Published: November 09, 2009 08:24 pm      

CURRAN: Banking program plays favorites

If you pay attention, you really can learn something new every day. I’ve recently learned that among the many other absolute necessities in life that we must lament a lack of and subsidize the gaining of is a bank account.

The state of Indiana has followed its capital city in joining a program called Bank On. The state and city programs are called, respectively, Bank on Indiana and Bank on Indy.

The goal, we’re told, is to get people who are low-income or otherwise disadvantaged and wary of banks to get bank accounts. It is described as a private-public partnership that has banks signing on and generally agreeing to terms such as low or no overdraft fees.

It is unclear to what extent state funds are being used for this program. It’s sponsored in Indianapolis by Mayor Greg Ballard and his wife as part of a broader financial education program. State Treasurer Richard Mourdock is responsible for the state program.

Scant information about the program is listed on these government officials’ respective Web sites, and it doesn’t include such details as whether financial incentives are being offered to the banks to participate or what state monies might be used for the attached financial education classes and promotion of the program.

Even if state funding is minimal or nonexistent, there are still real problems with this program, starting with the supposed problem it is designed to address. Those who lobby in opposition to various nonbank financial services such as check-cashing services, payday advance companies and tax-refund anticipation loans have long claimed that programs are needed to divert these companies’ clients away. The argument is that people only use these services because they don’t have access to traditional banks or are wrongly distrustful of these institutions.

These niche activists argue the fees charged by these nonbanks are predatory and exploit the poverty and financial illiteracy of the poor, hapless, ignorant population they serve. New arguments also claim that it is simply a fact of life that a bank account is necessary in a society quickly going paperless.

One of the Indiana sites claim a bank account will soon be necessary for employment, and that those without traditional accounts can’t get debit cards. Though the merit of some of these claims hinge on opinion or values, a lack of access to debit cards is factually false as several alternative providers offer them.

Part of the terms of the program, for banks, is for them to allow people who may have had an account closed in the past because of overdrafts to open a new account, giving them — the client — a supposed second chance. Given my own experience with a bank and those I’ve heard shared by others, it sounds like the bank is the one getting a second chance.

Many people have been burned by banks and don’t believe it is a safe place for them to put their hard-earned money. The economic events of the past two years aren’t exactly the best advertisements for banks as an industry.

Check-cashing operations and similar providers often offer fee-based services. The client knows ahead of time exactly how much the transaction will cost them. There is no worry about being overdrawn or the institution having possession of your account which they can debit at will or incorrectly figure.

The relationship is short-term and only for the service requested rather than a commitment. The benefits of these services aren’t necessarily superior to those offered by banks, but they are different, and clearly preferred by some people.

By getting involved with this program, the state is implying several values and preferences. Certain financial services are good; others are bad. If the program is successful, the state will have gotten into the business of picking the winners and losers in this market, an odd position for a Republican administration.

The state is elevating banking in general, preferring them not only over other financial institutions, but over cash transactions that often carry no fees. Rather than simply reacting to the potential reality of a paperless society, it is nudging that reality along by stating it as fact and enabling it.

Governments at all levels already determine how much of our household budgets are allocated. Taxes is the most obvious item, but also insurance, soon health care, various licensing, business requirements and more. It now seems the state has decided the banks need their cut, too.



Jeffersonville resident Kelley Curran is always wary about where she stashes her cash. You can bank on it. Write her at kelinawriterhat@aol.com