[Federal Register Volume 88, Number 245 (Friday, December 22, 2023)]
[Notices]
[Pages 88702-88705]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-28263]
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DEPARTMENT OF THE TREASURY
[TREAS-DO-2023-0014]
Request for Information on Financial Inclusion
AGENCY: Departmental Offices, Department of the Treasury.
ACTION: Request for information (RFI).
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SUMMARY: The Department of the Treasury (Treasury) invites public input
to inform its development of a national strategy for financial
inclusion. This request for information (RFI) offers the opportunity
for interested individuals and organizations to identify opportunities
to advance financial inclusion through policy, government programs,
financial products and services, technology, and other tools and
infrastructure.
DATES: Written comments and information are requested on or before
February 20, 2024.
ADDRESSES: Please submit comments electronically through the Federal
eRulemaking Portal: https://www.regulations.gov.
In general, all comments will be available for inspection at
www.regulations.gov. Comments, including attachments and other
[[Page 88703]]
supporting materials, are part of the public record. Do not submit any
information in your comments or supporting materials that you consider
confidential or inappropriate for public disclosure.
FOR FURTHER INFORMATION CONTACT: Natalia Li, Director, Office of
Consumer Policy, 202-622-1388, [email protected]; Nora Esposito,
Senior Advisor, Office of Consumer Policy, 202-604-9307,
[email protected].
SUPPLEMENTARY INFORMATION:
I. Background
The Financial Services and General Government Appropriations Act,
2023 (FSGG), enacted December 29, 2022, directed Treasury to develop a
national strategy to improve financial inclusion. Specifically, the
FSGG tasked Treasury with developing a strategy to broaden access to
financial services among underserved communities and improve the
ability of such communities to use and benefit from financial tools and
services. The FSGG stated that ``the strategy should establish national
objectives for financial inclusion, set benchmarks for measuring
progress, and offer recommendations for how public policy, government
programs, financial products and services, technology, and other tools
and infrastructure can advance financial inclusion.'' \1\
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\1\ U.S. Congress, Joint Explanatory Statement for Financial
Services and General Government Appropriations Bill, 2023, 117th
Congress, https://www.congress.gov/117/cprt/HPRT50347/CPRT-117HPRT50347.pdf.
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Treasury intends for the strategy to identify clear and actionable
opportunities for the public, private, and nonprofit sectors to advance
financial inclusion. Treasury is therefore seeking information and
recommendations from all interested parties for the purpose of
advancing financial inclusion through policy, government programs,
financial products and services, technology, and other tools and market
infrastructure. Treasury is committed to including a broad range of
perspectives in efforts to promote financial inclusion and is
particularly interested in the views and needs of underserved
communities.
II. Overview
Households rely on consumer financial products and services, from
transaction accounts to mortgages, to meet their financial needs and
goals. However, historic and ongoing discrimination, exclusion, and
disparate treatment have resulted in significant disparities in access
to and use of financial products and services across different
populations and communities, including low-income and low-wealth
communities, Black, Indigenous, (and) People of Color or BIPOC
communities, and women. Improving inclusion in the financial system is
a critical part of fostering financial security, expanding
opportunities to build wealth, and closing the racial wealth gap.
While definitions of ``financial inclusion'' vary, conventional
interpretations of the term often center around accessibility,
indicating that financial inclusion pertains to access to core
financial products and services like bank accounts, credit, and digital
payments.\2\ Beyond access, the term can also be used in ways that
incorporate considerations of the affordability, utility, safety,
sustainability, and suitability of financial products and services.
Financial inclusion can involve things other than specific products or
services, such as financial information or education that helps
consumers learn how to access and use financial products, or to avoid
frauds, scams, and other predatory financial practices. The
interpretation of the term is also influenced by the unique
socioeconomic, cultural, and regulatory context in which the term is
used. Financial inclusion is often associated with other areas more
broadly related to the status of consumer finances, including financial
well-being and financial health, among others.
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\2\ See The World Bank, Financial Inclusion, https://www.worldbank.org/en/topic/financialinclusion/overview, and United
Nations Secretary-General's Special Advocate for Inclusive Finance
for Development, Financial Inclusion, https://www.unsgsa.org/financial-inclusion.
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The ability to access and use financial products and services can
confer significant benefits to consumers. At the household level,
access to financial products and services enhances households' ability
to make payments, save, and borrow, helping to facilitate full
participation in the economy and the ability to both manage day-to-day
needs and navigate financial shocks or emergencies. Certain financial
products and services also play a central role in facilitating
individual and household financial security and wealth; for example,
financing for businesses or educational opportunities can help generate
future financial benefit. Financial inclusion can meaningfully enhance
consumers' ability to transact and save, as well as enable investments
that bolster income and wealth, which can ultimately have positive
impacts on the overall economy.
The United States has well-established financial infrastructure
which provides many consumers with broad access to financial products
and services. A commonly cited measure relating to the state of
financial inclusion and access to financial services is the unbanked
rate, the share of households without a checking or savings account at
a bank or credit union. The most recent 2021 FDIC National Survey of
Unbanked and Underbanked Households found that an estimated 4.5
percent, or 5.9 million, of all U.S. households were unbanked, the
lowest since the survey began in 2009.\3\ Recent data from the Federal
Reserve Board indicates that in 2022, 82 percent of all adults reported
having a credit card, and the majority of adults who applied for credit
were approved for the amount they requested.\4\
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\3\ Federal Deposit Insurance Corporation, 2021 FDIC National
Survey of Unbanked and Underbanked Households (Jul. 2023), https://www.fdic.gov/analysis/household-survey/2021report.pdf.
\4\ Federal Reserve Board, Report on the Economic Well-Being of
U.S. Households in 2022 (SHED) (May 2023), https://www.federalreserve.gov/publications/2023-economic-well-being-of-us-households-in-2022-banking-credit.htm.
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However, there are significant disparities in how well the
financial system functions for different populations and communities.
Low-income and low-wealth communities, racial and ethnic minorities,
Native and Tribal communities, people with disabilities, women, LGBTQI
communities, immigrants, individuals with limited English proficiency,
justice-involved individuals, and other underserved individuals and
groups experience differences in access to the financial system and use
of financial products and services, with consequences for their
economic security and wealth-building capacity. These disparities
relate to historic and intentional exclusion from the financial system,
ongoing forms of discrimination and predatory practices, and other
barriers.
In 2021, while only 2 percent of white households were unbanked, 11
percent of Black households, and 9 percent of Hispanic households
lacked bank accounts. Persistent disparities in unbanked rates between
white and minority households are found at all income levels.\5\
Additionally, in 2021, 14.1 percent of households were ``underbanked,''
meaning respondents had a bank account but also used often-costly
alternative financial services within the past year to meet needs that
they were unable to meet through offerings from traditional financial
service providers, such as quickly
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cashing checks, sending money overseas, or accessing short-term
credit.\6\ Underbanked households were more likely to belong to racial
and ethnic minority groups, have lower incomes, or have a disability.
For those unable to access these financial products and services,
managing day-to-day finances can be difficult and expensive.
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\5\ See Federal Deposit Insurance Corporation, op cit. 3.
\6\ Alternative financial products and services include nonbank
transaction or credit products or services, which are often
associated with comparatively higher costs than those of traditional
financial products and services. See Federal Deposit Insurance
Corporation, op cit. 3.
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Disparities also exist in access to financial products and services
used to facilitate long-term financial security and wealth. Beyond un-
and under-banked rates, there are disparities among different groups in
the use of financial products and services, including tax-advantaged
retirement accounts, stock market investments, insurance, and small
business loans. In 2020, while 54 percent of white households reported
owning a retirement account, only 28 percent of Hispanic households and
36 percent of Black households reported having an account. In 2022,
rates of stock and business ownership were 65 percent and 16 percent
respectively for white households. These rates stood at 40 percent and
11 percent for Black households and 27 percent and 13 percent for
Hispanic households. Lack of access to such financial products and
services can hinder households' ability to manage financial shocks and
build long-term financial security, which is reflected in persistent
gaps in broader economic measures between different groups. According
to data from the Federal Reserve Board, in 2022, median wealth among
Black and Hispanic households was only 15 and 20 percent, respectively,
of that of white households.\7\ Members of minority groups also have
consistently lower financial well-being scores as measured by the
Consumer Financial Protection Bureau's Financial Well-Being Scale.\8\
As these figures demonstrate, equalizing financial access and inclusion
is a necessary component of fostering financial security for all
Americans and closing the racial wealth gap.
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\7\ Federal Reserve Board, 2022 Survey of Consumer Finances
(SCF) (Oct. 2023), https://www.federalreserve.gov/econres/scfindex.htm.
\8\ For more details about the CFPB's definition and measurement
of financial well-being, see CFPB, Making Ends Meet in 2022 (Dec.
2022), cfpb_making-ends-meet-in-2022_report_2022-12.pdf
(consumerfinance.gov), and https://www.consumerfinance.gov/data-research/research-reports/financial-well-being-scale/.
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There are many reasons that individual consumers may face barriers
accessing or using traditional financial products and services, and the
challenges different communities face are diverse. Further, while some
consumers may have the ability to access traditional financial products
and services, they may prefer to manage their financial needs through
other means. In 2021, unbanked households' most-cited reasons for not
having a bank account were account fees and minimum balance
requirements, as well as concerns over privacy and lack of trust in
banks.\9\ In addition to financial precarity, some of these concerns
may relate to legacies of historic mistreatment of certain communities
by the financial system, and to ongoing forms of discrimination.\10\
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\9\ See Federal Deposit Insurance Corporation, op cit. 3.
\10\ U.S. Department of the Treasury, Freedman's Bank Demise,
https://home.treasury.gov/about/history/freedmans-bank-building/freedmans-bank-demise, Amalie Zinn, Michael Neal, Vanessa G. Perry,
Building Trust in the Financial System is Key to Closing the Racial
Wealth Gap, Urban Institute (Jun. 2023), https://www.urban.org/urban-wire/building-trust-financial-system-key-closing-racial-wealth-gap, Rocio Sanchez-Moyano and Bina Patel Shrimali, The
Racialized Roots of Financial Exclusion, Federal Reserve Bank of San
Francisco (Aug. 2021), https://www.frbsf.org/community-development/publications/community-development-investment-review/2021/august/the-racialized-roots-of-financial-exclusion/.
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New developments in the provision of financial products and
services have implications for financial inclusion. Recent efforts to
foster competition and innovation in the financial sector may benefit
consumers as providers develop new or improved offerings.\11\ In
addition, both traditional banks and non-bank entities have
increasingly offered financial products and services through digital
channels, opening access to financial products and services for some
consumers.\12\ However, the ``digital divide,'' or gap between those
with and without broadband access, presents a significant limitation to
the potential inclusionary benefits of digital financial services,
while also potentially creating new disparities in access.\13\
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\11\ E.O. 14036, 86 FR 36987 (Jul. 9, 2021).
\12\ U.S. Department of the Treasury, Report to the White House
Competition Council, Assessing the Impact of New Entrant Non-bank
Firms on Competition in Consumer Finance Markets (Nov. 2022),
https://home.treasury.gov/system/files/136/Assessing-the-Impact-of-New-Entrant-Nonbank-Firms.pdf.
\13\ U.S. Government Accountability Office, Broadband: National
Strategy Needed to Guide Federal Efforts to Reduce Digital Divide
(May 2022), https://www.gao.gov/products/gao-22-104611.
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Expanding the provision of certain financial products and services
may also raise concerns about predatory or exploitative practices.
Providing financial services to certain households on unfair,
deceptive, or abusive terms, or in a way that exposes consumers to
inappropriate levels of risk can result in financial harm to consumers
and communities and may also undermine trust in financial service
providers. As financial institutions continue to innovate their
products or business models, ensuring that resulting consumer products
and services are safe, beneficial, and do not perpetuate or create new
forms of exclusion or discrimination is vital to efforts to promote
financial inclusion.
III. Request for Information
Treasury welcomes input on any matter that commenters believe is
relevant to Treasury's efforts to develop a national strategy for
financial inclusion. Commenters are encouraged to address all of the
following questions, and to provide any other comments relevant to work
improving financial inclusion for underserved communities. Where
possible, please provide specific examples.
A. Defining Financial Inclusion
1. How do you or your organization define financial inclusion?
(a) Some definitions of financial inclusion include considerations
of access, safety, usefulness, appropriateness, and affordability of
financial products and services, among others. What are the key
elements of your definition and why do you include them?
(b) Some topics related to financial inclusion include financial
health, financial well-being, financial capability, and financial
resilience. Do any of these or other related topics relate to or
influence your definition of financial inclusion, and if so, why?
(c) Given the multiple elements and terms associated with financial
inclusion, is there an alternative term that you believe should be used
instead of financial inclusion?
2. What do you consider to be in and out of scope for efforts to
promote financial inclusion?
(a) Which financial products and services should consumers be able
to access in order to be considered financially included? Please
provide specific examples. Are there particular qualities that are
important for these products and services to have?
(b) Which consumer financial activities are relevant when
considering how to advance financial inclusion? For example, do you
consider accessing tax benefits you may be eligible for, sending peer-
to-peer payments, or transacting in cash relevant? Do you consider
activities like saving for retirement, investing, purchasing a home, or
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starting or growing a business relevant to financial inclusion? Are
there consumer financial activities that are not relevant?
(c) What is the relationship between financial inclusion and
financial security? Between financial inclusion and building wealth?
B. Barriers to Financial Inclusion
1. Are there features of the existing financial system (for
example, pricing strategies, fees, penalties, underwriting methods and
standards, uses of consumer data, technological systems or constraints,
institutional protocols related to fraud or risk management, or other
features) that limit or create inequalities in the ability of consumers
and communities to access, use, and benefit from financial products and
services? Which features are the most limiting, and for whom? Please
provide specific examples.
2. What is the role of other factors such as broadband access,
mobile or digital proficiency, language access, individuals' broader
economic circumstances, or availability of unbiased information about
products and services in financial inclusion? Please provide specific
examples, including which community or communities might face resulting
impacts.
3. What barriers do underserved communities in particular
experience in accessing, using, and benefiting from financial products
and services?
(a) If relevant, what are the community-specific barriers faced by
members of your community or the communities you serve or represent in
relation to accessing or building credit, accessing or using savings
and investment tools (including those that facilitate retirement
security), managing financial risk, acquiring assets, or other
financial activities? Please provide specific examples.
C. Measuring Financial Inclusion
1. What are key indicators that can be used to measure and track
financial inclusion? If possible, please provide specific examples of
existing data sources.
(a) What are appropriate quantitative and qualitative measures of
financial inclusion? For example, this could include the share of
households that own a credit card or transaction account, or consumers'
beliefs about how well financial products and services fit their needs.
(b) What are appropriate individual and/or system-level measures of
financial inclusion? For example, this could include the share of
consumers' total payments made electronically, or consumers' average
savings balances. More broadly, this could include metrics related to
availability, affordability, utilization or benefit of financial
products and services, such as the number of bank branches available in
a certain area, average transaction costs, rates of utilization for a
given product or service, or consumer outcomes related to product or
service use.
(c) Are there any intermediate benchmarks or indicators that should
be tracked to measure overall progress toward financial inclusion?
2. If relevant, how do you measure or track the state of financial
inclusion (or exclusion) in your community or in the communities you
serve or represent? Please provide specific examples.
D. Actions To Promote Financial Inclusion
1. Please describe examples of existing programs, initiatives,
products, or services successful in promoting financial inclusion. Why
were these effective and what are promising practices or other lessons
learned?
2. What should be done to improve financial inclusion for
underserved communities?
(a) How can initiatives to promote financial inclusion be tailored
to address the unique needs and preferences of underserved communities,
and how can the financial system build trust among consumers who have
been excluded? Please provide specific examples.
(b) If relevant, what do you or your organization do to promote
financial inclusion for underserved communities? Please provide
specific examples.
(c) If relevant, what would you or your organization need (for
example, information, resources, policies, regulatory actions, etc.) to
be able to better meet the financial needs of underserved communities?
Please provide specific examples.
3. What can be done to enable responsible, equitable innovation in
financial products and services that enhances financial inclusion while
ensuring robust consumer protections, including privacy and data
security? For example, could novel data sources, data analytic
techniques or algorithms be leveraged to promote access to financial
products while ensuring privacy protections and safeguarding consumer
data?
(a) What are examples of innovative financial products, services,
and strategies that have enhanced individuals' ability to access, use,
and benefit from these offerings?
(b) What can be done (in financial institution practice, policy,
regulation, or otherwise) to ensure that efforts to promote financial
inclusion, or products marketed as inclusionary do not result in or
perpetuate discriminatory or predatory practices?
4. What should be prioritized (in policy, regulation, practice or
otherwise) in the effort to promote financial inclusion?
(a) In your view, what are the most significant opportunities to
advance financial inclusion both broadly and for underserved
communities in particular? Please provide specific examples.
5. What roles should the public, private, and nonprofit sectors
play in promoting financial inclusion?
6. In your view, what should a national strategy for financial
inclusion contain or aim to accomplish?
E. Other Topics Related to Financial Inclusion
1. Are there additional aspects of or topics related to financial
inclusion that Treasury should be aware of in developing a national
strategy for financial inclusion?
Natalia V. Li,
Director, Office of Consumer Policy.
[FR Doc. 2023-28263 Filed 12-21-23; 8:45 am]
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