Feature

by José Cisneros

What would your financial picture look like if you didn’t have a bank account? Would your family be able to save and build assets if you paid 3% to 10% of your income simply to access your own money? How well would you sleep at night if you knew that all of your life savings were stashed under the mattress?

When I found out that an estimated 50,000 San Francisco households are “unbanked,” meaning they live without access to basic financial services (such as a checking or savings account), I knew I had to take action. As the Treasurer of San Francisco, and a former banker, I know a thing or two about money and the banking system. To think that 15% of our city’s households, and one in two African-American and Latino adults living in San Francisco, have neither a checking nor a savings account is shocking to me.

Families who rely on check cashers can spend approximately $800 a year to cash checks and pay bills. Those who can least afford it are charged exorbitant fees just to access their own hard-earned money. Unable to build assets and save for the future, these families are particularly vulnerable in times of crisis, not to mention their increased likelihood of becoming a victim of a crime. In the event of an emergency, such as a fire or an earthquake, families risk losing everything and will be unable to access needed funds remotely.

In response to this very obvious need for better financial products for our residents, I created Bank on San Francisco. The Bank on San Francisco initiative is a collaborative effort of my office, the Federal Reserve Bank of San Francisco, the nonprofit EARN, and 15 local banks and credit unions. San Francisco is the first city in the nation to address the problems faced by the unbanked and attempt to help everyone transition into the financial mainstream.

In late 2005, Mayor Gavin Newsom and I challenged every bank and credit union in San Francisco to partner with us to create Bank on San Francisco. One year later, the initiative emerged as a coalition united around the ambitious goal to bank 10,000 unbanked San Franciscans during the first two years of this project. We are already halfway to this goal; we have opened 5,000 checking accounts and helped set those families back on the road to financial security.

What Is the Social Cost of Not Having a Bank Account?
Like most cities, San Francisco is a city of two different financial services systems. In one, people may choose from a variety of institutions to safely save and access their income, obtain loans to buy homes and build businesses, and create financial stability and prosperity. But for many San Franciscans, there are seemingly insurmountable obstacles to accessing this system. So they turn to the other, comprised of check cashers, payday loan providers, pawn shops, auto title lenders and rent-to-own stores. These alternative providers charge high fees and can mire individuals in a cycle of debt, even if they work hard and earn a paycheck week after week. Individuals are hard pressed to build savings and assets if they rely on check cashers to conduct their financial lives. This problem is not unique to San Francisco. In fact, one in four Californians—and an estimated 22 million Americans—are unbanked.

Without a bank account, people pay more to conduct their daily financial activities. In addition, families without accounts don’t have a safe place to keep their money. They walk around with wads of cash in their pockets or keep their money at home in a coffee can. Robberies are more prevalent around check cashers, especially on payday.

Unbanked individuals are especially vulnerable in the event of a disaster. Shockingly, seven in ten Hurricane Katrina evacuees didn’t have bank accounts. Their savings washed away with the rest of their belongings, and without direct deposit they had no way to access their money—such as social security payments or wages—remotely.

A bank account is the first step to financial security. Without one, it’s harder to get well-priced car loans, credit cards or mortgages—the exact financial tools needed to climb the economic ladder. To date, no other major American city has launched a comprehensive policy initiative to bring its unbanked residents into the financial mainstream. I believe that cities are well positioned to play a catalytic role in working with banks, community groups and other stakeholders to build an inclusive financial system. To this end, we worked with financial institutions to develop a program to address the needs of unbanked San Franciscans and to reach the following goals: increase the supply of starter account products for the low-income unbanked market; raise awareness among unbanked consumers about the benefits of account ownership; provide quality money-management education to San Franciscans; clamp down on the proliferation of check cashers and payday lenders; and raise citywide awareness of the unbanked problem and potential solutions.

We now have 15 banking partners working together on this issue: Bank of America, Bank of the West, Citibank, Mission Area Federal Credit Union, Mission National Bank, Northeast Community Federal Credit Union, Patelco Credit Union, San Francisco Federal Credit Union, Spectrum Federal Credit Union, Sterling Bank and Trust, Union Bank of California, United Commercial Bank, US Bank, Washington Mutual and Wells Fargo. Together, we are working to secure the financial future of all San Franciscans.

Why Are So Many Unbanked?
Focus groups conducted with unbanked consumers in San Francisco reveal that they would prefer to have a bank account than to use check cashers, but have serious concerns about the cost of a bank account, or are worried they will be denied an account because they have made mistakes with a bank account in the past. Others believe that without a social security card or California State ID, they are simply not eligible for an account. In addition to these “hard” barriers to banking, some believe they simply do not make enough money to have a bank account, or fear they will be disrespected or made unwelcome if they enter a mainstream bank or credit union branch.

The reality is that many financial institutions simply don’t have a suitable product to help everyone be successful in banking, and those that do have had a hard time getting the word out in the community. Through Bank on San Francisco, we worked with banks and credit unions to develop products that would address the needs of the unbanked market. As a result, all of the banks and credit unions participating in the program have agreed to the following baseline criteria:

• Offer a low-cost or no-cost product with no minimum balance requirement. The structure of many accounts—with high minimum balances and fees—is a key factor keeping the unbanked out of the financial mainstream.
• Adapt internal systems to allow customers on ChexSystems to open “second-chance” checking accounts. If you make a mistake with a checking account, you will find yourself on the national ChexSystems register, and unable to open an account for seven years. Bank on San Francisco partners have agreed to waive ChexSystems, work with clients to help them open a second-chance account and get back into the mainstream.
• Accept the Mexican Matricula and Guatemalan Consular identification cards as primary ID. For many immigrants, the barrier to opening an account is having the proper documentation.
• Expand marketing in targeted, low-income neighborhoods. Increase the visibility of appropriate products in San Francisco and develop new strategies to reach unbanked customers in low-income neighborhoods.
• Provide a minimum of four financial-management training sessions in the community per year.
• Partner with nonprofits in San Francisco to identify customers ready to enter the financial mainstream.

Bank on San Francisco is an unprecedented attempt to address a serious, yet solvable, social problem. Through an innovative partnership, which draws on the strengths of local and federal government agencies, for-profit banks and credit unions, and a wide range of community partners, Bank on San Francisco is poised to become the first comprehensive program in the nation to address the needs of the unbanked and set thousands of families on the road to financial security. I am proud of the work we are doing here in San Francisco, and I hope to continue to build on these groundbreaking efforts and create an environment of financial empowerment throughout our community.

If you would like to partner with us, and help get the word out to your tenants, employees or others in your community, please visit our website at www.bankonsf.org, or email us at bankonsf@sfgov.org.

The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of the SFAA or SF Apartment Magazine. José Cisneros is the treasurer of the City and County of San Francisco. Copyright © 2007 by SF Apartment Magazine. All rights reserved.