[Congressional Record Volume 155, Number 56 (Thursday, April 2, 2009)]
[Senate]
[Pages S4316-S4317]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. AKAKA (for himself, Mr. Schumer, Mr. Inouye, and Mr. 
        Lieberman):
  S. 786. 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. Mr. President, today I am reintroducing the Improving 
Access to Mainstream Financial Institutions Act of 2009. This bill 
provides economic empowerment and educational opportunities for working 
families by helping bank the unbanked and increasing access to 
financial literacy opportunities. It will also encourage the use of 
mainstream financial institutions for working families that need small 
loans. I thank my cosponsors, Senators Schumer, Inouye, and Lieberman.
  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.
  We must 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. The bill that I am introducing today would help to 
educate, empower and protect consumers.
  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. Among those families who make up 
the bottom 20 percent of earners, one in four does not have a 
transaction account according to the Federal Reserve's Survey of 
Consumer Finances. Indeed, the unbanked are often among the most 
vulnerable. More than 15 percent of families headed by a single parent 
are unbanked. 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 making it difficult for these individuals to better 
their finances.
  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 high 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 and 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. 
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. 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, Loan Interest Rates. Several credit 
unions have developed similar products.
  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

[[Page S4317]]

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,
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 786

       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 2009''.

     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 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.
                                 ______