On Friday, the House of Representatives passed the Wall Street Reform and Consumer Protection Act (aka HR Bill 4173). The vote was 223-202. If it were to pass the Senate, the bill would create the regulatory Consumer Financial Protection Agency (CFPA) in addition to other Wall Street and financial institution directed reform measures.

Republican Opposition

Obama applauded the passing of the bill, but blasted Republicans and finance lobbyists in his weekly address and on a 60 Minutes interview airing on Dec. 13 for trying to prevent reform in light of the 2008 economic collapse. Zero Republicans were in favor, (in addition to 27 Democrats who opposed the legislation). Last week, top House Republicans urged more than 100 financial industry lobbyists to work harder to defeat the bill. Lobbyists have spent more than $300 million this year trying to shut the bill down. Republicans argue that the CFPA would limit product innovation and dictate what type of loans consumers should receive in certain situations.

According the White House, as stated on
financialstability.gov, the CFPA would:

1. Provide protection against unfair credit card rate increases and late
fee traps.
2. Set guidelines for simple “Plain Vanilla” mortgage products.
3. Duties of care for mortgage brokers to avoid broker conflict of interest.
4. Ban unfair side payments from lenders to mortgage brokers.

On Executive Compensation

The bill would also oversee executive compensation practices (although not the compensation amounts). In the 60 minutes interview, Kroft asks Obama if he thinks that bailed out banks repayed TARP money just to avoid government oversight on compensation and pay. “I think that in some cases, [to be able to pay bonuses] was the motivation,” Obama responds. “Which I think tells me that the people on Wall Street still don’t get it…They’re still puzzled why it is that people are mad at the banks. Well, let’s see. You guys are drawing down 10, 20 million dollar bonuses after America went through the worst economic year…in decades and you guys caused the problem.”

Watch CBS News Videos Online

In all fairness, they do seem to get it, they just don’t seem to care.

Bittersweet Response from Consumer Groups

Some consumer groups see some benefit in the CFPA, yet argue that the bill does little to address breaking apart ‘too big to fail’ financial institutions such as Goldman Sachs and JP Morgan into pieces (to protect against systemic failure). Others note that the bill does nothing to help those in foreclosure situations or address complex derivatives, the likes of which brought down AIG. Three amendments to address derivative oversight were voted down.

Two members of the Progressive Caucus — Reps. Dennis Kucinich (D-Ohio) and Marcy Kaptur (D-Ohio) — also voted against the final legislation because they were concerned that it didn’t go far enough to help consumers.

Final Thoughts

It is very clear that financial institutions and their lobbyists have had a heavy hand in reshaping the WSRCPA to be a shadow of its former self. Sadly, it’s unclear whether the consumers and taxpayers (whom the bill was originally created for) will be better off should the bill pass the Senate in early 2010.

Perhaps the reform that we need most would come in the form of the regulation of lobbyist activity and campaign contributions. The Center for Responsive Politics found that members of the House who voted against the measure collected 70 percent more from commercial banks since 1989, on average, than those supported it. And they raised an average of 50 percent more from credit and finance companies than the bill’s supporters, the CRP found.

I vote for reforming the reformers.

For more of GE Miller’s writing, visit personal finance blog
20somethingfinance.com.

In order to help compare and contrast the economic differences, we have simplified the data from the CIA World Factbook and NationMaster.com. For the exact numbers in any category, check here and here.

For more personal finance visualizations see: WallStats.com

This second question should be just as important to you because of the ways the overall US and global economies can affect you personally, regardless of how well you’re being served on your own accounts by the financial industry. This is about keeping your job or finding a better one, access to credit for a new home or a new business, the performance of your investments, the safety of your retirement, the chance your taxes will have to bail out more companies, the level of inflation affecting your purchasing power, etc.

There has been considerable financial deregulation for several decades and ripping up the rules of the road got us into big trouble,” White House economic advisor Austan Goolsbee told MintLife in a briefing last Friday. “Now we’re pushing back against that trend in a way that is smart—not excessive—with more aggressive and robust oversight.”

Minimizing Risk

All of these variables come down to the issues of risk, reform and regulation being debated in Washington this year. After decades of deregulation and don’t-get-caught policies, the Obama Administration and Democratic lawmakers are promising a new era of adult supervision.

“We can’t protect people from losing money if they make a mistake,” he warns, but adds, “We have to have transparency, make the rules clear and get rid of unfair predatory practices.”

Goolsbee points to the need for better oversight in three ways:

1. Some risky activities are missed today because they slip between the supervision of seven different financial regulatory bodies (see below). Subprime mortgages are an example, because only one-quarter to one-third of the loans were being made by regulated deposit-taking banks. The rest were being made by unregulated finance companies.

2. Other risky activities aren’t supervised because those regulatory bodies were set up before these new practices were devised and new laws aren’t keeping up with complicated new innovations in the market. One example is credit default swaps (essentially insurance on debt, or insurance on the insurance, and so on until you don’t even know what you are insuring) which sunk Lehman Brothers and AIG and started the dominos crashing.

3. And finally, new types of financial institutions are growing to gigantic proportions, but then failing through risky activities without a way for government to step in, renegotiate contracts, or liquidate bankrupt company or customer assets when investors’ value goes to zero. For example, the FDIC can do this with banks, but the government had no legal authority to seize Lehman the same way. Without the authority to “resolve” these institutional failures, the government can only throw good money (yours) after bad (theirs).

The Great Depression demonstrated that even private institutions could become “too big to fail” and pose risks to the whole system. So what Goolsbee and the Obama Administration are looking for are ways to improve regulation to avoid those “systemic” risks. Goolsbee divides the issue of systemic regulation into twin tracks: one is how to deal with systemically important or threatening institutions; the other is how to think about emerging systemic threats in the form of new instruments. That is, watching for new financial innovations, such as derivatives trading or credit default swaps that might pose risks to more than just those that invest in them.

Goolsbee admits this is tricky. Not all financial innovations will be good, but not all have to be good for society. “You can’t ban a financial instrument because somebody might make a bad bet and lose their money,” he explains. “The point of the administration’s plan is that we should be concerned about those financial innovations that pose risks to the whole system.”

Centralized Reform

Under current laws, the financial industry is essentially supervised by seven government bodies: the Federal Reserve, Federal Deposit Insurance Corporation, Office of Thrift Supervision, National Credit Union Administration, Federal Trade Commission, Office of the Comptroller of the Currency, and Department of Housing and Urban Development. New proposals call for consumer-related protections to be streamlined and consolidated under one umbrella at the CFPA. The Federal Reserve would continue to set monetary policy and keep responsibility for monitoring day-to-day systemic threats. Meanwhile, the administration also wants a new broad-based “systemic risk council” of financial regulators to watch for emerging or long-term systemic dangers.

“The council is designed to keep an eye on the horizon for the next thing like credit default swaps, to say ‘this is menacing to the system’ and apply higher capital requirements or assign it to be regulated according to some method,” according to Goolsbee. In other words, watching “things rising up that are not within the existing regulatory apparatus, where there is some identification that there are threats to the system, not just to the individual institution.”

“It is imperative that there be a central authority so that there is one set of standards applied across the whole marketplace,” he adds. “The president is committed to addressing issues like systemic risk and systemically important institutions. Somebody should be on them all the time, making sure they have enough capital so they can’t threaten the whole system.”

Again, Goolsbee cautions that even a forward-looking panel can’t regulate based on what every financial innovation might mean for society. You can’t require someone with a financial innovation to document how it would benefit the real economy. “For financial innovations that are brand new that are not systemically threatening in any way, it’s extremely difficult to document the impact of a specific financial product on productive behavior. I don’t know how we would put that in practice,” he explains. “How would we evaluate that? But the standard that is achievable by regulators is to ask, ‘does this product pose a systemic threat to the financial system?’”

“We have got to reestablish rules of the road that form a core of stability for the financial system. That means we can’t allow huge loopholes on anything that is fundamentally about systemic risk,” he says. “So if somebody talks about fundamentally changing rules to allow big systemic risks again that aren’t under anybody’s jurisdiction, or that can squeeze between the regulatory cracks, the president isn’t going to allow that to happen.”

The White House is calling for new “rules of the road” on three levels: protections for individual banking and credit consumers against predatory lending practices, abusive credit card terms, and unfair charges and fees; protections for individual investors against unclear terms and undisclosed risks in their portfolios; and protections for workers and taxpayers against another catastrophic economic meltdown caused by irresponsible practices.

Steve Barth has worked internationally with banks, governments and NGOs on microfinance and economic development. He blogs at Reflexions.

This morning, Austan Goolsbee briefed MintLife on the Obama Administration’s plans for financial industry regulatory reform in advance of President Barack Obama’s remarks Friday afternoon, particularly about the proposed Consumer Financial Protection Agency (CFPA). Goolsbee is staff director and chief economist of the President’s Economic Recovery Advisory Board, a member of the Obama’s Council of Economic Advisers and otherwise a University of Chicago economics professor.

For free markets to be fair and effective, they depend on two things: free flows of information and free choices for all parties. A comprehensive package about consumer protection and industry accountability will address both, Goolsbee says. The Obama Administration is essentially calling for more accountability from three parties: from the industry, from government itself and from you the consumer.

Industry Accountability

In terms of protection, the White House is calling for new “rules of the road” on at least three levels:
• Protections for individual banking and credit consumers against predatory lending practices, abusive credit card terms, and unfair charges and fees;
• Protections for individual investors against unclear terms and undisclosed risks in their portfolios and retirement savings—and protections from conflicts of interest by their investment advisors;
• Protections for citizens and taxpayers against another catastrophic economic meltdown caused by
irresponsible and unregulated financial practices and “innovations” .

Goolsbee points to a number of unfair practices that would be prohibited by new rules enforced by the CFPA: eliminating bait-and-switch teaser rates on credit cards, by forcing companies to honor their offers and commit to them for the specified period of time; preventing companies from retroactively raising interest rates on existing balances; no “gotcha” tactics to earn late charges, such as moving deadlines to early morning in payment due dates to early mornings (before mail deliveries); or no payment processing tactics to clear large items before small ones in ways that maximize overdraft charges.

Government Accountability

The CFPA would consolidate authority that has previously been fragmented among disparate efforts, making it easy for abusive or risky business practices to slip—or be slipped—through the cracks between seven different financial regulatory agencies. Having too many separate agencies “allowed certain actors in the financial system to wiggle their way between the regulatory cracks or to exploit those agencies that had the least amount of oversight,” he says. For example, Federal Reserve standards on housing lending by banks didn’t have jurisdiction over the other two-thirds of the subprime mortgage market.

Consolidating and streamlining oversight is also designed to improve the accountability of government in its role of preventing financial innovations or undercapitalization risky enough to endanger the whole system “with somebody who is accountable and whose job is to make sure consumers are being protected in the financial sphere,” Goolsbee adds. “There will be one person sitting there whose job it is to protect both the system and protect consumers.”

Consumer Accountability

But new rules have to apply to consumers as well. Accountability from institutions has to be complemented by more responsibility from consumers: not buying more house than they can afford, not charging more purchases than they can afford, and not making risky investments that they can’t afford to lose.
For example, on the transparency side, Goolsbee says the White House wants to see contracts and term sheets presented in “plain language” (despite his PhD in economics, he says even he can’t understand his credit card agreement). But such clarity is wasted unless customers make time to read their agreements before signing.

“Consumer protection is not intended to remove accountability from consumers. People still have to read their bills and read before they sign up for things,” he adds. “And there’s nothing wrong with borrowing money, but if you don’t pay it back there should be a penalty.”

Will rates and fees go down?

Not necessarily. Will there be fewer surprises in your monthly statements? Theoretically. Will new rules stay ahead of financial innovations that can bring down the economy? Let’s hope so.

“Part of our reform effort involves putting in place new safeguards that would help prevent the irresponsibility and recklessness of a few from wreaking havoc on our entire financial system. We want to close gaps in regulation; we want to eliminate overlap; and we want to set rules of the road for Wall Street that make fair dealing and honest competition the only way for financial firms to win and prosper,” President Obama said later in the day. “But a central part of our reform effort is also aimed at protecting Americans who buy financial products and services every day — from mortgages to credit cards. It’s true that the crisis we faced was caused in part by people who took on too much debt and took out loans they couldn’t afford. But my concern are the millions of Americans who behaved responsibly and yet still found themselves in jeopardy because of the predatory practices of some in the financial industry. These are folks who signed contracts they didn’t always understand offered by lenders who didn’t always tell the truth. They were lured in by promises of low payments, and never made aware of the fine print and hidden fees.”

Political Battles Ahead

The briefing was an economic transaction in its own right. Goolsbee was offering insights, but also asking for help from the largely liberal political bloggers on the call. Only Web-based activism, he says, can counter political vulnerability to special interest lobbying.

“Interest groups associated with the financial industry have decided they want to block or seriously change the effort of the administration to reestablish rules of the road and some kind of stability to the financial system,” Goolsbee said. “So the president is looking to amp up public pressure on what changes are needed. Just going back to the status quo, which got us into the worst financial crisis since 1929, is completely not an option.”
Expect the financial industry to war against these regulations with a lobbying campaign that’s even bigger than the one being waged over healthcare reform. Obviously, Republicans will fight Democratic proposals tooth and nail, but likely Democrats will fight among themselves, too. Undoubtedly, so will the various executive branch agencies fight for control of the new agency.

If so, this doesn’t bode well for effective regulation, does it?
A fact sheet (pdf) on the Consumer Financial Protection Agencyis posted on the White House website.

Flush with their $700B in bailouts from taxpayer dollars, are your banks showing you the love?

Quite the contrary. Banks continue to increase their non-interest fees and charges as a way to mitigate the huge investment and loan fees suffered as a result of the financial crisis and by all indications this is unlikely to change any time soon, with or without an economic recovery.

Banks like to point out that these charges are completely avoidable as long as you pay bills on time and don’t spend any money that you don’t have. Whether you take the banks at their word or not, there are indeed ways to avoid fees such as
unnecessary service charges, insufficient funds (NSF) and overdraft charges, late payment fees or getting your interest rates raised.

With new regulations looming in Congress, America’s financial institutions are paying close attention to squeezing every dime onto their bottom lines, so you need to pay attention too.

So when was the last time a $1.25 espresso actually cost you almost more than $100 when it triggered a cascade of bounced payments?

A new study by Bankrate.com shows banks are continuing to boost bottom lines at your expense by racking up record fees and charges—before new Federal Reserve rules, expected by year’s end, force them to reduce or eliminate such penalties.

Every time you bounce a check, overdraw with a debit card, dip under a minimum balance, or use another institution’s ATM, banks clean up. The cost of careless banking has risen to an all time high. Based on a survey conducted in August, Bankrate found that, compared to last year:

· NSF charges on bounced checks increased 2.1% to an average of $29.58.

· Tiered overdrafts, which increase charges at the second or fifth bounce over 12 months, now average $33.88 and $36.19. (Some banks admit to processing the largest of multiple payments first to rack up more charges.)

· ATM surcharges rose 12.6% to an average of $2.22. (Banks increasing the fee outnumbered those reducing 7-to-1.)

· Monthly service fees for interest bearing accounts were up 5% to a record average of $12.55.

· On a positive note, Bankrate found that 76% of non-interest bearing accounts are now free of monthly service charges or minimum balances.

“Take steps to avoid fees,” suggests Bankrate senior financial analyst Greg McBride. “Note any fees and balance requirements of your account, request a link between your checking and savings accounts, and keep track of the available account balance so that your money stays your own.”

The FDIC calculates banks will earn as much as $43.6B from non-interest income related to deposit accounts in 2009, which apparently doesn’t even include non-network ATM surcharges. According to economic research firm Moebs Services, 44.5% of banks and credit unions earn more on non-interest revenue such as fees than on interest income.

Bankrate’s Laura Bruce suggests six tips to avoid getting stung by fees:

1. Visit bank websites to investigate your options

2. Choose a checking plan that has only the features you need

3. Know your balance and don’t risk a bounce

4. Plan for cash needs and only draw cash from your bank’s ATM

5. Consider interest checking only if it’s high-yield and you can maintain the required minimum or meet other requirements such as direct deposits

6. If necessary, connect checking to overdraft protection with a savings account or credit card. (Otherwise, be sure to tell your bank to turn off automatic overdraft protection on you ATM and debit card transactions).

Banks claim that mechanisms such as clearing checks against insufficient funds amount to a service rendered—and indeed, it’s only about 25% of Americans who “take advantage” of these services. On the other hand, the FDIC characterizes such charges as unregulated lending that often costs consumers the equivalent of thousands of points of annualized interest. On that basis, even the typical interest charged by payday lenders pales in comparison.

Last month, a number of major banks, including Wells Fargo, JPMorgan Chase, and Bank of America already promised to scale back their assessments for overdrafts, especially when the shortfall is less than $5 or $10. But as one Daily Mail writer quipped when UK banks finally lowered their rates last year (from overdraft charges as high as £38), “If charges are fair, then why lower them?”

Steve Barth blogs about work, play, society and politics at Reflexions.

Ally

(Image)

The online-only bank Ally, formerly known as GMAC Financial Services opened for business in 2009. At a time when customers are more suspicious than ever of banks (brand consultant Rick Barrera likens it to, “…walking down the dark alley with your arms up” according to the Wall Street Journal), Ally has positioned itself as the ultimate in courtesy, support and trust. The branch-less nature of the bank allows Ally to operate without monthly fees, minimum payments or minimum deposits, and their “Tier 1 capitalization leverage ratio is almost triple what is deemed “well capitalized” under the FDIC’s regulations”, according to Ally’s website.

Aldermore

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The dearth of new banks extends beyond the US and into Europe, but at least one UK bank has decided to open its doors amidst the recession – Aldermore. Billing itself as a “new name in British banking”, Aldermore is a relaunch of Ruffler Bank, according to the UK’s Guardian. Its primary selling point is a lack of involvement with the sophisticated securities and investment vehicles at the heart of our currently financial crisis. As the Guardian explains:

“It will be dead simple, old-fashioned banking. We don’t have any ‘back book’ of toxic debt, we are British, regulated in the UK and will provide consistently good rates to savers.”

The bank, which is, “…the first new bank to launch in Britain since the onset of the credit crunch”, chose to open under the name Aldermore because, “…alder is an ancient British tree that grows well while others fail.” It also aims to become known for its exceptional rates on savings bonds – currently offering anywhere from 3.69%-5.11%. At a time when savings are on the rise, Aldermore could be positioned for superb growth.

California General Bank

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On March 23, 2009, Reuters announced the opening of California General Bank, the only bank to open in all of southern California this year and one of only two in the entire state. Starting out with $20 million in capital, Pasedena-based California General bills itself on its website as a, “…community business bank specializing in the financial needs of the small to medium size privately owned business, professionals, and high net worth individuals.” All eyes will be watching to see how the fledgling young bank handles its first few years of existence amid the worst economy in decades.

Coastway Community Bank

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In its article “Coastway Becomes RI’s Newest Bank”, MoneyAisle.com discusses Coastway Community’s transition from a credit union to a full-service bank. As they explain, the newly formed bank is now free from the burdensome regulations it had to contend with as a credit union:

“As a credit union, the maximum Coastway could write in business loans was 12.25 percent of its assets. That was $36 million. The actual amount Coastway had in business loans as a credit union was almost double that at $70 million. It was able to do this because of federal guarantees mostly made by the Small Business Administration that guarantee up to 75 percent of a loan.”

Coastway is one of several financial institutions that have re-branded themselves or, in some cases, re-opened with a totally new array of services since the recession began.

Ann Arbor State Bank

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Ann Arbor State Bank opened its doors in December 2008 just a few months after filing for permission to operate. Starting out with $10 million in capital, founder Bill Broucek, a 47 year financial industry veteran exclaimed, “…it’s the very best time to start a bank because of the problems other banks are having” according to Michigan Live. The bank (which uses just one branch currently), was created in order to, “…target small to medium-sized businesses and professional organizations in Washtenaw County, specifically Ann Arbor, as well as offer retail banking and loan services for individual customers.” This seems to indicate a trend in new bank openings during the recession – start small, with growth engaged in only after solidifying one’s roots.

TD Bank

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Following its 2008 merger with Commerce Bancorp, TD Bank has opened several new banks. Most recently, TD has launched, “…its largest US initiative by opening a full-service bank center in downtown Boston, a move that will fill a big gap in its New England footprint” according to Boston Business Journal. And this branch is just the start. The BBJ goes on to explain that TD Bank is looking to aggressively expand its presence, opening several more banks despite the economy in efforts to “build its Boston-area deposit base by several hundred million dollars.”

Farmington Bank

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A major trend in banking during the recession has been rebranding existing banks, in an attempt to distance themselves from past perceptions. One of the more recent banks to utilize a branding strategy is Farmington Savings Bank, the long-standing Connecticut bank that will, effective in October, be known simply as “Farmington Bank.” According to HartfordBusiness.com’s article on the now-widespread practice, bank rebranding is much more than simply a name change.

[Farmington President, Founder, and CEO John J. Jr,] Patrick said the bank is dumping “Savings” from its name because it signifies a smaller institution that has only limited offerings.

“As we talked to a broader spectrum of influences in the region they didn’t realize we had the commercial lending capacities we now have,” Patrick said.

“We are not just a savings bank anymore and we want the name change to reflect that.”

Farmington is the latest in a series of bank rebrandings, including our last entry, TD Bank (formerly known as TD Bank Financial Group).

JP Morgan/Bear Stearns merger

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The bank merger perhaps most relevant to the recession was the sudden marraige of JP Morgan and Bear Stearns. In a deal orchestrated and largely financed by the Federal Reserve, JP scooped up its fallen competitor for a song and a dance, paying only $236.2 million (or roughly $2 per share.) According to MSNBC, the deal represented, “…a 93.3 percent discount to Bear Stearns’ market capitalization as of Friday, and roughly a 98.8 percent discount to its book value as of Feb. 29.” In exchange for the unprecedented discount, JP agreed to guarantee all of Bear Stearns’ business – particularly its trading and investment activities, which the Fed felt were too important to leave to chance. The combined entity is known simply as JP Morgan, and it is unclear whether the Bear Stearns name will surface again.

SJB National Bank (Coming Soon, Presumably)

(Free Ers)

Miami Dolphins owner Stephen Ross has been given the green light to charter a new bank, according to Bloomberg. Tentatively called ‘SJB National Bank’, Ross is said to be sharing majority ownership with Bruce Beal Jr. and Jeff Blau. Bloomberg also states that sources claim the new bank, “…will have at least $750 million of capital and may buy assets of banks seized by the Federal Deposit Insurance Corp.” While SJB will not begin operating as a bank until it is accepted by the FDIC, industry analysts expect no complications with either this or securing FDIC membership. This all follows Ross’ completed purchase of the Dolphins in Janurary for an estimated $1 billion.

Full disclosure: Ally is a MintLife sponsor but none of the banks included in this article, including Ally, had anything to do with writing it.

We’ve partnered with CollegeScholarships.org to bring you this infographic which shows you exactly what that degree may be worth and whether it will make economic sense in the long run.

For more personal finance visualizations see: WallStats.com

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Ever driven through a neighborhood and noticed there is a bank in almost every block corner? It’s easy to spot a well developed and financially stable neighborhood by the number of banks it has. But if you take a turn into a neighborhood that’s struggling, it’s almost impossible to find a bank branch and the only ATM available is in the local bodega that charges a high fee for its use. These are the so-called unbanked or underbanked communities and it’s where a new breed of banking is surfacing. These hybrids of banks and check cashiers are popping up in under-developed areas where affordable and convenient banking services are needed to serve low-income earners.

Unbanked communities made up of people who are not part of the mainstream of banking customers are not a small group. According to a June 08 survey by The Center for Financial Services Innovation, it is estimated that 40 million US households (106 million individuals) are either underbanked or unbanked. That means that the individuals who make up this number either have only a basic checking or savings account or no bank accounts at all. 685 banks responded to the survey sent out to 1,300 banks. 53% of those who responded said that they teach financial literacy and education sessions targeted towards these communities and 25% designed marketing strategies aimed at them.

Individuals in unbanked communities are mainly immigrants, low-wage earners and minority group members who go to check-cashing facilities to cash their work checks often at high fees. Reasons for going to these high fee facilities include distrust of the banking system and the need for transparency. According to surveys, low-income wage earners looking to cash their checks feel that the best place for this transaction is a supermarket or a check cashier facility where they know the exact fees. This is in contrast to banks where there is a lack of transparency and fees are not always clearly laid out. Distrust of the banking industry has reached new highs in the wake of the financial crisis, even among those who bank with more traditional financial institutions. It seems everyone wants visibility into what’s going on with their finances these days. However, the drawback to not having a bank account is that unbanked communities are unable to build a credit history or take advantage of interest accruing accounts.

Banks that cater to these unbanked communities have been increasing over the past several years. Many banks and other organizations have realized the potential for growth and economic development by banking these underrepresented areas. For example, in 2003, Key Bank started a check cashing service in Cleveland and by the end of 2008, Wal-Mart opened 1,000 Money Centers across the U.S. Wal-Mart’s Money Centers offer a variety of services including low cost check cashing with wire transfers and utility payment services. Conventional banks such as Citibank has also taken an interest in unbanked areas and sees the potential. It partnered with the United Way of Greater Los Angeles (UWGLA) to create the UWGLA Saving for the American Dream asset- building program which helps promote economic development to low-income families by mitigating language and cultural barriers and meeting the banking needs of the these areas.

Low-income neighborhoods benefit from these new banking facilities from the services they offer such as payroll cards. These are stored- value cards issued by employers instead of paper paychecks. Like direct deposits at commercial banks, the money is deposited directly into a bank account from which the employee can use the card to withdraw money from an ATM machine. Opening a checking and savings accounts is also easier since these banks offer very low minimum balances and fees.

In addition to Key Bank, Citibank and retailers like Wal-Mart who have expanded their services to include unbanked individuals, other facilities like CheckSpring have been created solely to service these neighborhoods. CheckSpring is a development bank founded in 2007 and headquartered in Bronx, New York. The bank offers personal loans, credit building services, residential mortgages and home equity loans and lines of credit. In addition to check cashing, bill pay, money transfers and online banking, the bank serves businesses in the area with commercial lending, currency services and checking and savings accounts. Prior to the recession, many cities had major branch openings from banks like Washington Mutual, HSBC and others. However, this Bronx community had not seen a bank branch opening in the past 25 years.

The transition to becoming banked has worked well, most of the customers who come into CheckSpring for check cashing services end up opening bank accounts by enrolling in a savings clubs. The savings club later converts into a regular savings account when a certain balance requirement is reached. This is the ultimate goal of these developmental banks, to convert unbanked individuals to bank account holders.

It’s evident that more banks see the economic potential of these communities and are trying to gain market share by targeting the areas that where ignored in years past. While many banks have either expanded into these communities and new developmental banks have sprouted giving these areas an economic lift, there are still many underrepresented places without adequate banking services.

For more personal finance visualizations see: WallStats.com

For more personal finance visualizations see: WallStats.com

Americans have made their voices heard with their stomachs. The second quarter of 2009 showed increasing growth in the number of people eating out. American consumers have increased their purchases in most national chain restaurants. Burger King and Taco Bell are the big winners in fast food while IHOP and Rubio’s lead the way in sit-down dining. So go on, treat yourself to a burger or a pancake this weekend, but be prepared to wait in a line… Our latest infographic is based on the aggregate data from over 1 million Mint.com users, a representative sampling of US consumers.