[Congressional Record Volume 146, Number 62 (Thursday, May 18, 2000)]
[Senate]
[Pages S4201-S4202]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SARBANES (for himself, Mr. Daschle, Mr. Dodd, Mr. Kerry, 
        Mr. Bryan, Mr. Johnson, Mr. Reed, Mr. Schumer, Mr. Bayh, and 
        Mr. Edwards):
  S. 2592. A bill to establish a program to promote access to financial 
services, in particular for low- and moderate-income persons who lack 
access to such services, and for other purposes; to the Committee on 
Banking, Housing, and Urban Affairs.


                       First Accounts Act of 2000

 Mr. SARBANES. Mr. President, I rise today to address a very 
serious problem facing our nation: millions of low- and moderate-income 
Americans lack adequate access to basic financial services. I am 
pleased to introduce the First Accounts Act of 2000 (``FAA''). This 
bill, which has been proposed by the Administration, establishes a 
pilot program within the Department of the Treasury designed to promote 
access to financial services for the millions of low- and moderate 
income persons currently facing barriers to affordable and convenient 
banking services. Joining as original co-sponsors in the introduction 
of this legislation are the Senate Democratic leader, Senator Daschle, 
and my fellow Democratic members of the Banking Committee--Senators 
Dodd, Kerry, Bryan, Johnson, Reed, Schumer, Edwards, and Bayh.
  Access to basic banking services is essential for Americans seeking 
to participate fully in our increasingly complex financial and economic 
system. Unfortunately, recent studies show that millions of families 
lack access to affordable banking accounts and safe and secure ATMs, 
and do not have adequate knowledge of beneficial financial services and 
products. The lack of information and access to such financial services 
limits economic opportunities for low- and moderate-income persons, 
steers them toward high cost services offered by fringe operators in 
the financial services industry, reduces their ability to manage their 
finances and plan for the future, and may even place these individuals 
at a risk to their personal safety. Under the bill, the Treasury 
Department is authorized to partner with financial institutions, 
community organizations, and financial services electronic networks to 
improve access to mainstream financial services in four ways: 
affordable banking accounts, safe and secure ATMs, extensive financial 
literacy, and research and development efforts.


                      Affordable Banking Accounts

  First, the bill would promote access to financial services by helping 
write-down the cost to depository institutions of establishing low-cost 
accounts

[[Page S4202]]

for low- and moderate-income consumers. According to the Federal 
Reserve, approximately 8.4 million low- and moderate-income families 
did not have a bank account in 1998. This represents 22% of such 
households. The high cost of banking services--particularly high 
minimum opening balances and monthly fee--remains a major obstacle to 
many families establishing a relationship with a federally-insured 
depository institution. According to the Federal Reserve Board, the 
average minimum opening balance requirement was $115 in 1997. Moreover, 
a 1999 U.S. Public Interest Research Group study revealed that 
consumers who could not meet account minimum balances at banks paid an 
average of $217 annually.
  Althoguh seven states currently require banks to offer some form of 
low-cost banking accounts, there is a growing recognition that banks 
would voluntarily expand access to affordable accounts with appropriate 
encouragement. For instance, Treasury currently provides incentives 
under the Electronic Funds Transfer (``EFT'') program to banks that 
provide low-cost accounts for recipients of government checks. More 
than 538 federally-insured institutions signed up to offer the low-cost 
account during the first nine months of the EFT program.
  I am pleased to have worked closely with Treasury in developing the 
EFT program to extend its benefits to the ``unbanked'' who receive 
government checks. This legislation would build on that experience to 
extend the benefits of direct deposit accounts to those who receive 
private sector checks.
  The lack of access to basic banking services creates numerous 
difficulties for the ``unbanked.'' First, it increases the cost of 
financial transactions for law- and moderate-income persons. These 
individuals pay high service fees to check cashing outlets and other 
nonbanks when cashing checks and purchasing money orders. A 1998 study 
by the Organization for a New Equality showed that over a lifetime, a 
low-income family could pay over $15,000 in fees for cashing checks and 
paying bills outside the financial services mainstream.
  Moreover, the lack of a banking account often makes it difficult for 
low- and moderate-income individuals to establish traditional credit 
and limits their ability to access other financial products. First-time 
homeowner programs, rental property managers, utility companies, and 
credit card companies are increasingly requiring applicants to have 
bank accounts. In the absence of a relationship with banks, low- and 
moderate-income individuals often end up as customers of fringe bankers 
who charge them exorbitant fees to access credit.


                          safe and secure atms

  Second, Treasury would provide assistance to banks and financial 
services automated networks that expand the availability of ATMs in 
safe, secure, and convenient locations in low-income neighborhoods. The 
availability of convenient and safe ATMs and point-of-sale terminals is 
taken for granted by most Americans. However, a substantial number of 
Americans live in communities where there are either no ATMs or the 
ATMs are located in unsafe and insecure environments. A recent Treasury 
analysis of census tracts in Los Angeles and New York showed that there 
were nearly twice as many ATMs in middle-income census tracts than 
there were in low-income areas. The absence of safe and secure ATMs in 
many neighborhoods places residents in situations that risk their 
personal safety. Every day many low- and moderate-income Americans 
decide between the risk of carrying large sums of money on their 
persons and going to an ATM at night. The FAA would increase the number 
of safe and secure access points into the financial mainstream by 
working with financial institutions and financial services networks to 
install ATMs in secure locations such as U.S. post offices. A pilot 
program between Treasury and a major financial institution has already 
placed ATMs in post offices in underserved communities in Baltimore and 
Tallahassee, and there are plans to expand the program to post offices 
across the country.


                           financial literacy

  Third, FAA would support financial education for low- and moderate-
income Americans. Proponents of affordable banking services and 
products have come to recognize that the creation and design of these 
services only represents an initial step to improving access for this 
segment of the population. States such as New York have discovered that 
despite the existence of affordable banking accounts targeted towards 
underserved communities, many people do not take advantage of such 
services because they either do not know that such services are 
available or do not believe that they would benefit. This lack of 
information remains one of the greatest obstacles to bringing 
``unbanked'' Americans into the economic mainstream. Through 
partnerships with community organizations and a public awareness 
campaign, Treasury will educate low- and moderate-income Americans 
about the availability of affordable financial services and the 
usefulness of having a bank account, managing household finances and 
building assets.


                        research and development

  Finally, the FAA authorizes the Treasury to conduct research and 
development in order to expand access to financial services for low- 
and moderate-income communities.
  The Administration has strongly supported expanding access to 
financial services for all Americans. The FAA would build upon and 
expand current initiatives by the Administration. The Administration's 
FY 2001 budget seeks an appropriation of $30 million in fiscal year 
2001 for this program.
  The First Accounts Act will help millions of low- and moderate-income 
Americans who lack access to affordable and convenient financial 
services to become part of the economic mainstream. This will be to 
their benefit, the benefit of the financial institutions with which 
they do business, and the benefit of our society as a whole. This 
modest legislation can make an enormous contribution to giving all 
Americans the opportunity to participate fully in our current economic 
prosperity. I urge its support by all of my colleagues.
                                 ______