Are Banks Serving the People, or Serving Themselves?

NEW YORK, NY — Our banking system is failing large swaths of our country: Almost 20 percent of households in the US are either “unbanked” or “underbanked”—meaning the household has either insufficient or no access to a checking or savings account. Despite federal law prohibiting overt discrimination, banks regularly have fine and fee structures that functionally discriminate against the same communities the law aims to protect. The result is that low-income, Black, brown, and/or Spanish-speaking households are disproportionately un- and under-banked, and precluded from accessing the banking building blocks to independent economic security. Meanwhile, the same fees that exclude these populations from fair and free access to banking provide billions of dollars in revenue to some of the largest US banks, including Wells Fargo, Bank of America, and JPMorgan Chase. 

A new Roosevelt Institute issue brief, “Banking for the People: Lessons from California on the Failures of the Banking Status Quo,” argues that to create an inclusive banking system, lawmakers need to pursue alternatives to our traditional banking system, including FedAccounts, postal banking, and other public option banking programs at the state and local level. 

Author Emily DiVito, senior program manager of the Roosevelt Institute’s corporate power program, presents the findings of a new survey of more than 100 on-the-ground bank visits by canvassers across California, where one in four households are poorly banked. The survey uncovers the many barriers—including discrimination and exclusion based on race, ethnicity, and language—people face when trying to participate in our traditional banking system. In particular, the survey findings include that:

• People’s ability to access information and equal treatment at banks is directly affected by their race and spoken language: Bank tellers disproportionately turned away and neglected canvassers of color and Spanish-speaking canvassers;
• Overdraft fee-based accounts are prevalent, and bank staff were reticent to disclose cheaper alternatives when those options existed; and
• There was a near-total lack of no-fee, no-minimum balance account options at surveyed banks.

“The survey results from canvassers across California provide data points for what underbanked people have long-known: Our banking system is punitive, extractive, and discriminatory—both systemically and interpersonally. We need state and federal action on public banking to encourage full economic participation in our society—a prerequisite for a thriving economy,” says author DiVito. 

“Workers like me sweat for every cent in our paychecks, but we see our pay slashed by banking fees. I used to make minimum wage, and because I haven’t been able to meet the minimum balance requirements, the bank charges nearly an hour’s worth of wages to keep my account open,” says Julia Saravia, a fast food worker from Berkeley, California. “That’s more than $2,000 in automatically deducted fees since 2008. The bank is penalizing me for being poor.” 

At the state level, we’re already seeing momentum in efforts to create CalAccount, a no-fee, no-penalty debit account option championed by the California Reinvestment Coalition, California Public Banking Alliance, and SEIU California. CalAccount would be available to all Californians and, once in effect, would immediately benefit millions of individuals and families struggling to access banking services and products they need to participate fully in the economy. 

Inclusive banking is a necessary step toward structuring an equitable financial system. DiVito’s brief builds off of the Roosevelt Institute’s research arguing that public banking—namely postal banking and FedAccounts—will allow everyone to freely participate in the economy, thus strengthening the economy as a whole.