FINANCIAL EDUCATION AND AFFORDABLE SMALL-DOLLAR FINANCIAL PRODUCTS FOR UNDERSERVED AND UNBANKED INDIVIDUALS
- Community banks offer many affordable small-dollar loan and deposit products and services to their customers.
- ICBA supports new and innovative products and services for existing and potential customers. Guidelines developed for small-dollar loan products and services should be easily understood by bankers and flexible enough to be adaptable to various markets and operations.
- To expand the availability of affordable small-dollar products for consumers, it is important to identify barriers to their use, including regulatory and statutory obstacles that may discourage development of these products. Solutions should be made on an interagency basis.
- ICBA opposes any government initiative, such as a recent proposal by the U.S. Postal Service Inspector General, to offer financial products directly to the unbanked and underserved that would be in direct competition with those offered by community banks.
- ICBA supports effective and voluntary financial education. Increasing financial literacy protects consumers, fosters financial stability and benefits individuals, underserved communities, and our nation as a whole.
Affordable Small-Dollar Products. Many community banks offer many affordable small-dollar loan and deposit products and services to their customers. ICBA welcomes opportunities to expand ways to serve new, existing and potential customers, but guidelines must be simple, easily understood by bankers and examiners and flexible enough to allow individual community banks to adapt them to their own market and operations. Overly proscriptive requirements could add to burdens and costs and have the unintended consequence of discouraging these types of products.
Government Product Initiatives. Most community banks offer reasonably-priced products and deposit services to serve consumers with low and moderate incomes. ICBA opposes any government initiative to directly serve these consumers, such as the recent effort by the U.S. Postal Service Inspector General to have USPS offer retail banking services or an initiative by the U.S. Treasury to pilot a program that would establish year-round deposit accounts for recipients of tax refunds that would impede community banks’ efforts in this area. It is not the role of the government to provide banking services directly to consumers.
Caps on Interest and Fees. Consumer regulations have traditionally focused on disclosure of terms, not outright ceilings or limits on interest and fees. This approach gives consumers the information they need to make informed decisions about whether a product meets their needs. Disclosures are most effective when consumers have the requisite knowledge to understand their choices.
Financial Literacy. Managing money wisely and making effective financial decisions is critical to excelling in life and enjoying a secure financial future. Moreover, millions of Americans do not have a relationship with a depository institution because they do not understand the system. ICBA supports and promotes financial literacy programs for all consumers, especially those programs that help the underserved, disadvantaged and emerging markets, and encourages community banks to offer financial education programs in their local communities. Community banks engage in a wide range of financial education efforts, many in conjunction with local schools and civic groups. But ICBA recognizes there is more the industry can do. For this reason, ICBA supports federal efforts, such as Financial Literacy Month, to promote financial literacy education and forges government, nonprofit and private-sector partnerships to bring more financial literacy programs and resources to community banks and their communities. ICBA also informs the media and the public about what community banks are doing to promote financial education and help people better understand their financial choices. Whether showing students how to manage credit responsibly, helping a family understand the home buying process or teaching foreign-born residents the benefits of having a checking account, financial literacy programs build a stronger future for all.