A new report issued by the U.S. Congress Joint Economic Committee (JEC) found that roughly 20 percent of U.S. adults are either unbanked or underbanked, meaning they lack access to a bank account or rely on alternative financial services.
Further, the report, entitled “People of Color and Low-Income Communities Are Disproportionately Harmed by Banking and Financial Exclusion,” said that a disproportionate share of that 20 percent comprises lower-income earners or people of color.
“Access to banking and financial services are vital to actively participate in our economy. Yet too many workers, consumers, and entrepreneurs from low-income communities and communities of color are being underserved by our financial system,” U.S. Rep. Don Beyer (D-VA), chair of the JEC, said. “Barriers to full financial inclusion—like banking deserts and predatory lending practices—harm not only the marginalized communities that are directly affected, they also cause economy-wide losses by exacerbating racial and wealth inequality. The body of evidence shows that ensuring all workers and families can fully participate in the economy expands economic activity and ensures economic growth is stronger, stable, and more broad-based.”
Among the key findings, the report said that Black and Hispanic Americans are more than twice as likely as white Americans to be unbanked or underbanked. Further, families at the bottom of the income distribution are more than six times as likely as families at the top to be among the unbanked or underbanked. It also revealed that in many Black and Hispanic communities, check cashers and payday lenders are more common than bank branches and offer more accessible hours. In addition, prior to the coronavirus pandemic, financially underserved, unbanked, and underbanked Americans spent an estimated $189 billion in fees and interest on financial products. Also, it showed that Black and Hispanic households are more likely than white households to be denied or not receive as much credit as requested when applying.
“Low-income communities and communities of color have been burned over and over by our financial system, so it’s no wonder they don’t trust banks and face huge barriers to opening a bank account, cashing a paycheck, and applying for a loan,” U.S. Sen. Sherrod Brown, chair of the Senate Banking, Housing, and Urban Affairs Committee, said. “As we work to create a more inclusive and worker-focused economy, we must eliminate discrimination in our banking system, protect Americans from financial predators, and expand access to quality financial services for everyone.”