Banking may be routine for most Hoosiers, but some have to go without it.
The state estimates 216,200 Indiana households are without a bank account, which forces those families to spend hundreds of dollars a year cashing checks and paying bills.
To help fight the problem locally, Mayor Tom Henry last week proposed a Bank on Fort Wayne program to help lower-income residents and those with past banking mistakes to obtain an account. The plan is based on a similar program that started in San Francisco and has been copied in Evansville.
“This new initiative will generate opportunities for any Fort Wayne residents who have relied on expensive check-cashing services and payday-loan operations,” Henry said in his State of the City speech.
“It will allow some of Fort Wayne’s hardest-working residents to keep more of the money they earn, save for the future and establish relationships with local banks.”
Such a program is needed, said Marianne Stanley, family-support services manager with Community Action of Northeast Indiana. She said many of her clients have problems getting bank accounts and are forced to pay fees to cash their checks and fees to get money orders to pay bills.
“It’s hard for the poor,” she said. “If you have a couple of bad checks, banks are going to drop you.”
Research from the Pew Charitable Trusts – an independent non-profit based in Philadelphia and Washington – estimates that Hoosier households without banking services pay $1,148 annually in check-cashing fees, which don’t include other financial costs.
The study also showed the vast majority of those households use money orders to pay bills every month and are paid in checks. Only 11 percent of the households without a bank do not have some type of regular work income.
Program profile
Henry and his staff weren’t able to provide specifics on the plan. Councilman Glynn Hines, D-6th, whom Henry said he was working with on the program, said he has yet to meet with the mayor to discuss it.
But Henry said he wants to pattern the program after the one in Evansville. In fact, Indiana Treasurer Richard Mourdock launched the Bank on Indiana program to help Hoosier communities set up local banking programs.
In general, the program is intended to help families who would benefit from a bank account determine the proper type of accounts for them.
Because many people without a bank account might think they don’t need one, believe they couldn’t get one, or distrust banks, the Bank On program is designed to educate people and remove barriers to banking.
For example, the the Bank On checking account program allows people with a record of banking mistakes – but not fraud – to obtain an account. These accounts are intended to be low-cost or free and have no minimum-balance requirements.
Organizers try to have banks waive the first set of overdraft fees to use the situation as a teaching moment for people who might be unfamiliar with tracking the balance in an account.
Evansville success
The program has been a success in Evansville, which started its campaign in early 2009. Through the first three quarters of last year, 625 accounts were opened at the 15 financial partners, slightly more than half of the city’s two-year goal. The average monthly balance for the accounts was $207.
“Bank On Evansville has already exceeded our expectations. The number of accounts opened proves that there are many people who have the desire to enter the mainstream banking system. They just needed access to checking accounts which recognize their unique needs and challenges,” Mayor Jonathan Weinzapfel said.
The program is beneficial not only to the people involved but also to the banks, said Patty Avery, community outreach officer with Old National Bank in Evansville. It proposed the Bank On program to Weinzapfel, Avery said, as a way to help the community.
She said the bank had already participated in sponsorships and donations for charity, but this program “enabled us to take a tool from our tool kit and help people’s lives.”
Old National and many other Evansville banks had already offered “second-chance” accounts, but they were not widely promoted before the Bank On program began.
“We knew it was sound business,” she said.
While no financial instrument is always successful, Avery said the program has had success nationwide. In San Francisco, 80 percent of the accounts created under the program are open after two years and remain in good standing. The banks also hear numerous compliments from the participants, who get to avoid several fees.
“This model could literally keep food on the table,” she said.
No replacement
While the program is meant to help people avoid having to use payday-loan companies, Ryan Harris, communications manager for Check Into Cash, said quick access to money is important for many people.
“We welcome competition, although these types of programs are rarely ever true alternatives to payday loans,” he said.
“I can’t speak specifically for the Indiana proposal, but many other government-run programs carry fees and terms that do not provide the same convenience as a payday loan.”
Indiana law allows payday-loan shops to charge $15 for every $100 borrowed.
Harris added that some programs are just a way to get customers in the door so the business can earn fees on other products or credit union memberships.
