For the low-income, banks are moving out of reach

Banking isn’t easy if you’re poor.

Nationwide, checking accounts are getting more expensive and fees are getting harder to avoid, according to the most recent MoneyRates.com Checking Account Fee Survey. “Compared with five years ago, monthly maintenance fees are up by 8 percent, overdraft fees are up by 9.4 percent, and ATM fees are up by 10.7 percent,” the organization noted. For example, the average maintenance fee is $13.24 per month, or $158.88 a year to keep the account open, up from $153.96 a year ago. In addition, the number of banks offering free checking has declined from 36.62 percent in 2013 to 27.88 percent in 2018, while the minimum balance required to waive fees has increased to $11,845. “This threshold has nearly tripled over the past five years, and is up by over $1,000 in just the last six months,” the organization said.

According to the Federal Deposit Insurance Corp., 7 percent of U.S. households, or about 9 million, were “unbanked” in 2015, the most recent year for which numbers are available. “An additional 19.9 percent of U.S. households (24.5 million) were underbanked, meaning that the household had a checking or savings account but also obtained financial products and services outside of the banking system,” the FDIC added.

Idaho banks said they are attempting to address this population’s needs.

“As a mutual savings bank, serving low-income populations is fundamental to our mission,” said Jason A. Meyerhoeffer, president and CEO of First Federal, in Twin Falls. “I don’t believe there is a high threshold for the ‘legal requirements’ needed to open an account, but laws do require us to adequately verify the identity of a customer prior to opening an account. As for serving lower-income populations, we offer accounts with no service charges or fees and very low opening balance requirements.”

“We have checking accounts with no fee and no income requirements, which means our services are available to anyone regardless of income level,” said Kelly Parker, vice president of community relations & product development for Idaho Independent Bank, in Boise.

People with a history of charged-off checking accounts at other banks are referred to the Bank On financial literacy program, available in southern Idaho since 2013 and now expanding to North Idaho, Parker said. “This program offers financial education for adults and, upon completion of the program, we’ll open a checking account for them with no monthly fees,” she said.

“We make a concerted effort to help with financial literacy for populations who may not be familiar with modern banking or have concerns about how banking works,” said Bruce Lowry, president and chief executive officer of Ireland Bank, based in Malad City. “Each of our branches finds opportunities to reach out, provide education, charitable donations or a helping hand to reach low-income populations.” Low-income patrons are particularly an issue for Ireland Bank because many of its branches are located in rural areas, he said.

Low-income people need more than just checking. They also need business loans and mortgages. “We are very willing to make small business and personal loans that often times benefit this population,” Lowry said.

Similarly, banks are looking to help low-income people buy homes. “In Idaho last year, Wells Fargo launched its first ever statewide down payment assistance program, bringing $3.55 million into the state,” said Julie Fogerson,  assistant vice president of Idaho regional communications at Wells Fargo, in Boise. “Wells Fargo’s NeighborhoodLIFT program has become an important catalyst for homeownership in numerous cities across America. Funds were made available in Idaho virtually on June 5, and as of last month, all down payment monies were allocated, helping get more than 300 Idaho families into homes.” Funds are distributed through NeighborWorks Boise, she said.

The goal is to get people into banks rather than check-cashing companies, which typically cost more. “We don’t try to compete with the check cashing industry,” Meyerhoeffer said. “However, we do try to provide needed banking services. Most of the check cashing needs come from unbanked consumers. We try to help these people by bringing them into the banking system and offering them much lower-cost services.”

Another low-income banking avenue

A different method for providing banking services to low-income people, particularly for housing, is the community development financial institution (CDFI).

Idaho has six certified CDFIs. “It’s an elite, nonprofit group with Idaho that have that CDFI status,” said Bud Compher Jr., CEO of NeighborWorks Boise, formerly Neighborhood Housing Services. “The funds come to us from the U.S. Treasury and NeighborWorks uses those funds to leverage other dollars for our lending operation. In 2016, the organization was awarded $500,000, and this year, the organization applied for $700,000, after not receiving anything in 2017. “It’s very competitive across the nation,” he said.

Typically, the funds are used to pay for second mortgages, while another organization pays for the first 80 percent of the mortgage, Compher said. “So between the two, that gives them their 100 percent financing, and they don’t have to do mortgage insurance,” he said. “It helps create affordability within monthly payments.”

NeighborWorks Pocatello focuses more on home improvement loans that help people maintain the value of their houses by improvements including replacing the roof, wiring, or siding, said Mark Dahlquist, executive director. “It’s our mission to lend to people who don’t have access to affordable credit,” he said. “We saw a need in the community that there were residents who needed lending, particularly for fixing up their houses.” In an average year, the organization will deploy about $300,000 at interest rates ranging from 0 percent to 4 percent to help about 40 individuals, he said.

The Idaho-Nevada CDFI, based in Boise, has provided about $75 million toward affordable housing since its inception, which it has leveraged to provide $403 million in financing, 3,000 units of housing, 6,200 construction jobs, and 500 permanent jobs, said Dutch Haarsma, president. “High-quality, sustainable projects that are an asset to your neighborhood,” he said. “If we do it right, you don’t know it’s affordable housing.” And it’s not just for the formerly homeless, but for the “working poor,” such as first responders and teachers. “That’s who’s in affordable housing these days.”