Consular ID cards as valid identification for the purposes of 
opening an account; (2), bringing un-banked individuals into 
the U.S. banking system; and (3), allowing for more efficient 
regulation of currency in the United States.
    My legislation will allow these hard-working families to 
enter the mainstream financial system, thus enabling them to 
open checking accounts, savings accounts, establish a credit 
history, and possibly even purchase a car or home. Although my 
legislation runs on a parallel track to Treasury's recently 
promulgated Section 326 regulations, it goes further. It 
requires institutions to accept these identification cards. 
Consequently, my legislation will help improve our sagging 
economy by enabling these struggling families to avoid being 
preyed upon by sometimes unscrupulous check cashers and payday 
lenders, and instead permit them to enter the mainstream 
financial system, thus infusing our banks, credit unions, and 
ultimately our economy with much-needed cash.
    Think about it. If individuals were denied use of the 
Consular ID card, foreign nationals would not be able to open 
accounts at U.S. financial institutions and send remittances to 
their loved ones abroad at significantly reduced cost. Funds 
transferred from foreign nationals in the United States to 
their families allows them to purchase goods imported from the 
United States, thus creating a rather desirable economic cycle.
    The recent increase in competition for remittances by Wells 
Fargo, Citibank, Bank of America, Texas State Bank, and the 
credit unions, particularly Security First Federal Credit Union 
represented here today by its CEO and my constituent Al 
Beltran, has helped reduce the cost of remittances these 
families send back to their loved ones. We should continue to 
encourage such activity. Furthermore, improving and encouraging 
the development of financial literacy programs can only help 
increase the living standards of these nationals and of 
Americans in general. As I always say, education is the 
foundation for economic development. This hearing is a step in 
that direction.
    There are numerous financial literacy programs out there: 
FDIC's MoneySmart for Adults, both in English and Spanish; 
NCEE's K through 12 Program; ACB's MoneyRules program; Fannie 
Mae's homeownership program in both English and Spanish; 
Freddie Mac's CreditSmart Espanol; the SIA's online Stock 
Market Game; ICI's Investing for Success; Operation HOPE's 
Banking on our Future, and others that are improving financial 
literacy for our entire population. I would especially like to 
commend the Independent Bankers Association of the state of 
Texas for encouraging the Texas state legislature to pass 
legislation requiring two semesters of financial literacy to 
graduate from high school.
    Finally, Mr. Chairman, I would like to acknowledge all the 
hard work put into this hearing by Carter McDowell, Dina Ellis, 
Kevin Macmillan, Karen Lynch, and especially Jim Clinger of the 
majority staff, and special thanks also to Jaime Lizarraga and 
Jeanne Roslanowick of Ranking Member Frank's staff. As a result 
of all of their efforts, we have crafted a truly bipartisan 
hearing. I look forward to hearing the testimony of our 
witnesses.
    I yield back the balance of my time.
    [The prepared statement of Hon. Ruben Hinojosa can be found 
on page 56 in the appendix.]
    Chairman Bachus. Thank you.
    Mr. Lucas?
    Mr. Lucas of Kentucky. In the interest of time, I will 
pass.
    Chairman Bachus. Thank you.
    Mr. Scott, the gentleman from Georgia. I applaud your 
leadership on this issue and recognize you for an opening 
statement.
    Mr. Scott. Thank you so very much, Chairman Bachus. First, 
I want to congratulate and commend you for providing great 
leadership on this very important and timely issue of serving 
the underserved and getting forth the initiatives to broaden 
access to the financial mainstream hearing.
    I would like to also congratulate my friend, Ranking Member 
Sanders, for holding this hearing today as well.
    Yesterday, the annual survey of African American investors 
by Ariel Mutual Funds and Charles Schwab was released. It found 
that of black families with annual incomes of $50,000 or more, 
only 61 percent had money in the stock market, compared to 79 
percent for white families. Many of these middle-class families 
were moving their money into their homes, but this must be a 
small group because from 1998 to 2002, African American 
homeownership rates only rose from 45.6 percent to 47.3 
percent, compared with the national average increase from 66.3 
percent to 67.9 percent. With interest rates at a historical 
low, I believe that we must push even harder to help increase 
minority homeownership rates, but we cannot even begin to 
encourage low-and middle-wage earners to invest in the stock 
market or consider a home mortgage if they do not have basic 
economic understanding of savings and credit.
    I have worked, as you know Mr. Chairman from our 
discussions with you, to coordinate and improve homebuyer 
education to prevent predatory lending, and to increase 
investment and financial education and literacy. Our 
legislation, H.R. 1865, will help educate consumers about 
predatory lending by providing easy to locate counseling 
services. The legislation is based on our belief that consumers 
can best help themselves if they are armed with information and 
not confusing regulation.
    Specifically, H.R. 1865 would do the following. One, it 
would provide grants to states and nonprofit agencies for 
programs that educate consumers, especially low-income 
borrowers and senior citizens about lending laws, counseling 
programs for homeowners, and prospective homeowners regarding 
unscrupulous lending practices, and referral services for 
homeowners and prospective homeowners. Secondly, and which I 
think is one of the most creative features of our legislation, 
this bill will create a nationwide toll-free number to receive 
consumer complaints regarding predatory lending practices, 
provide information about unscrupulous lending practices, refer 
victims to consumer protection agencies or organizations, and 
create a database for information for consumers.
    Third, it will coordinate government agencies and nonprofit 
organizations that provide education, counseling to consumers 
who have been victims of predatory lending practices. And 
fourth, it will establish a predatory lending advisory council 
under the Department of Housing and Urban Development, 
comprised of community-based groups, homeowners, government 
officials, and the private industry. The council will advise 
the HUD Secretary and conduct a study on the root causes of 
default and foreclosure of home loans.
    I would like to ensure that all investor education programs 
are targeted in ways that reach the intended audiences and have 
a maximum impact. Many federal agencies, nonprofit groups and 
private sector firms have public investor education programs 
and plans. However, I believe that the unsophisticated consumer 
is not aware of these many overlapping programs. I believe that 
we can improve the delivery vehicle for many of these worthy 
programs, especially with the institution of our nationwide 
toll-free number.
    I would like for this committee to determine if some of the 
financial literacy programs in federal agencies can be combined 
or streamlined to reduce overhead, reduce overlapping missions, 
and be easy to find in a one-stop shop that even the 
unsophisticated consumer can find help. I would also like for 
the committee to continue to review the standards of investor 
education curriculum and discuss the best ways to help much of 
the investors with these programs.
    I look forward to the hearing and the testimony from 
today's panel. And Mr. Chairman if I may on a personal note, I 
do understand that we have Mr. James Young with us, who is the 
CEO of Citizens Trust Bank from my home town of Atlanta. We are 
delighted to have him. He is one of the pioneering leaders in 
our community and providing excellent banking services. Glad to 
have you, James. Thank you very much for being here, my friend.
    Mr. Chairman, I thank you for giving me the opportunity to 
make this statement.
    [The prepared statement of Hon. David Scott can be found on 
page 59 in the appendix.]
    Chairman Bachus. I appreciate your remarks, Mr. Scott.
    What the committee will now do is recess for votes on the 
floor. What we then intend to do with Mr. Hinojosa's consent is 
we will come back here probably about 11:45 a.m., as soon as we 
can return from the floor. Our first panel, which is two 
basically old friends to this committee, will offer their 
opening statements. And then my hope is that we will have 
probably about 30 minutes of questions by the members, so that 
we can try to get our second panel up by, say, noon, at least 
by noon, 11:45 a.m. or noon.
    Actually, I am going to resume as soon as we can. And I am 
hoping that in about 15 minutes we can do that. I keep getting 
indications to come back at 11:00 a.m., but I would just assume 
use all our time. So we are going to recess and we are going to 
come back as soon as the last vote. There are three votes on 
the floor, but the last vote is just about over. So we will 
come back. The others are 5-minute votes.
    I am sorry. We will shoot for 10:45 a.m. or 10:50 a.m.
    [Recess.]
    Chairman Bachus. Welcome back. I want to welcome everyone 
back.
    Our first panel is the Honorable Wayne Abernathy, Assistant 
Secretary for Financial Institutions, Department of the 
Treasury. Our second panelist is the Honorable Dennis Dollar, 
Chairman of the National Credit Union Administration. As I said 
before the break, you all have testified before our committee 
on many occasions. We have enjoyed your testimony in the past 
and look forward to your testimony here today.
    Secretary Abernathy, we will let you start the testimony.

  STATEMENT OF HON. WAYNE ABERNATHY, ASSISTANT SECRETARY FOR 
       FINANCIAL INSTITUTIONS, DEPARTMENT OF THE TREASURY

    Mr. Abernathy. Thank you, Mr. Chairman.
    It is a pleasure to be here, Mr. Chairman and members of 
the subcommittee. I appreciate the opportunity to appear before 
you this morning. The Treasury Department strongly believes 
that everyone should have the opportunity to establish a 
banking relationship with an insured depository institution. 
While most Americans already have the comfort of keeping their 
money in insured accounts, other Americans use financial 
services of a different sort. They cash checks at the 
neighborhood storefront and pay bills with cash or money 
orders. There may be a variety of reasons for this, but it is 
usually expensive, occasionally dangerous, and rarely the best 
option.
    Establishing a banking relationship is a key step toward 
building a promising financial future. Without a bank account, 
it is nearly impossible to establish a strong credit record, 
which in turn is necessary to qualify for a good car loan, home 
mortgage or small business loan at reasonable rates. A 
traditional banking relationship offers the account holder an 
opportunity to become familiar with the fundamental concepts 
that are critical in asset building. Bank accounts are tools to 
help families establish and fulfill their savings goals, and 
manage their money. Saving is the foundation for good financial 
management.
    Greater use of mainstream banking services also aids in our 
country's fight against money laundering. As individuals move 
their money from informal financial services providers and rely 
more upon safer insured depository institutions, the funds are 
removed from paths more likely to be frequented by those 
engaged in illegal activity. The Treasury Department's most 
visible initiative to provide greater access to financial 
services is the First Accounts program. The 15 First Accounts 
pilot projects provide an opportunity for the Treasury to 
evaluate a variety of experiments intended to increase 
participation in mainstream financial institutions. Our next 
step is to evaluate the success of the funded projects and to 
understand which are most effective in achieving our goals.
    Let me also highlight some other initiatives that Treasury 
is working on related to this effort. A key function of the 
Office of Financial Education is to identify sound, effective 
financial education programs around the country and highlight 
their efforts. Many of the individuals who need these programs 
do not even know of their existence. The attention that the 
Treasury Department can bring will help connect individuals in 
need to good financial education projects. For instance, 
earlier this week Treasurer Rosario Marin was in Columbus, Ohio 
to recognize the Ohio Credit Union League's Latino Financial 
Literacy Program which has provided classes for more than 200 
Hispanics in the Columbus area. The program incorporates many 
of the criteria that we have identified for effective programs, 
especially the inclusion of tools to measure results. Hopefully 
this program and many others like it will expand throughout 
Ohio.
    Another topic in this discussion is remittance activity. 
Many immigrants send remittances through a small number of 
alternative financial services providers. The limited 
competition has contributed to high costs, but this is 
changing. With our encouragement and support, more and more 
traditional financial institutions are recognizing that there 
is a positive opportunity to reach a diverse consumer base by 
offering low-cost remittance products. This can lay the 
foundation for new customers to save and build assets, 
establish a banking relationship, and acquire important tools 
of personal finance.
    At the same time, the increased competition will result in 
lower remittance costs. We support these and other efforts to 
make remittances more affordable for the people who send them, 
most of whom are low-wage earners and for those who receive 
them, people who often are in very great need. We should 
encourage this outreach and do nothing to discourage it.
    Expanding access to financial services is a nonpartisan 
issue that contributes to improved financial well-being. 
Opening an account at an insured depository institution 
provides the accountholder with a number of benefits: the 
opportunity for wealth building; lower costs for financial 
services; security; knowledge of and familiarity with the 
fundamentals of personal finance; and the chance to build a 
credit history and qualify for credit on better terms. Because 
of these benefits, Treasury is committed to promoting policies 
that will encourage individuals to establish traditional 
account relationships with insured banks and credit unions.
    Thank you for the opportunity to appear before you today. I 
look forward to working with the subcommittee on these 
important issues in the future.
    [The prepared statement of Hon. Wayne Abernathy can be 
found on page 60 in the appendix.]
    Chairman Bachus. Thank you, Assistant Secretary.
    At this time, we will hear from you, Chairman Dollar.

  STATEMENT OF HON. DENNIS DOLLAR, CHAIRMAN, NATIONAL CREDIT 
                      UNION ADMINISTRATION

    Mr. Dollar. Thank you, Mr. Chairman and Ranking Member 
Sanders and members of the subcommittee.
    On behalf of the National Credit Union Administration, I 
truly appreciate the invitation to appear here today and I am 
extremely pleased to have this opportunity to be able to 
testify and discuss NCUA's role in facilitating credit unions's 
ability to meet the needs of millions of underserved Americans 
in their desire for financial self-sufficiency.
    NCUA has initiated a number of successful efforts over the 
course of the years, and a number that we have streamlined in 
recent years designed to extend lower-cost financial services 
to more underserved individuals through member-owned, not-for-
profit financial cooperatives. We want to see more of the un-
banked be empowered to bank themselves through the self-help 
approach that member-owned credit unions can provide. We 
recognize that many residents of underserved neighborhoods find 
themselves in a vicious pawnshop payday lender cycle that can 
only be broken when they have access to the lower-cost and 
user-friendly alternatives provided by traditional financial 
institutions.
    The three initiatives I would like to briefly discuss here 
this morning in the little time that we have, and to offer as a 
results-oriented model of how NCUA's Access Across America 
program is making a difference in extending credit union 
services to the underserved, are our agency's Underserved Area 
Adoption program, our agency's interagency and credit union 
partnerships, and the Community Development Revolving Loan 
Fund.
    Very briefly, I would like to discus Access Across America. 
This is an NCUA initiative that is designed to facilitate the 
extension of lower-cost credit union services to underserved 
communities and create opportunities for economic empowerment 
for people from all walks of life. As of the year 2002, there 
were over 90 million Americans living in census tracts 
designated by the U.S. Treasury Department's Community 
Development Financial Institutions program, the CDFI program, 
as investment areas. These criteria are based upon income and 
economic criteria which certainly warrant the distinction as 
being underserved areas. In many of these instances, the 
residents of these underserved areas often find themselves 
largely at the mercy of higher-cost outlets such as pawnshops, 
check-cashing stores, rent-to-own companies in the absence of 
an affordable financial alternative.
    Mr. Chairman, without sacrificing safety and soundness, 
without lowering oversight standards, in fact without changing 
a single existing regulation, NCUA made the decision that we 
could further the goals of Access Across America by 
streamlining where appropriate, without sacrificing the 
integrity of our regulations, the process for credit unions to 
adopt underserved areas into their field of membership, an 
option that has been allowed to federal credit unions by 
regulation since 1994 and statutorily was incorporated by 
Congress into the Credit Union Membership Access Act of 1998.
    The removal of unnecessary regulatory impediments has 
resulted in the unbridling of innovation in service to 
underserved areas at what had become record levels. It has 
certainly served to put the ``access'' into our Access Across 
America initiative. Some numbers briefly, to help make this 
point. In 1999, under the same field of membership rules and 
statutes regarding underserved areas that we have today, there 
were seven federal credit unions that adopted CDFI-designated 
investment areas into their field of membership. There were 
approximately 235,000 people who lived in those underserved 
areas that became eligible for credit union membership.
    In 2001, just two years later, with the procedural 
enhancements incorporated under the umbrella of NCUA's Access 
Across America initiative, there were a total of 164 federal 
credit unions that adopted 281 CDFI-designated investment 
areas. Some adopted more than one. The result was a record-
setting 16.1 million Americans living in these underserved 
neighborhoods that at the end of the year had access to the 
lower-cost financial services of a credit union that had not 
had such access at the beginning of the year.
    In 2002, thinking we could never see the record-setting 
numbers of 2001 duplicated, we were pleased to see that 
applications were approved of 223 federal credit unions 
adopting 424 underserved neighborhoods, totaling over 23.5 
million residents. That is a 45.9 percent increase over 2001 
and a total increase 100 times greater than the results just 3 
years before had been in 1999.
    But we have not just stopped with encouraging and 
facilitating the adopting of underserved areas. We have tracked 
the results from this adoption program so that we can verify 
and monitor that his local and lower-cost financing alternative 
has indeed resulted in a significant number of the over 45 
million Americans residing in these underserved areas actually 
making the decision to take advantage of their eligibility and 
to become members of their local credit union.
    In fact, through our monitoring of our NCUA call report 
data, we find that the average annual membership growth since 
January 2000 in federal credit unions that expanded into 
underserved areas has been 4.80 percent. The national average 
for annual membership growth in all federal credit unions was 
2.49 percent in that same three-year period since January 2000.
    In other words, the membership growth for federal credit 
unions who adopt underserved areas is 93 percent greater than 
the average annual growth rate for all federal credit unions. 
Not only are the residents taking advantage of the access 
extended to them through this initiative, but credit unions are 
finding that there is good business in these communities as 
long as there is proper due diligence and risk management in 
place.
    That leads briefly to the second of our initiatives that I 
just want to briefly discuss, and that is the interagency and 
credit union partnerships that we are facilitating through 
Access Across America. My testimony in writing clearly states 
how we are dealing with various federal agencies to facilitate 
the extension of credit union services and to work in 
partnership and even in synergy with them to extend our 
programs into their areas and their programs into ours.
    We have partnerships with the U.S. Department of 
Agriculture, U.S. Department of Housing and Urban Development, 
U.S. Treasury Department's Community Development Financial 
Institutions program, the Internal Revenue Service through 
their VITA initiative, the Corporation for National Community 
Service, the FDIC through its MoneySmart financial literacy 
that we chose to endorse ourselves rather than reinventing the 
wheel. We felt that there was no reason for there to be a 
separate credit union financial literacy program endorsed by 
NCUA when the FDIC program was as strong as it was. The 
Neighborhood Reinvestment Corporation, Small Business 
Administration, these are all agencies that we are working 
together in partnership to extend this service.
    Another issue of importance, quickly, in extending lower-
cost financial services to underserved individuals is the issue 
that was discussed earlier of international remittance. The 
predatory high cost of international remittance has been a 
concern of NCUA for a number of years. We have tried to 
facilitate where appropriate the innovative services and 
technologies available through credit union partnerships such 
as the IRnet service facilitated by the World Council of Credit 
Unions. The savings to individuals remitting funds 
internationally can be sizeable when the not-for-profit credit 
union sector can offer a lower flat-fee alternative to the 
percentage of funds which is often charged by some 
international transmittal outlets. Credit unions, of course, 
must fully comply with all U.S. USA PATRIOT Act regulations and 
verify their customers' identity. But NCUA strongly believes 
that encouraging individuals to use traditional financial 
institutions actually provides greater security.
    NCUA will continue to facilitate these lower-cost 
international remittance alternatives wherever possible under 
existing law and regulation through credit union partnerships 
such as the IRnet and others.
    Lastly, I just want to mention the Community Development 
Revolving Loan Fund, Mr. Chairman, because I don't think that 
we could look at ways that the Congress and NCUA have worked 
together to further the extension of credit union services into 
low-income communities without briefly addressing the Community 
Development Revolving Loan Fund. It was established by Congress 
in 1979 through an initial appropriation of $6 million to 
assist officially designated low-income credit unions in their 
efforts to provide basic financial services to underserved 
communities. Over the years, Congress has continued its 
commitment to CDRLF program by increasing the number of 
appropriated dollars available for loans to $13 million.
    Now, for more than 13, almost 14 years, NCUA has 
successfully administered this ongoing program, providing more 
than 217 revolving loans totaling $32.8 million. We have been 
able to revolve your $13 million appropriation into $32.8 
million worth of loans to low-income credit unions during its 
history. In 1992, the NCUA board began funding technical 
assistance grants by using the interest that was generated from 
these loans.
    In fiscal year 2001, you began to recognize the success of 
that grant program by reserving certain funds, and you have 
reserved up to this point a total of $1 million of additional 
appropriation for technical assistance grants to assist low-
income credit unions. We have awarded more than 1,000 grants 
totaling $2.4 million between the two sources, both the 
interest from the loans and your $1 million appropriation. By 
providing an alternative to the higher-cost lenders, we believe 
that the CDRLF program furthers the goal of credit unions 
extending service into underserved areas.
    So Mr. Chairman, as you can see, the NCUA takes seriously 
its responsibilities to not only ensure the safety and 
soundness of the American credit union system, but also to make 
sure that it is both viable and valuable in meeting the needs 
of folks from all walks of life. We are building today's NCUA 
Access Across America initiative on the foundation of decades 
of outreach by financially sound credit unions. That has 
established a successful model of individual and community 
empowerment that we feel can have a positive impact on future 
generations and lead millions of individuals no longer in the 
ranks of the underserved, and giving the self-help empowerment 
through member-owned credit unions to bank themselves out of 
the category of the un-banked.
    I appreciate the opportunity to testify before you today. I 
will be more than glad to answer any questions that you or 
members of the subcommittee have. I respectfully ask that my 
full statement be entered in the official record.
    Thank you, Mr. Chairman.
    [The prepared statement of Hon. Dennis Dollar can be found 
on page 104 in the appendix.]
    Chairman Bachus. Thank you.
    In the interest of time, I am going to actually forego my 
questions. I would like to make one comment that I think is 
particularly important. That is that more Americans do have a 
bank account if for no other reason than to provide a safe 
place for deposit of their Social Security benefits or other 
government benefits, veterans benefits, electronic transfers, 
which can be a tremendous advantage to them.
    I am sure that the United States Government, the people of 
America have probably saved hundreds of millions of dollars on 
direct deposit programs. Because as you know, a prevalent 
problem in our country is people stealing benefit checks out of 
the mailbox.
    At this time, I am going to recognize Mr. Hinojosa for 
questions.
    Mr. Hinojosa. Thank you, Mr. Chairman.
    I want to commend all of you for your efforts to bank the 
un-banked. I am going to ask my first question of Wayne 
Abernathy. I recently obtained a copy of a letter from Treasury 
Secretary Snow to Chairman Sensenbrenner of the House Judiciary 
Committee announcing that you would reopen the regulations for 
a 45-day comment period. Why are you reopening these 
regulations that you recently promulgated and that were two 
years in the making? And what questions will you ask of 
financial institutions?
    Mr. Abernathy. Thank you, Congressman, for asking that 
question, because there has been some confusion as to exactly 
what it is that Treasury is doing in that regard. We are not 
reopening those regulations. Those regulations were promulgated 
on July 9. They will go into effect I believe in October. What 
we have made a promise to do, however, is because of the 
increased interest that there is on the impact of those 
regulations, the request was made to us from Congressman 
Sensenbrenner and others to continue to evaluate some of the 
concerns that they raised. We are very happy to do that.
    We don't have the view that any regulation, any answer is 
ever permanent, so we are always willing to gather additional 
information. We frankly would encourage everyone who has a view 
on these particular questions that we are putting forward to 
let us know what their views are, pro or con. And the two 
questions we are putting forward, one of the concerns that was 
raised in our regulation was whether or not financial 
institutions should be required to maintain photocopies of the 
identification documents that were used to open an account. The 
regulation does not require a lengthy retention of that kind of 
paperwork for a number of reasons that I think were explained 
during that two-year comment period that you mentioned.
    There are some in the law enforcement community who think 
that maybe that does not aid law enforcement. We are open to 
hear whatever comments the people may have on that. We would 
like to have people comment on that and tell us, does it assist 
law enforcement to retain that paper, or does it actually cause 
some additional vulnerabilities to retain that paper?
    And then the other question is, particularly with regard to 
the Consular identification cards, whether those are 
appropriate means of identification. We have the policy in the 
regulation as you know of saying that financial institutions 
have a very important responsibility that their new customers 
are who they say they are. But the regulation says that 
responsibility is yours, as a financial institution. You should 
be sure, as a financial institution, that you have in place a 
good system that makes you feel very comfortable that the 
people who are opening accounts with you are who they say they 
are, and your particular financial regulator when they come to 
examine you in your periodic examinations will be asking, what 
is your system? What procedures do you have in place to verify 
that your customers are who they say they are?
    That is where that question should be asked. It should be 
between the financial institution and their examiner. The 
burden is on the financial institution. The examiner will make 
sure they have looked at it properly. Treasury has said that is 
where the duty is.
    Mr. Hinojosa. I appreciate that. Let me ask you, is it 
accurate to say that the Section 326 regulations as recently 
promulgated would leave the decision of whether or not to 
accept Consular ID cards at the discretion of the financial 
institution?
    Mr. Abernathy. By and large, but not wholly. The 
responsibility is on the financial institution to have a good 
process in place, and they can be questioned about their 
process by their financial regulator. So it is partially a 
shared responsibility, but the primary responsibility is with 
that financial institution. We do not think that it is wise for 
the Treasury or for the government to come up with lengthy 
lists of which forms of identification are appropriate and 
which forms are not, for a very important reason.
    If we try to maintain those lists, we will always be behind 
the times. We will always be behind the times of putting on the 
list things that banks should not be using and putting on a 
list things that they ought to. We do not want to be behind the 
times. We want that to be a current process. It is best left to 
those who understand it best and in their community what works 
best.
    Mr. Hinojosa. Let me ask another question, and possibly 
Chairman Dollar can answer it. I am glad that NCUA recognizes 
the Consular ID card as a legitimate identification source for 
an individual to become a member of a credit union, and that 
you all are working closely through your office of general 
counsel to assist credit unions in the effective use of the 
matricula card.
    If Treasury decides to reopen the Section 326 regulations 
of the USA PATRIOT Act, how will this impact the NCUA and 
credit unions?
    Mr. Dollar. Congressman, we are very comfortable with the 
USA PATRIOT Act regulations as they were put into effect. The 
Treasury regulations, as you referred to, have also been 
adopted by the other financial regulatory agencies as our 
regulations. So we are in the process of, as Secretary 
Abernathy said, implementing them even as we speak.
    Our office of general counsel is working in close 
consultation with credit unions who are seeking our guidance as 
to the acceptance of the matricula card. We have made very 
clear to them that not only is it allowed in the regulation, 
but that we recognize it and that we will work with them to 
facilitate their use of the card. Then through, as Secretary 
Abernathy said, the oversight and supervision process, we will 
then be able to monitor the effective use of that.
    It is working very well among those credit unions, 
particularly in the southwest part of the United States, who 
have been looking for a way to be able to bring these 
individuals into the traditional financial institution, to show 
them the value of a credit union or another traditional 
financial institution as an alternative to the check-cashers, 
the international remittance sources that are so highly priced. 
So we think it is working well.
    We don't see a reason to revisit it at this particular 
stage, but we do see that there is an importance in all the 
financial regulators having consistent regulation. So if it is 
revisited by others, we would feel obligated to at least 
examine those issues, but we are very comfortable with the 
regulation as it is presently constituted.
    Mr. Hinojosa. Thank you, Mr. Dollar.
    Mr. Hensarling. [Presiding.] The chair now recognizes Mrs. 
Waters.
    Ms. Waters. Thank you very much, Mr. Chairman.
    I am very pleased that we are holding this hearing today 
and I would like to thank Chairman Bachus for paying attention 
to a subject that I am very much involved with and have spent 
an awful lot of time dealing with.
    I am very pleased to see the National Credit Union 
Administration here today talking about the efforts that are 
being made through your Access America campaign. This is 
something that I strongly support and I have urged the credit 
unions to move faster to locate in these underserved 
communities and to become very visible, because as you know, we 
are at the mercy of payday loan operations, check-cashers, 
rent-to-own and a whole host of services that have evolved in 
the poor communities that charge exorbitant amounts of monies 
and fees and they are just robbing poor people of their limited 
resources in order to be able to cash checks and have other 
kinds of limited services.
    I recognize that there are many people who end up without 
money prior to payday and that they need to have the ability to 
borrow money, but also recognize that there needs to be some 
kind of education that goes along with the borrowing of money 
for just very basic needs.
    What I would like to know is, could you give me an example 
of the difference in the kind of fees that the credit union 
would charge, the difference between the credit union and a 
check-cashing operation or a payday loan operation, for 
borrowing money or for check cashing? I will tell you why that 
is very important to put on the record. I have researched some 
of the payday loan and check-cashing operations. I have found 
with the payday loan operations we have people that are paying 
as much as 400 percent interest, in some cases 1,000 percent.
    I see these post-dated checks that are required, and of 
course people are intimidated with the post-dated check, that 
if you can't pay when you have agreed to pay, then you could be 
in violation of the law. And then an agreement often worked out 
where you flip it and you create another loan with additional 
interest rates. How would the credit union service this 
population? I am just sick and tired of poor people being 
ripped off. What can you do differently? You mention in your 
testimony low-cost services. Describe to me what you could do 
different than these payday loan rip-off operations?
    Mr. Dollar. Congresswoman, the first answer is the most 
statutorily fixed answer of all, and that is that federal 
credit unions have a usury limit of 18 percent that can be 
charged. So federal credit unions will charge no more for any 
loan than 18 percent. An 18 percent alternative to the costs 
that you were referring to in your statement makes a good 
comparison at any time. Even if because of risk these 
individuals were charged the highest amount that would be 
allowed, it would be an 18 percent alternative to what many 
times you are correct is a 400 percent and a 500 percent rate.
    I would like to make one quick point, if you don't mind. I 
really believe that the not-for-profit sector, the credit union 
sector is an important part of breaking this cycle of the 
check-cashing, rent-to-own, pawnshop mentality that is so 
prevalent in many underserved communities. One of the reasons 
that we believe we have had the success with Access Across 
America that we have is not only that credit unions are 
adopting these areas, but as a part of our requirements, they 
must establish a physical presence in that community. They 
cannot do it through home banking. They cannot do it through 
audio response. They cannot even do it through a mere ATM, 
although they can open ATMs in that area, but they must 
establish a physical presence.
    The pawnshop has a physical presence. The check-casher has 
a physical presence. The rent-to-own company has a physical 
presence. And if they have to take 28 bus stops to get to the 
credit union, then it is not as viable of an alternative. I 
believe that this physical presence has made a key contribution 
to the success of Access Across America. It is the reason that 
those membership numbers in credit unions that adopt 
underserved areas is so much higher than it is in the general 
credit union population.
    Ms. Waters. Thank you very much. I would request unanimous 
consent for one more minute. I see the light has gone on.
    Mr. Hensarling. Without objection.
    Ms. Waters. Thank you very much.
    I would also like to ask you if you are aware that the 
payday lenders are established near our Army bases, and that 
our Army personnel are now getting involved in getting these 
short-term loans and robbing these families of their limited 
resources. What can you do as you pay attention to the un-
banked and the underserved to also pay attention to what is 
happening around our bases? Because payday loans are sprouting 
up around all of our military bases, and it is another whole 
problem that I have got to try and address in this Congress. 
Are you aware of that and can you include that in the areas 
that you pay attention to?
    Mr. Dollar. Yes, Congresswoman. Let me say this, I do not 
know of a military installation in America that does not have a 
credit union that is associated with its field of membership. 
It is one of our goals in Access Across America to encourage 
those credit unions to get outside the doors of the base, to 
get outside the fences and the security by the base, and to get 
out in those surrounding communities to adopt those surrounding 
communities.
    Some of those bases even have the choice of more than one 
credit union. We see nothing wrong with that. We hope that 
someday residents of underserved communities will have the 
choice of as many credit unions as they do of pawnshops. When 
that day comes, I think we will have made a great contribution 
and we will be much more successful in this initiative.
    Ms. Waters. Thank you so much. Some of us would like to 
help promote that and would be willing to do ads and to go to 
events to help talk about the difference between the credit 
unions and the payday loan rip-off operations.
    Thank you.
    Mr. Dollar. Thank you. We will take you up on that offer.
    Ms. Waters. Yes, I would be happy to.
    Mr. Hensarling. Ms. Velazquez is now recognized.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mr. Dollar, in your testimony you note that the NCUA has 
partnered with key federal agencies including the Small 
Business Administration to 7(a) communities across the country. 
SBA has recently expanded credit union access to the 7(a) loan 
program, SBA's flagship loan program. In doing so, it was hoped 
that credit unions will greatly expand the reach of the 7(a) 
program. I believe that providing access to capital to would-be 
entrepreneurs in underserved areas must be part of any strategy 
aimed at bringing people into the financial mainstream. Access 
to capital is essential to spur economic development in many of 
these underserved areas.
    Mr. Dollar, how have credit unions made use of the 7(a) 
loan program to increase small business lending in such 
underserved areas?
    Mr. Dollar. Congresswoman, the last communication that I 
have had from SBA, there have been over 100 credit unions since 
they were authorized to participate in the 7(a) loan program, 
which was just several months ago, who have already made 
application and are in the process of either being approved or 
have been approved. May I say that I agree 100 percent with 
your contention that if we are truly going to make a long-term 
difference in these underserved communities, that the access to 
start-up entrepreneurial capital is key.
    Yes, it is a noble cause within itself to offer an 18 
percent alternative to a 400 percent payday loan, but I believe 
that with start-up entrepreneurial capital, there may well be 
the possibility that people will be able to have their own 
jobs, have their own businesses, and not need the payday 
lender. That is how we will most positively impact these 
communities. So not only through participation in the 7(a) loan 
program, NCUA has been working where we can within statutory 
restrictions to allow more member business lending by credit 
unions. This is a source for investment in these communities 
that we think will pay long-term dividends.
    Ms. Velazquez. Do you believe that credit products such as 
the 7(a) loan program should be part of any un-banked outreach 
strategy?
    Mr. Dollar. Yes, unquestionably.
    Ms. Velazquez. Mr. Abernathy, do you have a comment on 
this?
    Mr. Abernathy. Yes, I do, Congresswoman. Our view is that 
there are so many different reasons why people are not making 
full use of the financial services that are available to them 
that we need to address it in as many ways as we can. The 
credit unions have a multitude of different programs, working 
together with SBA and other governmental programs.
    One comment I would make on the question from Congresswoman 
Waters with regard to military bases, one of the things that we 
have tried to emphasize is to deal with this problem of people 
who do not have accounts is helping them understand what the 
options are. The option may be there. There may be a credit 
union on-base, but do they understand what it means to have an 
account with a credit union? Can we educate them?
    Very recently we had the Defense Department present, we 
convened a meeting in the Office of Financial Education of all 
of the different governmental agencies that have financial 
education programs. We had the Defense Department and the 
Agriculture Department who have excellent programs explain to 
these others what their programs are. What the Defense 
Department is doing is they are saying now to their military, 
``You will come to this class; and you will learn what it means 
to manage your pay and your various accounts; and you will then 
take a test to see if you understood,'' because they understand 
that it is a real problem. It harms the efficiency of a soldier 
if he is worried about the financial health of his family. So 
it is very important.
    Ms. Velazquez. Mr. Abernathy, in your testimony you noted 
that through the Partnership for Prosperity with Mexico, 
Treasury has encouraged the entry of new providers into the 
U.S.-Mexico remittance market. What sort of specific steps has 
the Treasury taken to encourage financial institutions to enter 
this market?
    Mr. Abernathy. I have discovered one of the biggest tools 
that we have at Treasury is we have a podium that we can talk 
from and people listen to us. We have been very encouraged at 
our continual jawboning of major financial institutions, 
pointing out to them that there is a real market opportunity 
for you to enter into, both in Mexico and here, in these 
important financial underserved markets that will be very good 
for your bottom line and very good for these populations.
    One of the most recent examples of that has really 
encouraged me, a major financial institution not long ago made 
a hefty investment in a large bank in Mexico. They have just 
recently leveraged that investment to make it possible for 
someone in Mexico to go to an ATM in Mexico and draw money from 
an account here in the United States at almost no cost at all. 
That is the kind of progress that we are happy to see.
    Ms. Velazquez. As you stated in your testimony, the 
international remittance market is growing rapidly. It is my 
hope that the prices will continue to fall. I also hope that 
consumer protections of such products will be enhanced. Are new 
entrants addressing some of the consumer protections issues 
with remittances, such as providing customers with clear notice 
and making the pricing of remittances more transparent?
    Mr. Abernathy. We have seen a lot of good work in that 
regard. Some of the banks that are getting into this business 
lately have discovered that they might not make any money on 
the actual remittance transfer. Where they will make money is 
they have discovered that is a great opportunity to build a 
relationship with their customer. As they build a relationship 
with their customer, they need to convince their customer that 
it is a good thing to bank with them. Those banks that are 
doing that, part of building that customer confidence is being 
very transparent in what your policies and programs are.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Chairman Bachus. Thank you.
    Mr. Davis, and then we will go to Mr. Baca.
    Mr. Davis. Thank you, Mr. Chairman. I appreciate that.
    Mr. Dollar, welcome to you. You and I shared a platform 
together last Friday and I appreciate your coming to 
Birmingham.
    Let me start with you, if I can. One of the things that I 
am struck by as I look at your written testimony and a lot of 
other data, is how successful the credit unions have been in 
reaching the underserved population. I want to focus on one 
particular aspect of that, financial literacy, as I assume that 
is a critical component to whatever you are doing effectively. 
If you would talk a little bit about how you manage and how 
your entities manage to reach out to the underserved 
communities to help them with financial literacy, that would be 
helpful.
    Mr. Dollar. I think we begin with the fact that a credit 
union by its nature is a member-owned institution, and also by 
its structure it is a not-for-profit institution. So therefore, 
there is a tie to the membership, either through an employer, 
an association or a local community that enables them to 
perhaps have a little more of a high-touch approach. I think 
then we have been very serious and diligent in our 
encouragement of credit unions to look at ways to promote 
financial literacy. We have even gone to the point of realizing 
that this is a combination effort, that is not just a credit 
union effort, but it is a financial institution effort from 
banks to thrifts to mortgage companies to credit unions.
    So as I stated in my earlier remarks, we have partnered 
with the FDIC on their MoneySmart financial literacy program. 
Rather than spending several hundred thousand dollars to 
develop our own credit union financial literacy program to be 
endorsed by NCUA to further this initiative, we chose to 
endorse theirs. I issued a credit union letter to all federal 
credit unions encouraging them to examine the program. From my 
reports at FDIC, there have been several hundred credit unions 
that have taken the FDIC MoneySmart program, adapted it, put it 
in their high-touch approach that they have as a member-owned, 
not-for-profit institution. I think the results are 
demonstrating themselves in the various statistics that were 
included in my testimony.
    Mr. Davis. Let me shift, Mr. Abernathy, to a slightly 
different area, and it is the earned income tax credit and the 
potential impact the credit unions can have about the earned 
income tax credit. Some of your colleagues and some people in 
this institution have raised concerns about what they view as 
being rampant fraud or abuse that takes place around the earned 
income tax credit, and that is a discussion for another day. 
But I want to raise what I think is a more pressing problem.
    I think that there are a lot of people who frankly would 
benefit from the earned income tax credit, but do not know how 
to take advantage of it, people who are not getting it. One of 
the things that I think we need to talk about when we talk 
about reaching the underserved is that population of people who 
would be able to take advantage of the earned income tax credit 
if they were more financially literate and were better educated 
about it. Do you agree with me that there is a problem in this 
country with people who are eligible for the earned income tax 
credit not getting it and not being able to take advantage of 
it?
    Mr. Abernathy. I think there is a very big problem with a 
lot of people not understanding a whole panoply of what their 
tax benefits are. We have been very encouraged. A number of 
these pilot projects that are currently taking place under the 
First Accounts program include not just getting you into a bank 
account, but giving you the financial education that is needed. 
Part of that financial education, many of them are focusing on 
how the tax program works; how tax benefits can be obtained; 
how you file your tax forms; and how to take advantage of what 
is being extended to you through the tax system. I think that 
is an excellent combination of all the different aspects that 
any family needs to know if they are going to be managing their 
finances effectively.
    Mr. Davis. And would you agree, Mr. Abernathy, that that 
problem of people who should be getting the earned income tax 
credit or should be taking advantage of it, the problem of they 
are not being accessed into the system is, if anything, 
probably a more pressing problem than that of people abusing 
the earned income tax credit?
    Mr. Abernathy. I couldn't comment with regard to the earned 
income tax credit program itself. I am no expert on that. I can 
certainly envision that as being a problem. If people don't 
know how to fill out their tax returns properly, they do not 
understand how the tax system works, then they are not going to 
be able to take full advantage of the programs that are there 
to help them.
    Mr. Davis. Mr. Dollar, if you could just comment on some 
things that your credit union has done to educate people about 
the earned income tax credit and to position people to take 
advantage of it.
    Mr. Dollar. It is an important part of the MoneySmart 
financial literacy program. Another partnership that you will 
see listed in my testimony is one that I entered into and 
signed with officials of the Internal Revenue Service, in which 
we agreed to work with them in the promotion of the VITA 
program and the informational campaign that they have to make 
sure that those who are eligible to take advantage of the 
earned income tax credit and other tax opportunities that are 
available to them, are aware of and do so. They can do that and 
can provide that information through credit unions.
    Mr. Davis. Thank you, Mr. Chairman.
    Chairman Bachus. Mr. Hensarling, and then we go to Mr. 
Baca, and then I am not sure if we have to recess for a vote on 
the floor. We will try to get all of the questions in.
    Mr. Hensarling. Thank you, Mr. Chairman.
    I believe that it is a good thing that we are holding this 
hearing today. I believe this is a subject worthy of our 
attention. I believe there probably is a problem with the un-
banked and, I am here to learn about the scope of this problem. 
I suppose there are several reasons why one might be un-banked. 
One is, they know what banks are about and they have chosen not 
to do business with a bank.
    Another reason perhaps is for some reason the banks are 
barring their doors to some certain subset or class in our 
society, and I would be curious to know if we have any evidence 
of that. I suppose a third reason is simply ignorance of what 
banks and financial institutions have to offer, and education 
is often a good remedy for ignorance.
    So number one, Mr. Abernathy, is there any evidence that 
Treasury has that there is some class of people in our society 
that are being prevented from entering the banking system?
    Mr. Abernathy. I don't believe that there is any evidence 
that there is a systematic bar in place keeping people from 
entering into the banking system. The reason why I say that is 
we have laws against that. We have not heard any indications 
from the financial regulators that there is a systematic 
problem of redlining currently occurring. So I think the 
fundamental causes for why people don't have bank accounts 
probably are elsewhere.
    What we would like to do, though, is move away from the 
current situation where we are in now where most of the 
evidence of why people don't have bank accounts is pretty 
anecdotal. We think there is a good opportunity and need to 
have a more systematic evaluation of why it might be that 
people are not opening up bank accounts. A lot of evidence 
seems to point that people don't have access to bank accounts 
because there is not a bank nearby. There isn't a financial 
institution close enough to do business. Other concerns are, 
people just aren't familiar with their opportunities, what it 
means to have a bank account, why it's important and why that 
is of benefit to them. It can be intimidating if people don't 
understand what a bank does. They can have a very imposing 
exterior that makes it hard for people to walk in and feel, 
``will I be comfortable there.''
    I think we need to study it better, but we have not heard 
from the bank regulators that there is a systematic problem of 
redlining today.
    Mr. Hensarling. I appreciate the sentiment that perhaps a 
study is certainly needed in this area. I, for one, would be a 
member interested in working with you on that, so we can 
understand better perhaps the reasons that this phenomena 
exists. We have had testimony that there are a number of 
people, and perhaps mainly low-income people, who choose to 
deal with payday lenders and rent-to-own and check-cashing 
services for some their quasi-banking or monetary needs.
    It seems to me in a free society people would have the 
choice whether to deal with these institutions or banks, but 
perhaps Treasury has some other observation. If people are 
choosing to use these various services, does Treasury have any 
evidence that there is widespread fraud among these particular 
institutions?
    Mr. Abernathy. There certainly have been cases from time to 
time of people who have been taken advantage of in the informal 
financial sector. But I think you make a good point that banks 
are not the only financial services providers in the nation. 
What we want to make sure is that everybody has a real choice 
of whether they want to have a bank account or not. To do that, 
you have to do a couple of things. First, you have to make 
banking available to people. Secondly, you also have to educate 
them as to what their choice really is so that they can make an 
educated choice.
    If some consumers decide that they don't want to choose for 
whatever reason to have a bank account, that is fine, provided 
they really had a meaningful choice. That is the goal that 
Treasury wants to achieve, that everybody in this country has a 
full and meaningful choice to open a bank account, be it in a 
credit union, a bank, or savings and loan. And then the 
knowledge and ability to exercise that choice.
    Mr. Hensarling. Speaking of choices, sometimes I choose to 
buy my bread and milk at 7-11 and sometimes I choose to buy it 
at Tom Thumb. When I choose to buy it 7-11, typically it is 
more expensive. I choose to do that because I can find a 7-11 
on every street corner and I know that I will never face a line 
of more than two or three people. At Tom Thumb, I have to drive 
some distance and the lines quite often are long.
    So might it be a rational decision by an informed consumer 
that they prefer the ubiquitous nature of some of these other 
institutions and prefer the convenience as a factor of why they 
might be using these payday lenders and rent-to-own and check-
cashing businesses for their banking needs?
    Mr. Abernathy. I think convenience is probably the number 
one driving reason why people use these other financial 
institutions. It is more convenient because it is in their 
community. It is more convenient because they are willing to 
provide funds when another financial institution might not be 
willing to provide funds. I think what we would like to do and 
what we see happening is banks are becoming more convenient. 
They are feeling that pressure. And so they are offering 
products to increase their convenience. But nevertheless, as 
long as the consumer knows what his options are, understands 
them, let the consumer make the choice as to what meets their 
needs best.
    Mr. Hensarling. Thank you. My time is up.
    Chairman Bachus. Thank you.
    The gentleman from California, Mr. Baca?
    Mr. Baca. Thank you, Mr. Chairman.
    My question is for Mr. Abernathy. On May 9, the Treasury 
Department published the final rule requiring financial 
institutions to establish consumer identification programs to 
identify the identity of each consumer opening an account. Many 
in the financial service industry supported this rule because 
it allowed them to accept Matricula Consular cards. 
Unfortunately, the Treasury Department is, I state, 
``reexamining the rule.'' Shouldn't banks be the ones to 
determine what they are going to use for foreign ID? That is 
question number one. And do you think that banks need the 
flexibility of identifying the risks? That is question two.
    In my district in Rialto, the police department recently 
decided to accept Matricula Consular cards, joining the police 
departments in Chino, Colton, Fontana, Rialto, Indio and San 
Bernardino and Upland. Do you think the Treasury Department is 
in a better position to evaluate the risk than local law 
enforcement? That would be the final question.
    Mr. Abernathy. Very good questions, Congressman, I 
appreciate the opportunity to comment on them. I think you have 
presented exactly the correct distinction. The regulation went 
into effect or was promulgated and will go into effect in the 
fall. At the request of members of the Congress and others, we 
have agreed to reexamine the rule. We are not reopening the 
rule, and that is important to understand. We are willing to 
receive additional comments on the advisability of going 
forward with the rule, which has been published as a final 
rule.
    I think you have touched upon the reason why we have 
promulgated the rule the way we have. It is very difficult for 
us to understand why Treasury should put itself in the position 
of trying to second-guess people who in their communities are 
making the decisions as to what are the best forms of 
identification, particularly with regard to financial services.
    So the rule says, you as a financial services provider have 
a requirement to be sure that who is doing business with you is 
who they say they are. But it is up to you to find out the way 
that works best for you to fulfill that requirement, knowing 
that you might have to justify your decision and your process 
and your procedures with your bank regulator. That is the 
principle. We think that is the best way to do it. We think 
that way we are more likely to have the solution that really 
fits the needs of that particular community.
    Mr. Baca. You mentioned that members of Congress have asked 
you. Is this Tancredo and his groupies?
    Mr. Abernathy. A number of congressmen have asked questions 
and we are happy to respond to requests from Congress. I want 
to make this very clear. The results of the information that we 
get during this comment period, we intend to come and discuss 
with this committee. It is this committee that has jurisdiction 
and responsibility over that particular part of the law. I do 
not think that we would even contemplate making any changes to 
the regulation without having close consultations with this 
committee.
    Mr. Baca. Earlier you talked about choice in banking 
availability and educating the knowledge that is important. 
Well, you have got to create the climate that is there. And by 
offering matriculas, at least then people feel a sense of 
comfort going into a bank, so attitudes then change in terms of 
perception towards individuals. So it is a lot easier to be 
educated if you create the kind of climate and attitude that is 
going to be there. But if you claim the attitude in terms of 
the identification and not accepting matriculas, it becomes 
very difficult. And that is why people choose to go somewhere 
else other than one of our banking institutions. So we have got 
to change those kind of climates and those kind of attitudes.
    Mr. Abernathy. I agree with you fully. What we need to be 
doing is finding ways to attract people into financial 
institutions, not erecting new barriers.
    Mr. Baca. Thank you.
    Mr. Abernathy. Thank you.
    Chairman Bachus. Instead of asking questions, I am simply 
going to make a statement. I want to associate myself with your 
remarks and those from Mr. Baca that a lack of documentation by 
legal immigrants is one of the main barriers to them 
establishing a bank account. I believe that federal regulations 
allowing these institutions if they so choose, credit unions 
and banks, to accept these foreign government-issued 
documentation is the right approach and really the humane 
approach. I very much support the use of Matricula Consular 
cards as identification and I applaud those banks which are 
accepting them.
    Ms. Maloney?
    Mrs. Maloney. Thank you, Mr. Chairman.
    I would like very much to be associated with your remarks 
on this subject, as well as Mr. Baca's and Mr. Abernathy's. 
Following up on Mr. Baca's line of questioning, some in 
Congress, as you mentioned, and I would add other anti-
immigration groups, have turned what is essentially a debate on 
curbing money laundering into a debate on immigration policy. 
My question is, can you tell us Treasury's view about whether 
it is appropriate for financial institutions to take on the 
role of participating in the immigration policy debate?
    Mr. Abernathy. I don't pretend to be an expert on 
immigration issues, but I can say that certainly Congress has 
decided that immigration issues are to be determined in two 
focal points, by and large: at the border and at the workplace. 
Congress has not placed in any statute that I am aware of that 
we should be using the financial institutions and access to 
them as a means of enforcing immigration policy.
    Mrs. Maloney. In enforcing the anti-money laundering 
provisions of the USA PATRIOT Act, which Treasury and others 
are very involved in, have you seen any evidence that Mexican 
nationals are using matricula cards to launder money? Has there 
been any evidence of that?
    Mr. Abernathy. Certainly not in any more noticeable way 
than any other forms of identification are abused. We see 
driver's licenses abused. We see birth certificates abused. We 
don't see Consular identification cards being abused any more 
frequently than those other documents are.
    Mrs. Maloney. Earlier in your testimony, Mr. Abernathy, you 
mentioned that a United States bank had opened up a branch in 
Mexico, whereby one could go to the Mexican branch and use an 
ATM card and get money from America. Is that correct? Is that 
what you said?
    Mr. Abernathy. Actually, what they have done is even more 
expansive than that.
    Mrs. Maloney. May I ask which bank is it? I am curious.
    Mr. Abernathy. Bank of America.
    Mrs. Maloney. Bank of America.
    Mr. Abernathy. Bank of America made an investment of well 
over $1 billion in Banco Santander Serfin, I believe it is, a 
major bank in Mexico.
    Mrs. Maloney. Was it just one branch or are they all over 
Mexico?
    Mr. Abernathy. No, all the branches of Banco Santander 
Serfin, their branches can be accessed to reach money in an 
account in a Bank of America operation here in the United 
States. So it is very large and very extensive. I believe Banco 
Santander Serfin is the third largest bank in Mexico.
    Those kinds of relationships are the kinds of benefits, 
frankly, that we expected would occur from NAFTA, and the 
greater penetration of U.S. banks into Mexico, and we are 
beginning to see those benefits.
    Mrs. Maloney. I think it is fair to say that we have an 
interest in stabilizing and helping the economies of other 
countries, particularly those that border us. It appears to me 
to have been a good policy decision for this to happen. I 
further would like to follow up and ask about the current 
Section 326 rules for financial institutions. These 
institutions can decide for themselves whether to accept 
identification documents in opening an account for non-U.S. 
citizens. As you discussed earlier, these document may include 
the matricula cards issued in Mexico, but they might also 
include driver's licenses issued in Canada. Is there any anti-
money laundering reason why we should be concerned with Mexican 
matricula cards, but not Canadian driver's licenses? I have 
heard this debate all over the place on the matricula cards, 
but no one seems to be questioning the Canadian driver's 
licenses. So is there any difference in Treasury's mind?
    Mr. Abernathy. Our view is that Treasury does not want to 
weigh in on the debate of whether a bank should use a Consular 
ID or should use a Canadian driver's license, what they should 
use. The responsibility is on the financial institution, with 
the oversight of their particular financial regulator to make 
sure they have the answer right. But they have the 
responsibility to decide what really does successfully work for 
them as a financial institution to be sure that their customer 
is who he says he is.
    Mrs. Maloney. Mr. Abernathy, have any other American 
financial institutions opened up branches in Mexico? Is Bank of 
America the only one that has opened up branches or is it 
growing?
    Mr. Abernathy. Yes, there are other U.S. banks that have 
their own branches and operations in Mexico. We expect that as 
the benefits of NAFTA continue to develop that you will have 
increased penetration of U.S. banks in Mexico for the benefit 
of Mexican consumers.
    Mrs. Maloney. Thank you very much. My time is up. I would 
like to really thank Mr. Hinojosa who pushed very hard to have 
this hearing. It is a tremendously important one. I thank the 
Chairman for responding to the concerns of the minority request 
on this important hearing.
    Thank you.
    Mr. Gillmor. [Presiding.] That will conclude the first 
panel. I want to thank you both, Mr. Abernathy and Mr. Dollar, 
for your testimony and your help. Thank you.
    We will call forward the participants in panel two.

STATEMENT OF JAMES E. YOUNG, PRESIDENT AND CEO, CITIZENS' TRUST 
                     BANK, ATLANTA, GEORGIA

    Mr. Young. I am pleased to appear before you today to offer 
comments on the topic, Serving The Underserved: Initiatives to 
Broaden Access to the Financial Mainstream. I thank you for the 
invitation and opportunity. You are to be commended for holding 
hearings on this matter best known in the financial services 
arena as banking the un-banked. I am also pleased to see 
Congresswoman Waters here, who has been a long-time supporter 
of minority-owned financial institutions.
    I am here of course representing Citizens Trust Bank, 
headquartered in Atlanta, Georgia. Citizens Trust Bank was 
founded in 1921 and in fact gained its experience in serving 
the un-banked for very different reasons in 1921 and years 
thereafter. It is currently the Southeast's largest African 
American-owned commercial bank and we are the third largest 
African American-owned commercial bank in the nation, with 
nearly $400 million in total assets. I would remind you, 
though, that is smaller than the branches of some of the major 
banks.
    Citizens Trust Bank is a community development financial 
institution, a designation received from the U.S. Treasury 
Department by banks and other financial institutions with the 
primary mission of promoting and meeting community development 
needs in distressed areas of its market area. Recently, 
Citizens Trust acquired the historic Citizens Federal Savings 
Bank of Birmingham, Alabama and currently has 11 branches 
throughout metropolitan Atlanta, the Columbus, Georgia area, 
two branches in Birmingham and one in Eutaw, Alabama.
    We have for many years been involved in banking the un-
banked. In January of this year, we began a program called the 
CT Beginnings program, which is a retail services program 
designed to provide a DDA, demand deposit account and savings 
account to low-to moderate-income individuals, in conjunction 
with the U.S. Department of Treasury initiative on bank the un-
bankable.
    We have in fact been utilizing the FDIC's MoneySmart 
financial literacy program and we have been teaching that in 
conjunction with faith-based community services operations. We 
are employing the human resource department's educational Lunch 
and Learn series. We conducted evening seminars through our CTB 
branch network. As of June, we had conducted 10 seminars, some 
of them running as long as six weeks; three at local churches 
and seven through the branch network. Seminars are held twice a 
month at our branches. However, since March, we have opened 
only 27 accounts. Small impact.
    However, what we require before accessing the CT Beginnings 
initiative and a new account is in fact that there be this 
educational process. The direct deposit from employers is 
helpful in this regard and we have a minimum deposit to open an 
account of only $10.
    In the context of how the financial services industry 
currently works, low-income citizens must establish a deposit 
account as a means to enter the financial mainstream and begin 
asset accumulation. It is also my contention that economic 
vitality can flourish in low-income communities if, and only 
if, significant numbers of the members of that community are 
able to move forward on an asset-building track. Therefore, 
access to financial mainstream for the un-banked is more than 
simply being able to open bank accounts. It is more than simply 
being able to simply open bank accounts. Indeed, equal access 
to the financial mainstream is a critical component of local 
development.
    Insured depositors should take on providing such access, 
and in general these institutions offer useful services to 
support an individual asset-building program by taking direct 
deposits, providing a safe place for electronic payrolls, 
government benefit checks and other deposits to be received; 
promoting savings by paying interest and often limiting access 
to funds on deposits; providing account statements to track the 
customer's savings and checking balances and interest earned; 
providing access to regulated loan products which have minimum 
standards of customer protection; providing a means to 
establish good credit; encouraging homeownership through 
mortgage loans; lower the cost of basic financial services for 
customers with qualifying balances; combining the delivery of 
financial services with informal customer education on 
financial planning, including appropriate loans and savings for 
college, homeownership, home improvement or retirement.
    The question is, what are the challenges facing most 
mainstream financial institutions in making such banking 
services available to the un-banked? As a banker, I would 
submit the following observations for your consideration. Such 
financial institutions do not offer the types of retail 
services that meet the particular needs of the un-banked 
because they do not find such transactions cost-effective. Many 
low-income customers need personal high-touch services at odd 
hours. In addition, many banks and credit unions prefer not to 
underwrite the small short-term loans those low-income 
customers require. Because low-income households barely have 
sufficient funds to meet their day-to-day needs, many need 
short-term credits, especially when unexpected expenses arise.
    However, we know the profile of the un-banked individual, a 
history of bounced checks, account closures, poor financial 
management, cash-only basis for household expenses, and the 
low-to middle-income levels.
    Therefore, the challenge in banks and other financial 
institutions face in providing banking services to the un-
banked is that they must build a significant volume of 
customers within an array of products and a level of service 
that meets the immediate financial needs of the un-banked; 
builds a strong interest on the part of the un-banked in 
establishing a deposit account; and a healthy credit 
relationship that promotes asset accumulation; and finally turn 
a profit.
    There have been many studies done by such organizations as 
the National Community Investment Fund, Fannie Mae and the 
Federal Reserve Bank. They have been conducted to quantify and 
explain the high proportion of Americans who have no checking 
or savings account in regulated banks and credit unions. The 
National Community Investment Fund is an independent trust and 
certified community development financial institution whose 
mission is to increase the number and capacity of depository 
institutions that are both effective agents of local community 
development and sound financial institutions.
    In May, with the support of a grant from the Fannie Mae 
Foundation, the NCIF conducted a comprehensive study on the un-
banked and published one of the most thorough reports that I 
have read on this subject. The report is entitled, A Report on 
Innovative Products and Services for Low-Income and Un-Banked 
Customers. It was published in May 2002. In order to support 
the products and services described in this report, I believe 
that community banks, those relatively small and locally based 
financial institutions, are best prepared to deal with this.
    Going even further, minority-owned financial institutions 
such as mine are even more focused on communities where our 
low-to moderate-income fellow citizens live. The fact of the 
matter is that the initial owners of these institutions founded 
them with that notion in mind. They remain in those communities 
today, although most of them were founded more than 50 years 
ago. Today, there are 167 minority-owned depository banks in 
the country. Of these, 49 are black or African American, 69 are 
Asian or Pacific Islander American, 30 are Hispanic American, 
17 are Native American or Alaska Native American, and 2 are 
multiracial American. These banks are located in 96 cities in 
30 states and two U.S. territories. In the aggregate, these 
institutions control some $93 billion in assets.
    However, it should be noted that there are no special 
charters granted to these banks and they must comply with all 
the banking laws and regulations governing all banks. In fact, 
the regulators have the ability to look in every nook and 
cranny of our small institutions, something they cannot achieve 
with the major institutions. While almost all of these are 
profitable and meet minimum standard capital requirements, they 
can ill-afford to incur the losses attributed to providing 
normal banking services to the un-banked. Yet they have been 
less than profitable and less profitable than major banks; less 
profitable than those who serve the majority market. We are 
measured on profitability. We are measured on capital adequacy 
by the very regulators who now promote serving the un-banked.
    There have been funding initiatives by the federal 
government such as the Bank Enterprise Award program of the 
U.S. Treasury Department, and the most recent New Markets Tax 
Credit Allocation program administered by the same department. 
However, when applying for such funding, minority-owned banks 
find themselves competing for the limited resources against 
much larger majority-owned financial institutions.
    Mr. Gillmor. Mr. Young, to try to stay on schedule, could 
we ask you to wrap up?
    Mr. Young. Yes. I will be finished in 2 minutes, please.
    The result is that many of these smaller minority-owned 
financial institutions are often overlooked and shut off from 
the kind of financial support needed to offer normal banking 
services in disadvantaged communities. To give you an example, 
there was $2.6 billion available in tax allocations to 
encourage the private sector to support the development and 
redevelopment of projects in these underserved communities. 
When it all came out, there were $26 billion in applications, a 
number of them minority-owned banks. There was only one 
minority-owned bank in this country that received a tax 
allocation for such work.
    I do not quarrel with the process. I do quarrel with the 
outcome. While you invited me here to make comments, I would 
also like to make the following recommendations for your 
consideration. One is to form a true partnership with minority-
owned banks in this country to foster the implementation of the 
integrated products that are described in the NCIF report. 
These institutions need to have initiative funds allocated only 
to those banks. They should not have to compete with the major 
banks. After all, these institutions are heavily regulated 
already, regularly examined by governmental agencies, and have 
to meet strict criteria for the maintenance of their respective 
banking charters.
    Number two, one of the critical problems facing the nation 
is financial illiteracy. Our children are not being taught the 
importance of participating in the financial mainstream even 
though they attend public school daily. If we must teach 
science, math and art, surely our presence here dictates that 
we should empower our children in financial matters long before 
they are ready to be first-time homebuyers or before they 
become un-bankable.
    Within this city is the National Bankers Association, which 
is a 70-year-old trade organization for the nation's minority-
owned banks. It represents a convenient access to those banks 
that have labored long and hard to provide the affordable 
banking services we would all like to see available to all.
    I want to thank you again, and as I stated at the outset, 
access to the financial mainstream of the un-banked is more 
than simply being able to open bank accounts. Indeed, equal 
access to the financial mainstream is a critical component of 
local development.
    Thank you again, and I apologize for taking advantage of 
the opportunity.
    [The prepared statement of James E. Young can be found on 
page 130 in the appendix.]
    Mr. Gillmor. Thank you, Mr. Young. It was an 11-minute 5 
minutes.
    Mr. Young. They told me I had 10 minutes before I came 
here.
    Mr. Gillmor. Okay. Well, that is fine.
    Next we will hear from Mr. Al Beltran, who is the Chief 
Executive Officer of Security First Hidalgo Federal Credit 
Union in McAllen, Texas. You are here on behalf of the Credit 
Union National Association. Mr. Beltran?

 STATEMENT OF AL BELTRAN, CEO, SECURITY FIRST HIDALGO FEDERAL 
  CREDIT UNION, MCALLEN, TEXAS, ON BEHALF OF THE CREDIT UNION 
                      NATIONAL ASSOCIATION

    Mr. Beltran. Thank you.
    Good morning, Representative Gillmor and my good friend, 
Representative Ruben Hinojosa, and members of the subcommittee.
    I am honored to appear before you this morning to present 
testimony on the plight of the un-banked and underserved. I am 
Al Beltran, President and Chief Executive Officer of Security 
First Federal Credit Union, a $137 million community-chartered 
credit union serving nearly 21,000 members in McAllen and the 
Rio Grande Valley of South Texas.
    I appear before you today on behalf of the Credit Union 
National Association. My written statement includes detailed 
descriptions of a recent CUNA modest-means survey, a study on 
serving new Americans and fairly lengthy descriptions of many 
programs credit unions are employing in an effort to meet the 
financial needs of the un-banked and the underserved. Because 
of time constraints, I will only briefly mention some of those 
programs.
    Before I do that, let me quickly say that CUNA and credit 
unions are extremely grateful to Chairman Dollar for his tenure 
on the NCUA board. His leadership in the area of reaching out 
to the underserved has been unparalleled in credit union 
history.
    Many of the un-banked still depend on some entity to help 
them wire much of their hard-earned money back to their 
families in their native countries. CUNA, along with the World 
Council of Credit Unions, has for a long time recognized the 
desperate need for affordable remittance services and the 
difficulties in providing these services. This recognition has 
resulted in an aggressive effort by credit unions to address 
these needs.
    I am proud to say that Security First Federal Credit Union 
has been offering its members the opportunity to wire money 
back to Mexico and use the World Council of Credit Unions 
service called International Remittance Network, or the IRnet. 
This service saves our users at least one-third the cost of 
using a high-cost money transfer agent. As you know, many of 
the un-banked are immigrants, all of which need some form of 
identification to be able to use the services of a mainstream 
financial institution. For those from Mexico, that form of 
identification is often the Matricula Consular.
    CUNA is very concerned about some current efforts to 
discredit the use of the matricula. We have formally adopted a 
position to oppose any legislation prohibiting the use of the 
matricula or other similar government-issued ID, and support 
legislation allowing its use for financial institutions or for 
general purposes. In that regard, we congratulate 
Representative Ruben Hinojosa on the introduction of H.R. 773, 
the 21st Century Access to Banking Act.
    There is a growing public awareness that none of these 
products or services will help consumers unless they are aware 
of their options and how the financial system works. Credit 
unions recognize that it is necessary to offer financial 
literacy training to successfully integrate the un-banked into 
the financial mainstream.
    Security First actively sponsors community-and school-based 
educational programs and seminars. We also provide credit union 
staff as volunteers to read to elementary school children, 
participate in the Partners in Excellence program with the 
local school district, and provide scholarships to needy high 
school students. All these services are provided at no cost and 
are open to credit union members and the community it serves.
    At the national level, CUNA has formed a partnership with 
the National Endowment for Financial Education and the 
Cooperative Extension Service to teach the high school 
financial planning program to high school seniors across the 
country. In addition, CUNA's foundation implemented a 
nationwide financial literacy campaign called Plan For It, Save 
For It to address the need for increased savings among low-to-
moderate income families.
    For the next few minutes, I will focus on some of the 
programs provided by Security First. As a whole, the Rio Grande 
Valley is considered an underserved area. Our credit union 
products are specifically designed to meet the financial needs 
of the people we serve. For example, to join the credit union, 
we have lowered our membership savings account requirement from 
$100 to $5. Direct deposit and payroll deduction may be 
established to reach the minimum savings account balance of 
$50. Once the savings account is open, they do not have a 
waiting period to use any additional products and services. We 
advertise in English and Spanish, including billboards and 
direct mail advertisements.
    Security First is currently piloting a checking account 
program called First Choice Checking, that is available at no 
cost with courtesy overdraft protection. Additional services 
include the first order of checks at no cost, debit ATM card 
access, no-cost check imaging, no-cost audio access, and no 
monthly maintenance fee. Credit union educational programs in 
Spanish are regularly presented to groups.
    In conclusion, on behalf of CUNA I am grateful for the 
opportunity to have commented on the plight of the un-banked 
and underserved, and how Security First Federal Credit Union 
and credit unions across the country are trying to reach out 
and bring them into the financial mainstream.
    There is no more pressing need, in my opinion, for it is 
only through economic opportunity that we can solve many of the 
problems facing our nation's poorest and most deprived 
individuals. Whether it is through the First Accounts program, 
affordable housing programs, enhanced IDAs, expanded 
opportunities to serve their communities, or financial 
literacy, credit unions stand ready to meet this very important 
challenge.
    Thank you and I would be pleased to answer any questions 
you may have.
    [The prepared statement of Al Beltran can be found on page 
72 in the appendix.]
    Mr. Gillmor. Thank you very much, Mr. Beltran.
    Is Mr. Hinojosa your congressman?
    Mr. Hinojosa. Yes, Chairman Gillmor.
    Mr. Gillmor. I was just going to tell him he has a very 
fine congressman, but I presume he already knows that.
    We will go to John Bryant, Chief Executive Officer of 
Operation HOPE.

         STATEMENT OF JOHN BRYANT, CEO, OPERATION HOPE

    Mr. Bryant. Good afternoon. I am honored to be here, Mr. 
Chairman and members of the subcommittee, and Congressman 
Hinojosa, and those members on the committee from California 
which is where I am based, including Congresswoman Maxine 
Waters.
    I would also like to take this opportunity to thank other 
of your colleagues in the House who have been extremely helpful 
in our work in California and across the nation. They include 
Congresswoman Diane Watson, where just yesterday we stood with 
Simone Lagomarsino, the CEO of $2.5 billion Hawthorne Savings 
Bank; the Bishop Charles E. Blake of the West Los Angeles 
Church of God in Christ and more than 100 community leaders to 
cut the ribbon to a full-service Hawthorne Savings Bank branch 
in the underserved yet deserving areas of South Los Angeles.
    This is significant because in 1996 we built what we called 
a HOPE Center at this location, and few financial leaders 
thought it would succeed. A HOPE Center is a cross between a 
traditional bank branch and a Kinko's for empowerment; one-stop 
shopping for changing your life. Well, 7 short years later and 
$100 million in homeownership and small business bank lending, 
and with zero reported home mortgage defaults. I will repeat. 
This is in the inner-city; $100 million in bank lending for 
homeownership and small business through Operation HOPE, all 
FDIC-insured banks, with zero reported home mortgage defaults 
over 9 years. Last year, Operation HOPE became the first 
nonprofit in U.S. history to build a bank branch and sell it to 
a bank.
    Congresswoman Diane Watson supports us in her district, as 
Congresswoman Lucille Roybal-Allard has supported us in her 
mostly Latino and Spanish-speaking district, with our HOPE 
Centers there. I am proud to say that there, too, in Maywood, 
California, the densest city in the State of California with 
more than 30,000 Spanish-speaking individuals, we now have a 
full service bank branch replacing the role of Operation HOPE 
in this deserving community. California National Bank, a $6 
billion bank, and their CEO Greg Mitchell made the decision to 
invest there, and is doing quite well, I might add. Before 
Operation HOPE made the commitment to serve the underserved yet 
deserving community of Maywood, the only mainstream financial 
service provider was an ATM and a 7-11.
    And then there is Congresswoman Juanita Millender-McDonald, 
where we have a HOPE Center in Watts. And Congressman Charles 
Rangel of Harlem, New York, we partner with the Congressman and 
former President Bill Clinton to educate every child in Harlem 
by the year 2005, that is 35 schools in Harlem, in economic 
literacy through Banking on Our Future, our economic literacy 
program, teaching kids the basics of a checking account and 
savings, credit and investment.
    Operation HOPE has taught over 107,000 youth in 400,000 
teaching sessions in more than 500 schools, community-based and 
faith-based organizations, with more than 1,000 trained and 
certified volunteer banker teachers, what we call Life 101, 
economic literacy skills, what Mr. Young was referring to 
earlier. Operation HOPE today is the only national urban 
delivery platform for economic literacy in the country, both 
inspiring and depressing.
    And then you have U.S. Senator Dianne Feinstein who has 
proposed to expand our HOPE Center model across the State of 
California. I am proud to say today we are building a HOPE 
Center in Oakland, California with Bank of the West and SBC 
Communications. After four years of operating, the bank has 
committed to build a bank branch in our place.
    Finally, we have been asked by Senator Rick Santorum of 
Pennsylvania to bring Banking on Our Future into the entire 
State of Pennsylvania. Working with the Senator and the Federal 
Reserve Bank of Pennsylvania, we will make this happen next 
year.
    We are working with this administration, the Bush 
Administration, to push and press a bold economic literacy 
agenda for our nation and a hoped-for Presidential priority. We 
are talking, they are listening, and we are on the verge of 
several major partnerships with this administration.
    So I am honored to be with you today to talk about the 
wealthless and what I call the ``silver rights'' movement. How 
concerned should America be if 80 percent of its economic 
activity is tied to the U.S. consumer? Very, because it is 
true. How concerned should the President and Congress be if 
some propose that we manage our own Social Security accounts 
when a good number of us cannot manage our own bank accounts? 
Very, because it is true.
    How concerned should economists and policymakers be if 
billions of dollars in yet unrealized taxable income and other 
tax receipts are effectively left on the table, so to speak, in 
urban inner-city and low-wealth communities because people 
don't know better and as a result find it hard to do better? 
Very, because it is true. How concerned should all of us be 
that more than 1 million American filed for bankruptcy 
protection in 2000 and 1.5 million in 2001, with the largest 
group of bankruptcy filers being youth between 18 and 24? Very, 
because it is true.
    But not all the news is alarming news. I come with good 
news. It is called the ``silver rights'' movement. The silver 
rights movement says two quick things. If the 20th century was 
marked by race and the color line, then the 21st century will 
be marked by issues of class and poverty. It also suggests that 
there is a difference between broke and being poor. Being broke 
is economic and being poor is a disabling frame of mind and a 
depressed condition of our spirit. We must vow never to be poor 
again.
    In both cases, as I told Federal Reserve Chairman Alan 
Greenspan on June 5 when we took him into an inner-city 
classroom here in D.C. at John Philip Sousa Middle School in 
Southeast Washington, DC. He and I talked at an economic 
literacy course called Banking on Our Future to 35 young bright 
lights. One kids said when asked what did ATM mean, he said 
``all the money.''
    [Laughter.]
    And to bring the attention of economic literacy to our 
nation and to you for monetary policy and public policy. 
Greenspan agreed that education is the ultimate poverty 
eradication tool and I must commend Congresswoman Waters for 
first bringing Greenspan into South-Central LA and we are now 
passing the baton to take it to the next level.
    All the indicators suggest that the rich are getting 
richer, the poor are getting poorer, and it is harder to be 
middle class. Thirty years ago, middle class was one parent 
working. Today, it is two parents working and the television 
set is raising your child. According to CNN, half of all 
Americans are living paycheck to paycheck. That is not black 
folks, that is all folks. And an estimated 65 million Americans 
or 10 million households have no traditional banking 
relationship and there are 33 million poor Americans in this 
great country. That is more than 21 states combined.
    And then you have our children. As I just mentioned, the 
largest group of bankruptcy filers are youth between 18 and 24. 
That is not black kids. Those are middle class white college 
students, getting a master's degree in psychology and an 
undergraduate degree in bankruptcy paying for their pizza with 
a credit card and believe a check is a form of credit. We have 
to do this because our nation and our economy depends on us 
doing this. Let me now go to the good news. We are the only 
nation in the world where every race of people is within our 
borders. We also happen to be the largest economy in the world. 
The two largest economies in the nation are California and New 
York. The two most diverse places in the nation are California 
and New York. The fifth largest economy in the world is 
California. The 10th largest economy in the world is Los 
Angeles County, 180 ethnic groups. I tell CEOs, don't put 
blacks and Latinos on your boards because it looks good. Do it 
because it is good for your bottom line.
    Facts: The largest condiment seller in the nation for 
generations has been ketchup. It is now salsa. African 
Americans are an economic force to be reckoned with. We 
represent a $500 billion a year consumer spending force, the 
ninth largest in the free world. We represent 25 percent of 
every movie ticket sold in this country and that is why Magic 
Johnson's theater in South-Central LA is one of the top ten 
theaters in the entire SONY chain.
    In Harlem, there is $1 billion in cash economy not showing 
up on census data. In Harlem, there is over $1 billion in 
untapped buying power and the crime rate per capita, per 1,000 
residents is lower in Harlem than in Manhattan. In D.C, there 
is $250 million of untapped cash economy and the mayor here has 
launched an illiteracy initiative to empower the individuals 
here to get the jobs that are actually available. We are 
bringing a HOPE Center here to Anacostia in partnership with E-
Trade Bank and the District and the federal government to prove 
you can do well by doing good.
    Finally, Banking on Our Future. As I mentioned, we taught 
107,000 kids economic literacy, the only national delivery 
platform. We partnered with the FDIC. It was noted earlier 
today how good this program is. I believe it is the best 
program in the federal government, and Chairman Powell deserves 
a lot of credit. We have also partnered with eight of the 
twelve Federal Reserve banks and the American Bankers 
Association and the American Community Bankers Association, and 
President Bush has highlighted our volunteers.
    I have already mentioned the local partnerships, and Wells 
Fargo and I have committed to bring economic literacy online at 
Bankingonourfuture.org. We get 250,000 hits per month on this 
Web site for folks desiring to get economic literacy. We are 
now partnering with, as I have mentioned, other branches of the 
administration, the Economic Development Administration, 
Veterans Affairs. I believe economic literacy has to be clear 
and transparent throughout our system, because as I said 
earlier, 80 percent of our economy is tied to the U.S. 
consumer.
    Results, and my final comment. Check-cashing customers into 
banking customers conversion. We partnered with Union Bank of 
California and Nix Check Cashing. I don't like check-cashers, 
but if you can't beat them, buy them. So we went into the 
inner-city and we partnered with Nix and Union Bank. I am proud 
to say today that of 30,000 checking accounts opened by Union 
Bank of California in 2001, 10 percent or 3,000 accounts were 
from our partnership, converting check-cashing customers into 
banking customers. By the way, Union Bank is on its way to one 
million ATM transactions in those locations this year. You 
cannot have an ATM transaction without a bank account.
    We have converted renters into homeowners. I referred to 
those statistics already. You might note that there is not one 
home burned in the riots of 1992 and there were 3,000 
structures damaged. You do not burn that which is your own. We 
believe in converting the un-banked into communities of choice. 
I have talked about the HOPE Centers already and I have 
mentioned that we have built three of them. We are building on 
in Oakland, California and we are building on in Washington, 
D.C.
    And so, my request to you today, our nation's legislators, 
is to do more and to have a call to action and a marked 
increase in support for economic literacy education and tools 
and services that empower the wealthless of our great nation. 
These individuals do not want a hand out, they want a hand up. 
I believe in the James Brown version of affirmative action, 
``Open the door, I will get it myself.''
    Thank you.
    [The prepared statement of John Bryant can be found on page 
85 in the appendix.]
    Mr. Gillmor. Thank you very much, Mr. Bryant.
    And we will go to Mr. Gabriel Manjarrez, who is the Senior 
Vice President, Hispanic Marketing Executive at the Bank of 
America.

STATEMENT OF GABRIEL MANJARREZ, SENIOR VICE PRESIDENT, HISPANIC 
              MARKETING EXECUTIVE, BANK OF AMERICA

    Mr. Manjarrez. Thank you, very much. Thank you, Congressman 
Gillmor, Congressman Hinojosa, Mr. Chairman, the rest of the 
distinguished members of the subcommittee.
    On behalf of Bank of America, I want to thank you for the 
invitation to testify on our initiatives to bring the un-banked 
and underserved into the mainstream financial system. 
Specifically, I want to talk about two of our programs seeking 
that objective in the Hispanic market.
    In my role in charge of marketing to Hispanic consumers, it 
is my job to develop sales and marketing strategies that will 
connect Hispanic customers with our financial products and 
services in a way that provides them with the most positive and 
integrated banking experience. In fact, our in-language 
advertising slogan is Superacion Constante, which conveys that 
we are always striving for improvement in the way we serve this 
market.
    I would like to take a little time today to describe what 
we have done to be responsive to the needs of this market. The 
first program I want to discuss is our initiative to accept the 
use of the Mexican consulate ID, the Matricula Consular. We 
developed this initiative because we wanted to make it easier 
for Mexican citizens living in the USA to have access to 
banking services from Bank of America. Like many of our 
Hispanic customers, we recognized the opportunity presented by 
the Mexican consulate ID, but needed to see if the card could 
serve as an effective form of identification. We launched a 
pilot in December 2001.
    The results were quite convincing, with significant net 
gains on new checking and savings accounts that have continued 
an upward trend to this day. The pilot program was successful 
and we decided to expand it nationwide as of June 2002. The 
size and significance of this step should not be 
underestimated. Bank of America is the nation's largest retail 
bank, with over 4,000 retail branches and more than 13,000 
ATMs. In fact, we are the only coast-to-coast retail bank in 
the nation; 75 percent of the nation's Hispanic population live 
in communities served by Bank of America.
    We knew that this is a market that has a high need for 
banking services and very high growth potential. Today, every 
single Bank of America banking center recognizes the Matricula 
Consular as a valid form of identification. We believe that 
banking services ought to be made available to everyone so that 
they can manage their money without carrying large sums of 
cash. As Congressman Hinojosa eloquently noted, the 
consequences of having to carry a stash of cash can be quite 
dire and take the form of muggings and other violent crimes.
    We strongly encourage the U.S. and Mexican governments to 
work together to ensure that the consulates have the best 
authentication measures and tracking systems in place. We also 
applaud the Mexican government for developing much stronger 
security measures to ensure the integrity of the card itself. 
Today, many consider it as secure as a U.S. passport because of 
its robust security features.
    The second program I want to talk about is our money 
remittance program. It is called SafeSend. Addressing 
Congresswoman Velazquez's excellent point about promoting 
alternatives, we launched an entirely unprecedented 
international money transfer service as an alternative to 
traditional wire transfer services that dominate the 
marketplace.
    SafeSend is a safe, trustworthy and convenient card that 
uses a telephone Internet and the ATM network, rather than 
expensive wire services. Our SafeSend customers can send money 
by phone or electronically to loved ones in Mexico 24 hours a 
day, 7 days a week, without having to leave their homes. On the 
receiving end in Mexico, the recipient uses a secure PIN and 
SafeSend ATM card to access the money within minutes in over 
20,000 Mexico-based ATMs.
    We created this product because customer feedback 
demonstrated the demand for less expensive options in the money 
transfer business. SafeSend is the first to serve that the Bank 
of America designed exclusively for Hispanics. It offers 
greater value and convenience than traditional wire transfer 
products and provides a secure service at a low cost to the 
sender. More than one-third of all our SafeSend customers open 
checking accounts when they subscribe to the service. We are 
finding our remittances business to be a great generator of 
deeper customer relationships and helping the un-banked and the 
underserved be banked and served.
    Last, we would be remiss if we failed to mention efforts to 
bring the underserved populations into banking through 
financial education initiatives. As Chairman Bachus and 
Secretary Abernathy pointed out, financial education is key to 
improve the situation of the un-banked. Bank of America is one 
of the nation's strongest supporters of financial education.
    We have longstanding commitments to the health of the 
communities where we do business, and as a provider of 
financial services we have a responsibility to help our 
customers and clients understand our products and services so 
they can plan for every stage of their lives. We have several 
examples of alliances we have done, including with the National 
Council of La Raza, with Freddie Mac and Consumer Credit 
Counseling Service, and with Consumer Action to provide 
educational services.
    In sum, the Mexican consulate ID, SafeSend, and our 
financial education initiatives are opening the door to 
financial services for more un-banked customers. As a result, 
more are opening new bank accounts, cashing checks, making 
international money transfers, subscribing to other banking 
services, and becoming more documented in the process. We are 
providing opportunity for thousands to gain access, many for 
the first time, to mainstream banking services, and applaud the 
subcommittee's interest in learning more about the subject.
    I would like to thank the subcommittee once again for the 
opportunity to share our perspective and look forward to 
answering any questions.
    Thank you.
    [The prepared statement of Gabriel Manjarrez can be found 
on page 116 in the appendix.]
    Mr. Gillmor. Thank you very much, Mr. Manjarrez.
    We go to Ms. Sheila Bair, who is the Dean's Professor of 
Financial Regulatory Policy at the University of Massachusetts.

    STATEMENT OF SHEILA BAIR, DEAN'S PROFESSOR OF FINANCIAL 
         REGULATORY POLICY, UNIVERSITY OF MASSACHUSETTS

    Ms. Bair. Thank you, Mr. Chairman.
    I appreciate the opportunity to testify this morning on 
initiatives to broaden access to the financial mainstream among 
traditionally underserved populations.
    Last fall, the Inter-American Development Bank asked the 
University of Massachusetts to undertake a research project on 
ways to improve Latin American immigrants' access to the U.S. 
banking system. Today, I will highlight the report's key 
findings.
    Previously sponsored IDB survey data show that lack of 
documentation of legal status to be the most frequently cited 
reason Latino immigrants do not use banks. Consistent with that 
data, our own survey and interviews revealed widespread 
consensus that banks and credit unions must be able to accept 
foreign government-issued documentation to successfully reach 
the un-banked Latino immigrant community.
    There was also widespread support for the approach taken in 
the Treasury Department's recently finalized section 326 
regulations to allow banks and credit unions to accept foreign 
government-issued documentation if the institution determines 
that such documentation provides a reasonable basis to know a 
customer's true identity.
    Our research showed that mainstream financial 
institutions's acceptance, particularly the Matricula Consular, 
appeared to move a major impediment to bringing un-banked 
immigrants into banked status. For instance, Wells Fargo 
estimated that it opened 60,000 new accounts since it began 
accepting the matricula in November 2001. The FDIC Chicago 
office recently began surveying banks accepting the matricula, 
and of the eight banks they had surveyed so far, nearly 13,000 
new bank accounts had been opened, representing $50 million in 
deposits. The FDIC is in the process of collecting data from an 
additional 26 institutions.
    The provision of bilingual services was the second most 
important access issue identified by those we interviewed. 
Virtually all our surveyed institutions provided bilingual 
account-opening documents, product information, and bilingual 
assistance at their car centers and Web site, as well as 
placing a high priority on hiring and training bilingual staff. 
The provision of products and services for individuals with 
little or no credit history was also deemed important. All 
surveyed institutions offered secure credit products and some 
made small unsecured loans based on alternative criteria such 
as regular timely payment of rent to let new customers build a 
credit history.
    In addition, appropriate product offerings were considered 
very important. Most institutions offered low minimum balance 
savings accounts on an introductory basis and used caution in 
introducing checking accounts with overdraft features, credit 
cards, or other products that could entail high fees if 
inappropriately used. Financial education was also heavily 
utilized by all surveyed institutions. School-based programs 
were particularly effective at outreach since in a high 
percentage of Latino families the parents are un-banked. School 
banking programs introduced Latino children to bank accounts 
which they, in turn, would take home and share with their 
families.
    Surveyed institutions also made very stringent efforts to 
provide services in easily accessible locations and during 
nontraditional hours and to be visible, present forces in 
Latino neighborhoods. Many institutions had also entered 
partnerships with major employers of Latino immigrants, 
providing job-site banking services and ATMs, as well as 
financial education.
    Finally, all surveyed institutions offered remittance 
services, identifying that as the top product need of their 
Latino immigrant customer base. All also said that providing 
low-cost remittance services was a major marketing tool, a key 
to getting Latino immigrant customers in the door. A key 
benefit of banks and credit unions interested in marketing to 
the Latino community has been their entry into the remittance 
market. As other witnesses have testified this morning, their 
entry into this market has created needed competition which has 
already made significant progress in lowering the cost of 
remittances. To encourage this trend, however, it is imperative 
that banks and credit unions have the discretion to accept 
reliable foreign government-issued identification to open 
accounts.
    Unfortunately, their ability to do so under the section 326 
regulations has become embroiled in the larger debate over 
immigration control policy. Being able to have a banking 
account will not materially influence an individual's decision 
to immigrate or remain in this country illegally. As a 
consequence, denying banks or credit unions the ability to 
accept reliable foreign-issued documents to open accounts would 
do little if anything to accomplish immigration control 
objectives. It will, however, force undocumented workers to 
rely on higher cost, less-regulated financial service providers 
with the resultant loss in regulatory oversight and 
transparency.
    Regulated depository institutions have long experience in 
combating money laundering and illicit financing under the Bank 
Secrecy Act and are subject to stringent independent oversight 
by highly trained bank regulatory staff. It is unlikely that 
less-regulated financial service providers would devote the 
same level of expertise or resources against money laundering 
and terrorist financing. Thus inhibiting the ability of banks 
and credit unions to provide remittance services could run 
counter to our enforcement objectives.
    Senator Richard Lugar eloquently stated in a recent op-ed 
defending the Matricula Consular, quote, ``throughout American 
history, our nation has succeeded in integrating immigrants 
into the economic fabric of the country,'' end quote. For 
millions of immigrants, having access to a low-cost, federally 
insured depository account is a necessary part of achieving 
that integration. All of us, Republicans and Democrats, 
conservatives and liberals, can and should embrace the notion 
of removing government impediments to allowing people to work 
and contribute to this great nation.
    Banks and credit unions should be allowed to do what they 
are chartered to do, provide a safe place for people to deposit 
their money and provide a means by which those deposits can be 
translated into productive lending. The federal government 
should not try to micro-manage these institutions's customer 
relationships, nor should it try to undertake the impractical 
task of dictating among thousands of different types of 
identification which are acceptable and which are not.
    To be sure, there have been failings in our immigration 
policy, but intrusive interference with the ability of banks 
and credit unions to serve their communities is not the answer. 
There is near-universal support for improved border security, 
reformed visa procedures, coherent tracking systems and a 
rationalization of the patchwork of laws that make up the 
immigration code. This is where the focus of our immigration 
control efforts should be.
    Thank you, Mr. Chairman, for this opportunity.
    [The prepared statement of Sheila Bair can be found on page 
66 in the appendix.]
    Mr. Gillmor. Thank you very much, Ms. Bair.
    We will now go to Mr. Brian Satisky, who is the President 
of the Maryland Association of Financial Service Centers, 
testifying on behalf of Financial Service Centers of America.

STATEMENT OF BRIAN SATISKY, PRESIDENT, MARYLAND ASSOCIATION OF 
 FINANCIAL SERVICES CENTERS, INC., ON BEHALF OF THE FINANCIAL 
                  SERVICES CENTERS OF AMERICA

    Mr. Satisky. Good afternoon, Mr. Chairman, subcommittee 
members.
    My name is Brian Satisky and I am here today to testify on 
behalf of Financial Service Centers of America, also known as 
FSCA, where I serve on the board of directors. I am the Vice 
President of A&B Check Cashing and I also serve as President of 
the Maryland Association of Financial Service Centers, 
Incorporated.
    FSCA represents more than 5,000 businesses which provide 
consumers with a variety of financial services, including check 
cashing, money orders, ATMs, electronic bill payment, money 
wire transfers, transit tokens and passes, and a host of other 
financial and related services. Today, we hope to dispel some 
myths and make it very clear that we are in the financial 
mainstream serving millions of Americans on a daily basis.
    All consumers deserve access to essential financial 
services whether they are offered by banks or our service 
centers. The policy goal should be to assure that choices are 
available and not just shoe-horn consumers into a financial 
model which may not fit their circumstances. Everyone needs 
financial services; not everyone needs to get them from a bank.
    For many consumers, the traditional banking model is not 
the best choice. The Federal Reserve Board reported in the year 
2001that half of those who do not currently have checking 
accounts used to have them. For these consumers, the choices 
not to have an account are appropriate. Comptroller of the 
Currency John Hawke said last year that appearances to the 
contrary notwithstanding, check cashing customers do business 
outside the banking system for practical and economically 
rational reasons.
    The un-banked are actually the self-banked. These 
individuals understand the costs and benefits of maintaining a 
banking relationship and have voted with their feet to utilize 
our financial services. Consumers know that banks will not cash 
checks in amounts later than the amount of funds on deposit. 
Check-cashers will do so and make funds readily available to 
these consumers so they do not have to wait for a check to 
clear.
    Unlike banks which primarily derive their income from the 
spread between interest paid on deposits and their loan 
portfolios, we rely on transaction fees. Our success depends on 
providing a high level of service. It is not realistic to 
expect banks to welcome customers who do not add much to their 
bottom line, but these are our customers and they are pleased 
with our services. Eight-one percent of survey respondents 
rated our service either excellent or very good.
    Many consumers prefer to obtain their financial services at 
check-cashers despite the efforts of government to direct them 
to banks. There will always be some consumers for whom a 
depository account does not make economic sense, but those who 
choose to obtain depository accounts should have the 
opportunity to do so. We believe that our infrastructure could 
serve as a conduit for them into the banking system. Check-
cashers directly serve the people the policymakers are trying 
to reach.
    When the banks abandoned many of our nation's 
neighborhoods, our industry continued to serve these 
neighborhoods. Does it really make sense to ask these very 
banks now to offer them accounts? Or should government turn to 
the industry which has continued to serve the public without 
subsidies? Government has subsidized banks to serve our 
customers, but these programs can and do come with substantial 
costs to taxpayers.
    As the House Appropriations Committee has pointed out, for 
some consumers the cost to open each first account averages 
almost $250. Last year, the GAO questioned the efficiency of 
the ETA, stating, ``Given the limited appeal of the ETA, we 
question whether the program would generate savings sufficient 
to offset Treasury's costs of maintaining and promoting this 
program.''
    Although many banks have abandoned neighborhoods, FiSCA 
members have found some financial institutions with which 
partnerships can be formed to benefit all parties involved. My 
company, A&B Check Cashing, is involved in a project in 
Southwest Baltimore City in which we have partnered with a 
federal credit union to provide services to a community that 
has lacked banking for the past five years. We call it Our 
Money Place. This partnership arose after a community group, 
Operation Reachout Southwest, sought a bank to serve the 
community, but was rejected time and time again. Finally, they 
came to the Social Security Administration Baltimore Federal 
Credit Union which agreed to serve the neighborhood, but did 
not want to provide cash services. That is where we come in.
    Our company provides all the cash services that are 
necessary for a full-service financial institution to have. We 
will not only cash checks, but dispense free money orders to 
the customers to use as they see fit. If a customer has a 
savings account and wishes to make a deposit, A&B will cash 
their check and issue them a free money order in the amount of 
the deposit they want to make. They simply walk over to the 
credit union window and make the deposit.
    Additionally, Operation Reachout Southwest maintains a desk 
in our lobby that answers questions and provides financial 
literacy education and counseling. A neighborhood that had no 
banking at all now has a full-service financial institution to 
serve them.
    In New York, another FiSCA member, RiteCheck Cashing, is in 
a cooperative venture with Bethex Federal Credit Union. In that 
case, the idea is to permit the credit union to expand its 
reach without incurring the expenses of constructing and 
servicing new branches. In California, some Nix Check Cashing 
locations are co-located with Union Bank facilities, allowing 
consumers full access to depository services. The partnership 
teams up with Operation HOPE, a community group represented 
here today by its Chairman John Bryant.
    While FiSCA members are working with some institutions to 
expand services, other banks continue to abandon our customers 
by refusing to serve all check-cashing businesses. They are 
following guidance from the OCC suggesting that check-cashers 
and a few other businesses are at high risk for money 
laundering. This designation is false, misleading and damaging. 
Our record of compliance is exemplary. The Financial Crimes 
Enforcement Network, FinCen, has found our industry not to be 
at any higher risk than any other industry.
    This problem could be acute for our customers. There are 
now only two major banks serving the industry in New York City, 
and with the loss of competition, fees are likely to rise. Many 
banks have also stopped verifying funds availability for our 
customers' accounts. It makes it difficult for our customers 
who are attempting to cash payroll checks as check-cashers need 
to be able to determine that there is a likelihood that the 
funds are available. Even the recently passed USA PATRIOT Act 
encourages all financial institutions to verify funds to help 
fight against fraud and suspicious transactions. How can we 
comply if the banks refuse to assist us? FiSCA intends to 
pursue these issues of bank discontinuance and lack of 
verification of funds with this subcommittee.
    I thank you and I would be pleased to answer any questions 
that you may have.
    [The prepared statement of Brian Satisky can be found on 
page 121 in the appendix.]
    Mr. Gillmor. Thank you very much, Mr. Satisky.
    Let me begin and I would like to go to Mr. Manjarrez. You 
stated in your testimony that the Bank of America's policy is 
to accept Matricula Consular as a valid form of identification 
when it is presented with a secondary form of identification. 
In your experience, what other forms of identification do 
holders typically present when they are seeking to cash checks 
and open an account? And what standards does the bank apply in 
determining whether the secondary form of ID is sufficient?
    Mr. Manjarrez. Thank you very much for your question, 
Congressman Gillmor. As primary form of identification, we take 
the Matricula Consular along with a number of other 
identifications, including any U.S. Government-issued 
identifications. As a secondary form, we will take either a 
driver's permit or other photo identification that are assessed 
by our risk department to comply with our efforts to not permit 
fraud and to comply with all federal regulations.
    Mr. Gillmor. So it would have to be a government-issued 
photo ID of some type?
    Mr. Manjarrez. That is right.
    Mr. Gillmor. Okay. Let me go to Ms. Bair. Those who oppose 
the acceptance of the Matricula Consular by depository 
institutions have argued that the cards lack adequate security 
features which make them susceptible to fraudulent misuse. Does 
your research support or refute that claim? I might also ask 
you, what are the security features of the matricula? Also, I 
have been told and I just want to ascertain if it is true, that 
it would be relatively easy for someone who is not a Mexican 
citizen to obtain one, and is that accurate as well.
    Ms. Bair. I think the standard under section 326 
regulations is one of reasonableness and is based on available 
identification. We looked at the security features in the high 
security Matricula Consular and talked to a number of bank 
officials. B of A was one of the institutions surveyed and 
written up as an institution with best practices in our report. 
I would add, incidentally, that they are not alone. Most of the 
banks and credit unions we surveyed also require an additional 
form of ID. The Matricula Consular is accepted as the primary 
form, but their requirements are typical of the other 
institutions we looked at.
    Certainly I think a number of forensic specialists, which I 
am not, in this area would say that the security features are 
comparable to those that the U.S. government has tried to 
instill in our own documents, and superior to a number of the 
state driver's licenses in terms of the safeguards they have 
against counterfeiting. So I think in terms of that I think the 
Mexican government has made a good case that they have made a 
number of efforts to enhance the security of the card against 
counterfeiting. It is much more foolproof against 
counterfeiting than a number of state driver's licenses.
    Mr. Gillmor. From your knowledge, what standards does the 
Mexican government use before they would issue one?
    Ms. Bair. I can just read to you from our report. To obtain 
a Matricula Consular, the applicant must present an original 
birth certificate, another official ID with a photo, personal 
information, their name, address and all that, plus a document 
with their current address such as a utility bill. The 
matricula has nearly a dozen security features which are 
designed to deter falsification and counterfeiting. These 
include a holographic image with hidden marks such as the 
person's name appearing over the picture when viewed with a 
decoder, an official seal appearing over the photo that changes 
color in natural light, and issuance on green security paper 
with the Mexican seal printed in a special security pattern.
    Again, these are standards that they tried to learn from 
the types of security measures we put in our own documents and 
use them with the matricula.
    Mr. Gillmor. Switching ground a little bit, you said in 
your testimony the possibility of a large volume of remittances 
from the U.S. to Latin America could have a significant 
positive effect on local economies in Latin America. Has the 
Inter-American Development Bank or any other organization 
compiled statistical data which would show that effect? I guess 
based on your research, how would you expect any effect to show 
up in the data?
    Ms. Bair. I don't know. They have obviously the aggregate 
numbers of dollars that are sent. In terms of gauging local 
economic impact, no, I am not aware of any comprehensive 
studies. But it is a good idea they should do some, because it 
is quite a large amount of money going to a lot of these small 
impoverished communities. I can only assume anecdotally that it 
having a positive impact.
    Mr. Gillmor. I guess we assume that if you dump a lot of 
money somewhere it will have an impact.
    Ms. Bair. That is right.
    Mr. Gillmor. Going now to the gentleman from Texas.
    Mr. Hinojosa. Thank you, Chairman Gillmor.
    Mr. Beltran, I am very glad to see you here in Washington 
and that you accepted to come to this subcommittee hearing.
    Mr. Beltran. Thank you, Mr. Congressman.
    Mr. Hinojosa. What would you think if legislation were 
introduced to authorize $4 million for the First Accounts 
program, but $1 million of that was used to study the 
effectiveness of the 15 First Account pilot programs, basically 
using the money to contract out the funds to a private company 
to research the methodology each pilot program used?
    Mr. Beltran. I believe that by doing what you just said, 
using the money to research, I would hope that it would benefit 
the programs that we have and increase the understanding of the 
value of why we need those programs. I think we could find the 
study probably to reflect some of that in some of the programs 
that we offer.
    Mr. Hinojosa. Thank you.
    Ms. Bair, if you could pick one thing to do to reach out to 
the un-banked, other than through the First Accounts or IDAs, 
what would it be?
    Ms. Bair. That is a hard question. I assume your question 
goes to un-banked populations generally, not just to the Latino 
immigrant community which was the focus of our report. If we 
are talking about the recent Latino immigrants, clearly 
documentation is first and foremost. I think for the larger 
population, I do think I would agree with what Mr. Abernathy 
said on the first panel that access has really been a key 
issue, and I would agree with you that a lot of large banks got 
out of a lot of low-to moderate-income neighborhoods in the 
1990s. You saw a precipitate decline, a lot of bank closings, 
and a precipitous rise in alternative service providers going 
into these neighborhoods. They have offered an important 
service in terms of convenience and they have been there when 
other banks have not been.
    I welcome that there is a trend in the other direction, 
that big banks and small banks are moving back into these 
neighborhoods. They need to be there. They need to be 
physically present and accessible. They need to be open during 
nontraditional hours. I think particularly for the Latino 
immigrant community, they need to have a less institutional 
atmosphere. At a lot of banks, B of A again and Wells Fargo, as 
well as the smaller community banks, the decor is friendlier. 
There are play areas for the children when they come in. There 
is a lot of hands-on intensive attention when a person comes in 
to open an account, a lot of extensive counseling and 
explanation of the bank and the appropriate way to use a bank 
and the bank products.
    So I think that physical presence and access and being 
active partners in the communities that these banks large and 
small are trying to serve is really the most important thing.
    Mr. Hinojosa. Thank you.
    Mr. Gabriel Manjarrez from Bank of America, in your 
testimony you note that some critics of the Consular ID card 
have raised concerns about increased risk of fraud; that you 
have thoroughly considered these risks and have significant 
controls in place for screening potential customers and 
monitoring their accounts for fraudulent activity. I was 
pleased to hear that. You go on to state that your bank is also 
working closely with government agencies to comply with any and 
all the requirements, including those resulting from the USA 
PATRIOT Act. What is your opinion of Section 326?
    Mr. Manjarrez. Thank you, Congressman Hinojosa. I am no 
expert on Section 326. Our opinion is that we will comply with 
any and all federal regulations. We currently are simply trying 
to support our customer base and serve a large portion of 
underserved and un-banked customers. To do that effectively 
right now, the use of the Matricula Consular has been an 
incredibly effective way. We obviously support its use and we 
are continuing to work, and we thank the subcommittee for 
inviting us here to talk about its value.
    Mr. Hinojosa. Chairman Gillmor, to try to save some time, 
and I know that you are trying to finish this hearing by 1:00 
p.m., I want to ask unanimous consent that some of the letters 
that have come in to my office from different organizations 
that are interested in this issue be inserted in the record.
    For example I have a statement from the National Council of 
La Raza submitted to me by Brenda Y. Muniz, Policy Analyst for 
National Council of La Raza. She goes into detail about the 
identification card. In the conclusion, she says, ``In 
conclusion, the matricula is simply an identification card. It 
does not legalize the status of any immigrant. It cannot be 
used to obtain any immigration or citizenship benefits such as 
work authorization or the right to vote. And it cannot be used 
to obtain public benefits. Its continued use and acceptance, 
however, does have a positive impact on immigrant workers, 
their families and the communities where they reside, fostering 
greater transparency and integration into the U.S. society 
which benefits us all.''
    It is a very well written document and I wish to ask that 
it be made a part of today's proceedings.
    Mr. Gillmor. Without objection, the Chair hearing none, it 
will be made a part of the record.
    [The following information can be found on page 177 in the 
appendix.]
    Mr. Hinojosa. Also without reading them, there are two 
other documents that I would like to ask unanimous consent that 
they be accepted and made a part of today's record. One is the 
Citigroup's efforts on Banking the Un-Banked and Financial 
Literacy. It is a study that they made which is also very 
informative. The third one is one that is submitted by the 
Mexican-American Legal Defense and Educational Fund, better 
known as MALDEF. It is entitled ``Acceptance of Mexican 
Consular ID's Is Not Only Legal, It Improves Public Safety and 
Enhances the Economy.''
    Mr. Gillmor. Without objection it will be a part of the 
record.
    [The following information can be found on page 155 and 137 
in the appendix.]
    Mr. Hinojosa. Finally Mr. Chairman, I was very pleased to 
hear some of the presenters today talk about the fact that the 
Matricula Consular, or the Consular ID card as some call it, 
has invisible security features. I was able to obtain one for 
use at this public hearing from the Mexican embassy as a sample 
of the Matricula Consular or Consular ID card. In looking at it 
and comparing it with my driver's license, I find great 
similarity. It has lots of invisible security features 
contained in this document that I want to be made part of the 
record. I obtained it from the Embassy of Mexico here in 
Washington. It gives an explanation of those features. The 
document explaining that the term ``Matricula Consular card'' 
is printed on the card itself. It has invisible security 
features where, using a fluorescent light lamp, capital letters 
SRE can be seen all over the front.
    All of this is to say that I want this document to be made 
a part of the record because I am convinced that what we are 
trying to do with this hearing is to simply say that we want 
banks to be able to use the matricula identification card for 
identification purposes and that we do not want to complicate 
it or let anyone say that we are trying to use it for 
immigration purposes or allow it to be used for terrorism. The 
Consular card an identification card, and hopefully Congress 
will treat it as such when my legislation comes to a vote.
    Mr. Gillmor. Without objection, the Chair hearing none, the 
copies will be made a part of the record.
    Mr. Hinojosa. Thank you, Mr. Chairman. With that, I yield 
back.
    Mr. Gillmor. The gentleman yields back.
    The gentlelady from California.
    Ms. Waters. Thank you very much.
    Mr. Satisky, I would like to raise a few questions with you 
about some of the testimony that I had an opportunity to read 
prior to coming in today. I was in and out of the room, so I 
don't know if it was the same testimony that I see with the 
written testimony that was provided to us before the hearing.
    First, let me just say to you that I am not opposed to any 
organization providing services to poor communities. What I am 
opposed to is exploitation. I am opposed to exorbitant rates. 
And I am opposed to poor people being a convenient group of 
people by which to make money off of. Every scheme in America 
finds its way to the poor community. I have spent my life 
trying to articulate what is happening in poor communities and 
fighting on behalf of poor people. We have been able over the 
years since I served in the legislature and prior to coming 
here, to stop a lot of schemes.
    So I am very, very versed in the ways that these things are 
done. I am not an elected official who turns a blind eye 
because I can get a campaign contribution or because I can cut 
a ribbon or be a part of a ceremony sending a signal to people 
that I am doing something when I am not doing something. So I 
am only concerned with whether or not poor people are being 
treated differently because they find themselves in a 
particular situation.
    I would like you to explain to me the relationship that you 
have with credit unions. It could be that what you have 
described in this testimony is an answer to some of my concerns 
about how to provide services to poor people. I note that you 
describe some relationships between credit unions and payday 
loan operations or financial services, whatever you call it. 
And that it has worked out in such a way that the people able 
to benefit and even get checks cashed for free or for very 
little amounts of money because the credit union helps to 
reduce the cost of paying for the cashing of those checks.
    Would you describe to me the A&B-federal credit union 
relationship? I think it is in combination with Operation 
Reachout in southwest Baltimore.
    Mr. Satisky. Yes, I would be happy to, Congresswoman. I am 
also happy to say today that we both oppose the very same 
things. So all those issues that you oppose, we do as well.
    I got a phone call a little over a year ago from the Bon 
Secours Foundation, which is a nonprofit hospital-based 
foundation in southwest Baltimore City.
    Ms. Waters. Which foundation was that?
    Mr. Satisky. The Bon Secours Foundation, asking if A&B 
Check Cashing would be interested in partnering with a federal 
credit union to bring full financial services back to a 
community which had not had them for quite a long time. We were 
interested in such a program and we met with the groups of 
people involved, including Operation Reachout, which is a very 
active community group in that neighborhood.
    What we found out at that meeting is that they had been 
searching for a bank or a credit union to supply that community 
with full financial services for quite a time and to no avail. 
They could get a little of this and a little of that, but not 
the whole package which was really what they needed. They 
needed somebody to handle cash services as well as non-cash 
services. They wanted to do the loans and the savings accounts 
and the checking accounts. They also needed the people to cash 
checks and get money orders and all those sorts of things that 
are traditional banking services.
    We were surprised to hear that they had failed in such an 
attempt. Then the Social Security Baltimore Federal Credit 
Union came and stepped forward and said that they would in fact 
be interested, but it was not viable for them to handle the 
cash services. It just simply was not profitable for them and 
they just didn't see a way that they could do it reasonably. So 
if they could find a partner that would handle the cash 
services, then they would be interested as well.
    Well, all parties got together at that point and we 
hammered out some deals. It really was very easy for us, to be 
perfectly honest with you. We were very anxious for the 
opportunity to be involved in an FDIC institution and provide 
the cash services where the credit union could not. We also 
were very anxious to be involved in the financial literacy 
aspect of the whole program as well, of being able to provide a 
service desk in our lobby, educating people on how to obtain 
checking accounts; to determine is they even need a checking 
account, because it may not be for everybody.
    Ms. Waters. I am going to interrupt you for a minute now. 
In addition to the check cashing services, do you provide 
payday loan services?
    Mr. Satisky. No, ma'am. Short-fund payday lending is not 
available in Maryland at this time.
    Ms. Waters. Okay, so this is check cashing for the most 
part.
    Mr. Satisky. Yes, ma'am.
    Ms. Waters. Did your relationship reduce the amount that 
the consumers pay for cashing their checks?
    Mr. Satisky. Yes. Maryland is a regulated state and it has 
good quality regulations in line there as far as rate caps are 
concerned. I would tell you that in Maryland, especially in the 
Baltimore area that I am most familiar with, check cashers 
provide services for much less than the cap. The regular cap is 
4 percent for payroll checks, 2 percent for government checks, 
and 10 percent for personal checks. Most check cashers provide 
check-cashing between 1 and 2 percent. So it is a very 
competitive thing.
    Ms. Waters. Let me ask now, the credit union is nonprofit?
    Mr. Satisky. That is correct.
    Ms. Waters. For the community group Operation Reachout 
Southwest that got involved, do they receive payment of any 
kind?
    Mr. Satisky. I don't think so, but I am not 100 percent 
sure about that. That is a part of the negotiations that I have 
not had anything to do with.
    Ms. Waters. Okay. Also, with the New York operation that 
you described at RiteCheck Cashing, and I think it is Bethex 
Federal Credit Union, it seems that there are no fees for check 
cashing and it is paid for by the credit union at a different 
rate, and the marketing materials for Bethex as available at 
the check-cashing locations and loan applications are available 
so that folks can join the credit union and they can make loans 
and those loans are at rates that other credit union users 
would be charged.
    Mr. Satisky. Or less.
    Ms. Waters. Or less. Now, so I guess what I want to be very 
clear about is this, I am not opposed to alternative banking 
operations. Again, I am opposed to people pretending to do good 
for the poor when the poor are being exploited in the name of 
civil rights or anything else. So I say to you that one of the 
operations that was described here today, the cooperative so-
called nonprofit group, is making 5 percent from the check-
cashing payday loan operations, which means that the price of 
the product has increased when you have to pay everybody up the 
line for producing this product. If you show me operations such 
as you are describing now, I have no problems with that, none 
whatsoever.
    So what the people have to understand is the difference. 
Most elected officials do not know this. They are not 
concentrated on financial services and they can be sold a bill 
of goods any day of the week because it looks good and they 
want to do something for their people. But of course my job 
serving on this committee is to be able to know the difference 
and to be able to call it like it is. So as a representative of 
the alternative banking that is described as something that is 
desperately needed, if you could begin to talk within your 
industry about what some of our concerns are, people who 
represent poor communities, and how we welcome the 
opportunities for real nonprofits such as the credit unions who 
have real services that they can provide and reduce costs, 
those kind of operations we have no problems with whatsoever. 
There is a difference in what you have described here and some 
of the others who purport to be doing something for the poor, 
when in fact they are just fattening their pockets on the backs 
of the poor and talking trash. Okay? Thank you.
    Mr. Satisky. Thank you.
    Ms. Waters. I yield back the balance of my time.
    Mr. Gillmor. The gentlelady yields back.
    That concludes the questioning. I want to thank all six of 
our panelists for coming and for your very helpful testimony.
    Mr. Hinojosa. Mr. Chairman?
    Mr. Gillmor. Yes, Mr. Hinojosa?
    Mr. Hinojosa. Mr. Chairman, I apologize that I had 
overlooked a document that was prepared by my staff. In keeping 
with this hearing, which is entitled ``Serving the 
Underserved,'' Initiatives to Broaden Access to the Financial 
Mainstream, some of the presenters talked about the importance 
of education. This document that I ask unanimous consent be 
made a part of the hearing today is entitled ``List of Several 
Financial Literacy Programs.''
    In the record there should be a listing of these programs 
because anybody doing research would be helped a great deal if 
they knew that America's Community Bankers launched MoneyRules, 
a financial literacy campaign in which community bankers share 
their financial knowledge with the community. Others like the 
Federal Deposit Insurance Corporation initiated a national 
financial education campaign by developing a program called 
MoneySmart. There are many others, including Fannie Mae and 
Freddie Mac with their programs. The Independent Community 
Bankers of America have another program on MoneySmart. Again, I 
believe that this would be a good way to close our hearing 
today because I think it has wonderful information on the 
education that is necessary to help our un-banked community.
    Mr. Gillmor. Without objection, the Chair hearing none, the 
document will be made a part of the record.
    Once again, my thanks to the panelists and we stand 
adjourned.
    [Whereupon, at 1:25 p.m., the subcommittee was adjourned.]


                            A P P E N D I X



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