Building Community Through Equitable Access To Financial Services, Part 1

By Nathan Wilson:

I worked for several years as a Sous Chef at a well known Brooklyn restaurant. During the Black Out of 2003, three of the porters (from the Mexican state of Michoacán) stayed well into the night to help clean and put perishables on ice by candle light. Toward the wee hours, as we wrapped up, I offered to write them checks for all their help, but they didn’t have bank accounts. I was new to the city, and balked at how a person could function without a checking account. But they were not alone. Ensuring fair access to financial services for immigrants - including depository banking and loan lending (in particular mortgage lending) - is key not only to our economic recovery, but also to the well-being and stability of all of our communities. Limiting or discouraging access to mainstream banking services hurts all communities regardless of income.

By some estimates, more than 50% of all immigrants in the United States do not have bank accounts, compared to less than 20% of native born citizens.  (According to a recent survey, a mere 40% of non-citizen Mexican immigrants in New York had bank accounts.) Restrictive identification requirements and discrimination, coupled with the use of check cashers and remittance providers, has kept much of the immigrant community, in particular immigrants from Mexico and Latin America, away from financial service providers. Accordingly, many immigrants lack the ability to build the credit necessary to take out loans, apply for mortgages and other financial services.

A survey conducted by the NYC Immigrant Financial Justice Network found that a significant number of immigrants reported using check cashers for day-to-day transactions. Check cashing services charge exorbitant, per-transaction percentage costs. Banks can and often do business with undocumented workers, accepting various forms of identification to open bank accounts. (Banks are under no duty or obligation to inquire as to a person’s immigration status. Indeed, systemic inquiry into immigration status would likely constitute actionable discrimination.) Among the documents anyone can use to open a bank account is a valid passport, consular identification, or an Individual Taxpayer Identification Number (ITIN) issued by the Internal Revenue Service.

Finding Solutions

Protecting all people, not just immigrants, from the predatory practices associated with check cashers and other informal financial services (such as pawn brokers), protects our communities. In addition to extracting steep fees for their services, these businesses do nothing to help build positive credit histories and encourage investment in the local community. Maintaining a bank account is beneficial for numerous other reasons, such as filing a worker’s compensation claim. This is of particular importance for immigrants and other low wage workers, who are often engaged in work that can be dangerous, such as construction and restaurant work, and day labor. Without a clear, documented history of income, employers can understate an employee’s pay to reduce their own cost, cheating the injured worker of due compensation.

As part of the country’s path to economic recovery, we need to encourage immigrant participation in formal financial services. At a minimum, banks should not put onerous identification requirements on potential customers - they should accept all forms of valid identification such as passports, consular identification and ITINs.  Banks should also be more responsive to workers who do not receive steady paychecks, such as seasonal workers, for whom keeping a minimum balance is a challenge. This could include lowering or waiving minimum balance requirements, removing overdraft charges, and putting inactive accounts on hold without accruing a penalty.

Local government should encourage the establishment of Community Development Credit Unions (CDCUs). In addition to providing depository and savings services, CDCUs issue loans and offer remittance services. CDCUs are able to form intimate relationships within their communities, and use customer deposits to invest in local enterprises, improving the lives of everyone in the community.

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