I really don’t know how so many of you put up with the New York Times. Mrs. White’s 3rd grade newspaper at the Bearsville (NY) Elementary School demonstrates better quality journalism. In a (typically) shoddy piece titled Over a Million Are Denied Bank Accounts for Past Errors (not going to link to it, you can find it yourself), the author writes:
“Mistakes like a bounced check or a small overdraft have effectively blacklisted more than a million low-income Americans from the mainstream financial system for as long as seven years as a result of little-known private databases that are used by the nation’s major banks. The problem is contributing to the growth of the roughly 10 million households in the United States that lack a banking account, a basic requirement of modern economic life. The ranks of those without bank accounts have swelled — up more than 10 percent since 2009, according to the FDIC. [T]he databases have ensnared millions of low-income Americans, according to interviews with financial counselors, consumer lawyers and more than two dozen low-income people.”
I’m sure those 25 low-income people were representative of the overall low-income population in the US (sarcasm).
There are a few problems with the Times’ article:
1. Databases don’t “ensnare” anyone. Poor choice of words on the Times’ part, but what do you expect from a paper trying to emulate the National Enquirer? In any case, the databases track incidents, not demographics. According to a recent survey by Aite Group (sample size of 1,242, not “two dozen”), 51% of the consumers who were hit with an overdraft fee in 2012 earned more than $45k — i.e., not “low-income Americans.” Looking at it from a different angle, among Americans earning less than $15k, 24% paid an overdraft fee in 2012. Among consumers earning between $70k and $100k, 25% paid an overdraft. These consumers are in the databases, by the way.
2. The ranks of the unbanked have not “swelled.” The 2011 FDIC National Survey of Unbanked and Underbanked Households (which the NY Times was quoting from) found that 8.2% of US households were unbanked. As the FDIC put it, “the proportion of unbanked households increased slightly since the 2009 survey.” Maybe the Times’ spell checker inadvertently changed “slightly” to “swelled.” Hey, it could happen. In the Aite Group survey, the percentage of consumers qualifying as unbanked was 7.2%. Allowing for some margin of error, the unbanked ranks are not getting any bigger, let alone swelling.
3. A bank account is not a “basic requirement of modern economic life.” When asked why they didn’t have a bank account, the Unbanked don’t list “denied by past errors” as the main reason. Here’s what they do say:
|How important are the following reasons for why you don’t have a checking account?||A very important reason||Somewhat of a reason||Not a reason|
|If I run into a credit problem, I don’t want money withdrawn from my account without my permission||49%||17%||34%|
|I don’t want to pay a bank’s monthly fees||39%||25%||36%|
|I prefer to use a prepaid debit card||37%||24%||39%|
|Banks charge all sorts of fees, like insufficient fund fees, when a check bounces or a debit card is overdrawn||36%||26%||38%|
|I don’t want to maintain a minimum balance||30%||33%||37%|
|I have or had a credit issue or problems with a checking account in the past||29%||26%||45%|
|I need to have access to cash right away||22%||34%||44%|
|I prefer places where I can cash a check and pay my bills at the same time||16%||27%||57%|
|Banks’ hours are not convenient for me||4%||16%||80%|
|At banks, the service is slow||4%||28%||67%|
Source: Aite Group survey of 1,242 US consumers, Q2 2013
Only 29% said that past credit issues or problems explained why they don’t have a checking account, and in fact, nearly half (45%) flat out said past problems were not a reason why they don’t have an account.
On the other hand, 37% said that the reason they don’t have an account is that they “prefer to use a prepaid debit card.” In other words, they could get a checking account if they wanted to — but they don’t want to. They’ve discovered that a checking account is not a “basic requirement of modern economic life.”
Reading trash like this NY Times article makes me wish that The Onion would do a piece on “Millions Denied A Mercedes-Benz Because They Don’t Have Enough Money.” Not only is the Times’ off-base conceptually in its attempt to vilify the banking industry, it’s wrong factually.