[Congressional Record Volume 154, Number 129 (Thursday, July 31, 2008)]
[Senate]
[Pages S7968-S7971]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. AKAKA (for himself, Mr. Schumer, Mr. Lieberman, and Mr. 
        Inouye):
  S. 3410. A bill to authorize a grant program to provide for expanded 
access to mainstream financial institutions; to the Committee on 
Banking, Housing, and Urban Affairs.
  Mr. AKAKA. President, as a member of the Banking Committee, I have 
worked to improve the financial literacy of our country. My interest in 
financial literacy dates back to when my fourth grade teacher required 
me to have a piggy bank. We were made to understand how money saved, a 
little at a time, can grow into a large amount--enough to buy things 
that would have been impossible to obtain without savings. My 
experience with a piggy bank taught me important lessons about money 
management that

[[Page S7969]]

have stayed with me throughout my life. More people need to be taught 
these important lessons so that they are better able to manage their 
resources.
  Too many Americans lack basic financial literacy. Americans of all 
ages and backgrounds face increasingly complex financial decisions as 
members of the nation's workforce, managers of their families' 
resources, and voting citizens. Many find these decisions confusing and 
frustrating because they lack the tools necessary that would enable 
them to make wise, personal choices about their finances.
  Without a sufficient understanding of economics and personal finance, 
individuals will not be able to appropriately manage their finances, 
effectively evaluate credit opportunities, successfully invest for 
long-term financial goals in an increasingly complex marketplace, or be 
able to cope with difficult financial situations. Unfortunately, today 
too many working families are struggling as they are confronted with 
increases in energy and food costs or the loss of a job.
  It is essential that we work toward improving education, consumer 
protections, and empowering individuals and families through economic 
and financial literacy in order to build stronger families, businesses, 
and communities.
  Today I am introducing the Improving Access to Mainstream Financial 
Institutions Act of 2008. This bill provides economic empowerment and 
educational opportunities for working families by helping bank the 
unbanked. It will also encourage the use of mainstream financial 
institutions for working families that need small loans. I thank my 
cosponsors, Senators Schumer, Lieberman, and Inouye.
  Millions of working families do not have a bank or credit union 
account. The unbanked rely on alternative financial service providers 
to obtain cash from checks, pay bills, and send remittances. Many of 
the unbanked are low- and moderate-income families that can ill afford 
to have their earnings diminished by reliance on these high-cost and 
often predatory financial services. In addition, the unbanked are 
unable to save securely to prepare for the loss of a job, a family 
illness, a down payment on a first home, or education expenses.
  My bill authorizes grants intended to help low- and moderate-income 
unbanked individuals establish bank or credit union accounts. Providing 
access to a bank or credit union account can empower families with 
tremendous financial opportunities. An account at a bank or credit 
union provides consumers with alternatives to rapid refund loans, check 
cashing services, and lower cost remittances. In addition, bank and 
credit union accounts provide access to saving and borrowing services.
  Low- and moderate-income individuals are often challenged with a 
number of barriers that limit their ability to open up and or maintain 
accounts. Regular checking accounts may be too costly for some 
consumers unable to maintain minimum balances or unable to afford 
monthly fees. Poor credit histories may also hinder their ability to 
open accounts. By providing federal resources for product development, 
administration, outreach, and financial education, banks and credit 
unions will be better able to reach out and bank the unbanked.
  The second grant program authorized by my legislation provides 
consumers with a lower cost, short term alternative to payday loans. 
Payday loans are cash loans repaid by borrowers' postdated checks or 
borrowers' authorizations to make electronic debits against existing 
financial accounts. Payday loans often have triple digit interest rates 
that range from 390 percent to 780 percent when expressed as an annual 
percentage rate. Loan flipping, which is a common practice, is the 
renewing of loans at maturity by paying additional fees without any 
principal reduction. Loan flipping often leads to instances where the 
fees paid for a payday loan well exceed the principal borrowed. This 
situation often creates a cycle of debt that is hard to break.
  There is a great need for working families to have access to 
affordable small loans. My legislation would encourage banks and credit 
unions to develop payday loan alternatives. Consumers who apply for 
these loans would be provided with financial literacy and educational 
opportunities. Loans extended to consumers under the grant would be 
subject to the annual percentage rate promulgated by the National 
Credit Union Administration's, NCUA, Loan Interest Rates, currently 
capped at an annual percentage rate of 18 percent. Several credit 
unions have developed similar products. One example is the Windward 
Community Federal Credit Union in Kailua, on the island of Oahu, which 
has developed an affordable alternative to payday loans to help the 
U.S. Marines and the other members that they serve. I am very proud of 
the work done by the staff of the Windward Community Federal Credit 
Union. This program was developed with an NCUA grant. More working 
families need access to affordable small loans. More needs to be done 
to encourage mainstream financial service providers to develop 
affordable small loan products. My legislation will help support the 
development of affordable credit products at bank and credit unions. 
Working families would be better off by going to their credit unions 
and banks, mainstream financial services providers, than payday loan 
shops.
  I will work to enact this legislation so vital to empowering our 
citizens. In our current, modern, complex economy, not having a bank or 
credit union account severely hinders the ability of families to 
improve their financial condition or help them navigate difficult 
financial circumstances. Instead of borrowing money from payday lenders 
at outrageous fees, we need to encourage people to utilize their credit 
unions and banks for affordable small loans. Banks and credit unions 
have the ability to make the lives of working families better by 
helping them save, invest, and borrow at affordable rates.
  Mr. President I ask unanimous consent that the text of the bill and 
letters of support be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 3410

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Improving Access to 
     Mainstream Financial Institutions Act of 2008''.

     SEC. 2. DEFINITIONS.

       In this Act, the following definitions shall apply:
       (1) Alaska native corporation.--The term ``Alaska Native 
     Corporation'' has the same meaning as the term ``Native 
     Corporation'' under section 3(m) of the Alaska Native Claims 
     Settlement Act (43 U.S.C. 1602(m)).
       (2) Community development financial institution.--The term 
     ``community development financial institution'' has the same 
     meaning as in section 103(5) of the Community Development 
     Banking and Financial Institutions Act of 1994 (12 U.S.C. 
     4702(5)).
       (3) Federally insured depository institution.--The term 
     ``federally insured depository institution'' means any 
     insured depository institution (as that term is defined in 
     section 3 of the Federal Deposit Insurance Act (12 U.S.C. 
     1813)) and any insured credit union (as that term is defined 
     in section 101 of the Federal Credit Union Act (12 U.S.C. 
     1752)).
       (4) Labor organization.--The term ``labor organization'' 
     means an organization--
       (A) in which employees participate;
       (B) which exists for the purpose, in whole or in part, of 
     dealing with employers concerning grievances, labor disputes, 
     wages, rates of pay, hours of employment, or conditions of 
     work; and
       (C) which is described in section 501(c)(5) of the Internal 
     Revenue Code of 1986.
       (5) Native hawaiian organization.--The term ``Native 
     Hawaiian organization'' means any organization that--
       (A) serves and represents the interests of Native 
     Hawaiians; and
       (B) has as a primary and stated purpose, the provision of 
     services to Native Hawaiians.
       (6) Payday loan.--The term ``payday loan'' means any 
     transaction in which a small cash advance is made to a 
     consumer in exchange for--
       (A) the personal check or share draft of the consumer, in 
     the amount of the advance plus a fee, where presentment or 
     negotiation of such check or share draft is deferred by 
     agreement of the parties until a designated future date; or
       (B) the authorization of the consumer to debit the 
     transaction account or share draft account of the consumer, 
     in the amount of the advance plus a fee, where such account 
     will be debited on or after a designated future date.
       (7) Secretary.--The term ``Secretary'' means the Secretary 
     of the Treasury.
       (8) Tribal organization.--The term ``tribal organization'' 
     has the same meaning as in

[[Page S7970]]

     section 4 of the Indian Self-Determination and Education 
     Assistance Act (25 U.S.C. 450b).

     SEC. 3. EXPANDED ACCESS TO MAINSTREAM FINANCIAL INSTITUTIONS.

       (a) Establishment of Program.--The Secretary is authorized 
     to award grants, including multi-year grants, to eligible 
     entities to establish an account in a federally insured 
     depository institution for low- and moderate-income 
     individuals that currently do not have such an account.
       (b) Eligible Entities.--An entity is eligible to receive a 
     grant under this section, if such an entity is--
       (1) an organization described in section 501(c)(3) of the 
     Internal Revenue Code of 1986, and is exempt from taxation 
     under section 501(a) of such Code;
       (2) a federally insured depository institution;
       (3) an agency of a State or local government;
       (4) a community development financial institution;
       (5) an Indian tribal organization;
       (6) an Alaska Native Corporation;
       (7) a Native Hawaiian organization;
       (8) a labor organization; or
       (9) a partnership comprised of 1 or more of the entities 
     described in the preceding subparagraphs.
       (c) Evaluation and Reports to Congress.--For each fiscal 
     year in which a grant is awarded under this section, the 
     Secretary shall submit a report to Congress containing a 
     description of the activities funded, amounts distributed, 
     and measurable results, as appropriate and available.

     SEC. 4. LOW COST ALTERNATIVES TO PAYDAY LOANS.

       (a) Establishment of Program.--The Secretary is authorized 
     to award demonstration project grants (including multi-year 
     grants) to eligible entities to provide low-cost, small loans 
     to consumers that will provide alternatives to more costly, 
     predatory payday loans.
       (b) Eligible Entities.--An entity is eligible to receive a 
     grant under this section if such an entity is--
       (1) an organization described in section 501(c)(3) of the 
     Internal Revenue Code of 1986 and exempt from tax under 
     section 501(a) of such Code;
       (2) a federally insured depository institution;
       (3) a community development financial institution; or
       (4) a partnership comprised of 1 or more of the entities 
     described in paragraphs (1) through (3).
       (c) Terms and Conditions.--
       (1) Percentage rate.--For purposes of this section, an 
     eligible entity that is a federally insured depository 
     institution shall be subject to the annual percentage rate 
     promulgated by the National Credit Union Administration's 
     Loan Interest Rates under part 701 of title 12, Code of 
     Federal Regulations (or any successor thereto), in connection 
     with a loan provided to a consumer pursuant to this section.
       (2) Financial literacy and education opportunities.--Each 
     eligible entity awarded a grant under this section shall 
     offer financial literacy and education opportunities, such as 
     relevant counseling services or educational courses, to each 
     consumer provided with a loan pursuant to this section.
       (d) Evaluation and Reports to Congress.--For each fiscal 
     year in which a grant is awarded under this section, the 
     Secretary shall submit a report to Congress containing a 
     description of the activities funded, amounts distributed, 
     and measurable results, as appropriate and available.

     SEC. 5. PROCEDURAL PROVISIONS.

       (a) Applications.--A person desiring a grant under section 
     3 or 4 shall submit an application to the Secretary, in such 
     form and containing such information as the Secretary may 
     require.
       (b) Limitation on Administrative Costs.--A recipient of a 
     grant under section 3 or 4 may use not more than 6 percent of 
     the total amount of such grant in any fiscal year for the 
     administrative costs of carrying out the programs funded by 
     such grant in such fiscal year.

     SEC. 6. AUTHORIZATION OF APPROPRIATIONS.

       There are authorized to be appropriated to the Secretary, 
     such sums as are necessary to carry out the grant programs 
     authorized by this Act, to remain available until expended.

     SEC. 7. REGULATIONS.

       The Secretary is authorized to promulgate regulations to 
     implement and administer the grant programs authorized by 
     this Act.
                                  ____

                                           National Association of


                                        Federal Credit Unions,

                                     Arlington, VA, July 29, 2008.
     Hon. Daniel Akaka,
     U.S. Senate,
     Washington, DC.
       Dear Senator Akaka: I am writing on behalf of the National 
     Association of Federal Credit Unions (NAFCU), the only 
     national trade association that exclusively represents the 
     interests of our nation's Federal credit unions, to applaud 
     your leadership on working to get low- and moderate-income 
     unbanked individuals into mainstream financial institutions, 
     such as credit unions, and your continued commitment to 
     financial literacy as demonstrated in the Improving Access to 
     Mainstream Financial Institutions Act of 2008.
       We believe it is important to help the unbanked set up 
     credit union accounts that will allow these individuals to 
     obtain the products and services that they need, such as 
     lower cost check cashing and remittance services, as well as 
     financial education to encourage savings and thank you for 
     your efforts to help this cause.
       Unfortunately, payday lending has also increasingly become 
     a precarious problem for many Americans. People that find 
     themselves in sudden need of a financial boost and 
     individuals unfairly subjected to higher mortgage payments 
     with higher interest rates often rely on payday lenders to 
     help cover their bills. These types of loans can worsen their 
     current financial situation, making the consumer even more 
     dependent than before. Despite our greatest efforts to 
     prevent predatory lending in America, the evidence shows 
     these deceptive practices still occur. Predators continue to 
     target specific communities, such as low-income, minority, 
     elderly and, in recent findings, the men and women of the 
     United States military.
       Luckily, credit unions continue to be part of the solution, 
     not the problem. Many credit unions offer alternative loan 
     programs that ensure the safety and financial reprieve that 
     their members need. These loan programs offer consumers small 
     unsecured loans with low interest rates and encourage 
     financial responsibility. We greatly appreciate your 
     continued support of these efforts.
       NAFCU appreciates the opportunity to share our thoughts on 
     this legislation and strongly support your dedication to this 
     important matter. Please do not hesitate to contact me or 
     NAFCU's Associate Director of Legislative Affairs, Amanda 
     Slater at 703-522-4770 with any questions that you may have.
           Sincerely,
                                              Fred R. Becker, Jr.,
     President/CEO.
                                  ____



                                   Hawaii Credit Union League,

                                      Honolulu, HI, July 28, 2008.
     Hon. Daniel K. Akaka,
     U.S. Senate,
     Washington, DC.
       Dear Senator Akaka: On behalf of the Hawaii Credit Union 
     League and its 93 affiliated credit unions representing 
     approximately 811,000 members, I am writing in support of the 
     proposed Improving Access to Mainstream Financial 
     Institutions Act. This bill, which is targeted to assist low- 
     and moderate-income unbanked individuals, would go a long way 
     toward helping underserved people achieve financial stability 
     and independence.
       Today's volatile economic climate makes it difficult or 
     even unrealistic for people of modest means to borrow money 
     or open an account at an insured depository institution. This 
     measure would establish grant programs within the Department 
     of the Treasury to assist those who would otherwise be 
     unqualified for banking services. In addition, this measure 
     would provide financial literary education opportunities to 
     those applying for loans. Financial education is an 
     invaluable service that credit unions provide, and this 
     legislation would open more doors to this service.
       Please accept our gratitude for introducing legislation to 
     help the unserved residents of our state and nation. Should 
     you have any questions or concerns, please do not hesitate to 
     contact me.
           Sincerely,
                                               Dennis K. Tanimoto,
     President.
                                  ____

         Council for Native Hawaiian Advancement,
                                      Honolulu, HI, July 24, 2008.
     Re Unbanked and Payday Lending

     Hon. Senator Daniel Akaka,
     Hart Senate Office Building,
     Washington, DC.
       Aloha Senator Akaka: The Council for Native Hawaiian 
     Advancement is a nonprofit network of over 100 Native 
     Hawaiian organizations. Its mission is to enhance the 
     cultural, economic and community development of Native 
     Hawaiians. We achieve our mission through policy advocacy, 
     grant training, consultancy, leadership development and 
     connecting resources to challenges in our communities.
       We believe in policies that promote asset building that 
     empowers low and moderate income families to increase 
     financial asset management, home ownership and small business 
     development.
       Senator, there is a clear need for intermediary programming 
     that helps low and moderate income families to connect with 
     financial services, including deposit and savings accounts, 
     as well as loan alternatives to high cost payday lending 
     practices.
       CNHA has developed asset building products that are moving 
     families to financial self sufficiency. For example, we 
     developed the Homestead Individual Development Accounts 
     (HIDA) that is assisting 30 families to open savings accounts 
     at First Hawaiian Bank, provides financial education and 
     helps low income families to save toward the down payment on 
     a home purchase on Hawaiian trust lands. We also developed 
     the Home Ownership Assistance Program (HOAP), a statewide 
     program of the State of Hawaii, Department of Hawaiian Home 
     Lands to expand the reach and delivery of financial literacy 
     counseling to thousands of families.
       Currently, we are in the process of developing a dedicated 
     Earned Income Tax Credit program to assist families in filing 
     for this important tax credit to claim wages they have 
     earned.

[[Page S7971]]

       We support Federal legislation that will promote further 
     connections between families and banking services, 
     particularly, the ``unbanked''. We also know that payday 
     lending continues to be a detriment to families on the lowest 
     end of the income scale and would support assistance to place 
     alternatives to these loans in the community development 
     marketplace.
       Mahalo for your consideration. If we can provide additional 
     information, please contact me at any time at 808.596.8155 or 
     via email at robinhawaiiancouncil.org. 
           Sincerely,
                                             Robin Puanani Danner,
     President and Chief Executive Officer.
                                  ____

         Hawai'i Alliance for Community-Based Economic 
           Development,
                                       Honolulu, HI, July 30, 2008
     Re Support for ``Improving Access to Mainstream Financial 
         Institutions Act of 2008''

     Hon. Daniel Kahikina Akaka,
     U.S. Senator for Hawai'i.
       Aloha Senator Akaka: The Hawai'i Alliance for Community-
     Based Economic Development (HACBED) is pleased to support the 
     bill titled, ``Improving Access to Mainstream Financial 
     Institutions Act of 2008.''
       Hawai'i needs comprehensive public policies to help people 
     build assets. This should include a package of programs, tax 
     incentives, regulatory changes, and other mechanisms to help 
     people earn more, save more, protect hard earned assets, 
     start businesses and become homeowners.
       Assets are essential for three reasons:
       To have financial security against difficult times; to 
     create economic opportunities for oneself; and to leave a 
     legacy for future generations to have a better life.
       This legislation would create the following two grant 
     programs within the Department of Treasury:
       1. The first program would authorize grants intended to 
     help low- and moderate-income unbanked individuals to 
     establish bank or credit union accounts.
       2. The second program would provide consumers with a lower 
     cost, short term alternative to payday loans as well as 
     financial education.
       It is proven that ``banked'' households are better of 
     financially and more likely to build and own assets than 
     their ``unbanked'' counterparts. This bill will authorize 
     grants to assist millions of families to enter the financial 
     mainstream.
       Programs that help low- and moderate-income unbanked 
     individuals to establish bank accounts provide families with 
     the opportunity to save and build their assets. Approximately 
     22 million U.S. households do not have a checking or savings 
     account. These households depend on various high-cost, 
     alternative financial service providers to meet their banking 
     needs, including check-cashing stores, payday lenders, title 
     lenders, rent-to-own stores, and tax preparers. Reliance on 
     these types of financial services undermines a family's 
     ability to survive as they can become trapped in a cycle of 
     debt due to high fees and interest rates. These families' put 
     nearly 13.3 billion dollars toward predatory lending scams 
     annually.
       By improving our families' access to mainstream services, 
     we can enhance their financial security and success. Access 
     to savings and checking accounts can provide a foundation for 
     low- and moderate-families to begin accumulating assets. In 
     addition, families are more likely to save for assets such as 
     their children's college education, a home, retirement, and 
     business startup costs. By entering the financial mainstream 
     and having access to financial services, families are also 
     able to establish credit and increase their access to buying 
     power for the purchase of assets.
       Payday loans and other financial services with high fees 
     and interest rates undermine families' ability to truly save 
     and build their assets. This bill will provide families with 
     an alternative to payday loans as well as the opportunity to 
     receive financial education.
       Check cashing, or payday lending, is a short-term, high-
     interest loan that has the potential to severely impact 
     consumers. Many consumers are often not aware of the annual 
     percentage rate associated with the fee structure of payday 
     loans causing millions of families to struggle to meet their 
     most basic needs to survive.
       It is extremely important to protect hard working families 
     from financial services that are predatory in nature, and 
     stripping them of their hard earned income. Particularly 
     worrisome is the practice of targeting military families. 
     According to the Center for Responsible Lending, active-duty 
     military personnel are three times more likely than civilians 
     to take out a payday loan and one in five active-duty 
     personnel are payday borrowers.
       The loans provided to families under the grant in this bill 
     would be subject to the annual percentage rate promulgated by 
     the National Credit Union Administration's (NCUA) Loan 
     Interest Rates, which is currently capped at an annual 
     percentage rate of 18 percent.
       Several credit unions have developed similar products to 
     assist families. In Hawai'i, the Windward Community Federal 
     Credit Union has developed an affordable alternative to 
     payday loans to help the Marines and the other members that 
     they serve. This program was developed with an NCUA grant.
       This bill will also provide financial education to families 
     that apply for the loans. As the financial market expands and 
     becomes more complex, having a financial education is 
     extremely important for every family. More than ever, 
     financial education can help families navigate the maze of 
     financial services that exist. Providing families with a 
     financial education allows them to have choice and control 
     over their finances so they are able to save and build 
     assets.
       We urge the Senate's favorable consideration of this bill 
     that would give millions of low- and moderate-income families 
     the opportunity to successfully enter the financial world.
           Mahalo nui loa,
                                                 Larissa Meinecke,
                                          Public Policy Associate.
                                 ______