The Wall Street Journal editorial “The CFPB vs. Checking Accounts” (Dec. 25) argues that a recently finalized Consumer Financial Protection Bureau (CFPB) policy would be “bad for banks, and especially for their low-income customers.” But high fees already drive low-income Americans away from banking services. According to the Federal Deposit Insurance Corporation, 6.6 million American households are unbanked and 19 million households are underbanked.
RAND released a study in July on a proposed solution in California to this banking problem. We constructed a comprehensive data set of banking fees and found that, in California, the vast majority of banks charge overdraft fees. The median fee was $30 and 90 percent of banks charge above $15.
We also conducted a statewide survey of the unbanked and underbanked population. More than 40 percent of respondents cited high fees, such as overdraft fees and monthly service charges, as a reason for being unbanked. A third of respondents cited the unpredictability of these fees as another reason.
Whether the CFPB's approach is correct or not, the essential finding from our study—that fees create a barrier to traditional banking services—remains. These costs are particularly high for low-income households, and the compounded effect of the fees is enough to keep the poor poor.
The banking industry and its regulators should seek solutions to bring more of the unbanked into the traditional banking sector. That would be good for banks and their low-income customers.
