FDIC Pilot Program Targets “Unbanked”

More initiatives are being aimed at getting the “unbanked” to open bank accounts. The Federal Deposit Insurance Corp. (FDIC) recently approved a pilot program that encourages banks to offer deposit accounts with low costs. The idea is to get lower income people who rely on check cashing services to open savings and checking accounts with banks.

The FDIC program hopes to encourage banks to offer safe accounts with features that would attract people who have lower incomes, such as a $1 minimum balance requirement. “Access to mainstream financial services at a federally insured institution provides consumers with a safe place to keep their money and conduct basic financial transactions affordably. Such access can also help consumers build a credit history, access credit on favorable terms, and work toward financial security,” FDIC Chairman Sheila C. Bair said in a statement.

About 17 million adults in the U.S. rely on check cashing services, such as payday lenders, according to the Wall Street Journal. Payday lenders are notorious for charging exorbitant rates of interest that can climb past 300% annual percentage yield (APY). But many of the unbanked also cash checks at places like grocery or liquor stores that charge a fee per transaction. Approximately 21 million people in the U.S. are considered “underbanked.” These people have checking accounts but still use services such as payday lenders or car title lenders.

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