409

Minutes

of

The Meeting of the FDIC Advisory Committee on Economic Inclusion

of the

Federal Deposit Insurance Corporation

Held in the Board Room

Federal Deposit Insurance Corporation Building

Washington, D.C.

Open to Public Observation

May 15, 2015 – 9:02 A.M.

The meeting of the FDIC Advisory Committee on Economic Inclusion (“ComE-IN” or 

“Committee”) was called to order by Martin J. Gruenberg, Chairman of the Board of Directors of 

the Federal Deposit Insurance Corporation (“Corporation” or “FDIC”).

The members of ComE-IN present at the meeting were Robert A. Annibale, Global 

Director, Citi Microfinance and Community Development; Ted Beck, President and Chief 

Executive Officer (“CEO”), National Endowment for Financial Education; Kelvin Boston, 

Executive Producer and Host of PBS’ Moneywise with Kelvin Boston; JoséCisneros, Treasurer, 

City and County of San Francisco, California; Martin Eakes, CEO, Self-Help/Center for 

Responsible Lending, Durham, North Carolina; Rev. Dr. Floyd H. Flake, Senior Pastor, Greater 

Allen A.M.E. Cathedral of New York; Wade Henderson, President and CEO, Leadership 

Conference on Civil Rights, and Counselor to the Leadership Conference on Civil Rights 

Education Fund; Andrea Levere, President, Corporation for Enterprise Development, 

Washington, D.C.; Patricia A. McCoy, Liberty Mutual Professor of Law, Boston College Law 

School; Alden J. McDonald, Jr., President and CEO, Liberty Bank and Trust Company, New 

Orleans, Louisiana; Manuel Orozco, Senior Associate at the Inter-American Dialogue and Senior 

Researcher, Institute for the Study of International Migration, Georgetown University; Phillip L. 

Swagel, Professor in International Economic Policy, University of Maryland, Senior Fellow at 

the Milken Institute and a visiting scholar at the American Enterprise Institute; and John C. 

Weicher, Director, Hudson Institute’s Center for Housing and Financial Markets.
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Michael Barr, Professor of Law, University of Michigan Law School, Ester R. Fuchs, 

Professor, School of International and Public Affairs, Columbia University, Bruce D. Murphy, 

Executive Vice President and President, Community Development Banking, KeyBank National 

Association, John W. Ryan, Executive Vice President, Conference of State Bank Supervisors,

and J. Michael Shepherd, Chairman and CEO, Bank of the West and BancWest Corporation,

were absent from the meeting.

Members of the Corporation’s Board of Directors present at the meeting were Martin J. 

Gruenberg, Chairman, Thomas M. Hoenig, Vice Chairman, and Jeremiah O. Norton, Director 

(Appointive). Roberta K. McInerney, Designated Federal Officer for the Committee and Deputy 

General Counsel, Consumer, Enforcement/Employment, Insurance and Legislation Branch, FDIC 

Legal Division, also was present at the meeting. 

Corporation staff who attended the meeting included Willa M. Allen, Ruth R. Amberg, 

James A. Anderson, Michael W. Briggs, Luke H. Brown, Kim Chen, Alexander S. Cheng,

Karyen Chu, Carolyn D. Curran, Christine M. Davis, Patricia B. Devoti, Dianne E. Dixon, Diane 

Ellis, Keith S. Ernst, Ralph E. Frable, Janet R. Gordon, Bobbie Gray, Barbara Hagenbaugh, 

Angelisa M. Harris, Alan W. Levy, Christopher Lucas, Jonathan N. Miller, Robert W. Mooney, 

Thomas E. Nixon, Janet V. Norcom, Jessica Nye, Elizabeth Ortiz, Richard Osterman, Mark E. 

Pearce, Sylvia H. Plunkett, Barbara A. Ryan, Luke W. Reynolds, Sherrie Rhine, Richard M. 

Schwartz, Patience R. Singleton, Kimberly Stock, Lori Thompson, Jeffrey Weinstein, Smith T. 

Williams, and Charles Yi.

William A. Rowe, III, Deputy to the Chief of Staff and Liaison to the FDIC, Office of the 

Comptroller of the Currency, also was present at the meeting.

Chairman Gruenberg opened and presided at the meeting. He began by thanking the 

participants for attending and providing a brief overview of the meeting agenda, advising that the 

first panel of the morning session would provide an overview of the new youth financial 

education resources developed by the FDIC, in partnership with the Consumer Financial 

Protection Bureau (“CFPB”), for teachers, parents, and caregivers to help teach children about 

managing money; and that the second panel would present an overview of the interesting projects 

the FDIC has underway relating to access to the banking system. He next indicated that the 

luncheon speaker would be Eric Belsky, Director of the Division of Consumer and Community 

Affairs for the Board of Governors of the Federal Reserve System; and that the afternoon session 

would discuss potential areas that have been identified for future work of the Committee. 

Chairman Gruenberg then introduced Elizabeth Ortiz, Deputy Director, Consumer and 

Community Affairs, Division of Depositor and Consumer Protection (“DCP”), moderator for the 

panel discussion on “Youth Financial Education and Capability.”

Ms. Ortiz began by noting that the FDIC’s commitment to financial education was 

comprehensive and longstanding; that the FDIC’s Money Smart program includes educational 
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resources in multiple languages for adults of all ages, as well as small businesses, that can be 

delivered in classrooms or at home via self-paced instruction; that high quality curricula 

delivered with capable and committed partners in the community are considered a critical first 

step toward economic inclusion and access to economic opportunities; that the Money Smart 

program has demonstrated that carefully designed and implemented financial education programs 

can help consumers understand the benefits of a bank account and enhance their ability to sustain 

a banking relationship; and that the collaboration between the FDIC and the CFPB on youth 

financial capability has been done within the context of the Financial Literacy and Education 

Commission (“FLEC”), which uses the diverse expertise of its 22 federal agency members to 

coordinate financial capability initiatives. Ms. Ortiz advised that, in addition to federal agency 

partnerships, the FDIC was in the process of continuing a much broader collaboration with 

national, state, and local organizations, with team members reaching out to schools and 

communities across the country as part of the FDIC’s efforts to improve the ability of individuals 

reaching their financial goals; and that the Committee’s guidance would assist in moving forward 

with the FDIC’s youth initiatives, particularly with regard to how that work can be integrated 

with new or existing programs in education, workforce development, and municipal services.

Ms. Ortiz briefly updated the Committee on research by federal agencies focused on 

financial education, noting that the FLEC recently released two documents on building financial 

capabilities through hands-on learning that consolidates additional resources and research for 

initiating or supporting youth savings programs; that the FLEC partnered with the Journal of 

Consumer Affairs for the publication of ten new academic research papers on the topic of starting 

early for financial success; and that the CFPB’s research, including its latest report on “financial 

well-being,” has helped practitioners, funders, and researchers effectively use their resources to 

improve consumers’ financial lives. Ms. Ortiz then advised that the first panel discussion would 

focus on the results of the collaboration between the FDIC and the CFPB to support youth 

financial capability; that Janneke Ratcliffe, Director, Office of Financial Education, CFPB, 

would discuss the youth financial education research underway at the CFPB; that Kenneth 

McDonnell, Financial Education Outreach Analyst, Office of Education, CFPB, would discuss 

the CFPB’s and the FDIC’s work to engage parents and other caregivers through the youth 

financial education learning process; that Luke W. Reynolds, Chief, Outreach and Program 

Development, DCP, FDIC, would discuss developments underway to further youth savings 

through interagency federal guidance and the FDIC’s youth savings pilot; and that Bobbie Gray 

would discuss the FDIC’s new Money Smart for Young People tool.

Ms. Ratcliffe began by noting that many young people encounter important financial 

decisions and financial milestones without the basic knowledge and skills they need to make 

sound choices; that the CFPB was committed to helping consumers increase their ability to make 

sound financial choices to meet their own life goals, with financial education as a critical part of 

its mission; and that the CFPB’s strategy includes providing tools and information directly to the 

public, coordinating education initiatives through intermediaries, and researching effective 

approaches. She briefly discussed some of the CFPB’s recent initiatives, noting that the CFPB 
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developed a guide to connect policymakers with tools, information, and insights to enhance 

financial education efforts for school-aged children (grades K-12); that the CFPB worked with 

the Department of Labor to expand financial education into youth employment programs using 

the FDIC’s Money Smart program; and that the CFPB provided librarians with resources, 

training, and tools for financial education to help them serve library patrons more effectively on 

dealing with financial affairs. She also discussed the CFPB’s research efforts to define and 

measure “financial well-being” in terms that hold meaning for consumers, explaining that 

consumers generally defined “financial well-being” in terms of four elements: (1) feeling in 

control of their day-to-day and month-to-month finances; (2) being able to absorb a temporary 

financial shock; (3) having a sense that they are on track to meet financial goals; and (4) having 

the financial freedom to make the choices in their life. She also explained that the CFPB’s 

research provided a framework for understanding factors that lead to financial well-being and 

how financial education can impact those factors, noting that socioeconomic circumstances and 

available opportunities are major factors in financial well-being; that an individual’s behavior, 

which financial education can affect, interacts with opportunities to influence their financial wellbeing; and that behavior was influenced by several factors, including knowledge, skills, and 

certain traits and attitudes. Ms. Ratcliffe concluded by emphasizing that financial education can 

help individuals obtain and build the necessary skills to make sustainable choices that serve their 

life goals; and that the goal of the CFPB’s partnership with the FDIC was to empower young 

people to make better financial decisions by providing their educators with financial education 

resources and helping their parents and caregivers build good financial behavior by incorporating 

hands-on learning.

Next, Mr. McDonnell discussed initiatives that the CFPB has been developing in 

partnership with the FDIC to: encourage parents and caregivers to build up their children’s 

financial well-being; evaluate and select resources that parents and caregivers could use with 

their children; create an online destination for parents and caregivers; and promote financial wellbeing through social media, traditional media, and community outreach. He highlighted some of 

the research findings used as background information in developing the initiatives, noting that 

the Organisation for Economic Co-operation and Development’s Programme for International 

Student Assessment (“PISA”) study of students in 18 countries found that students in the United 

States need more skills before entering adulthood; that a CFPB study on navigating the market 

found that most financial information comes from the financial services industry rather than 

objective sources, with the industry spending $1 on financial education for every $25 they spend 

on marketing products; and that the CFPB focus groups with parents and caregivers across the 

country found that parents and caregivers were pressed for time, but often found opportunities to 

have conversations about money with their children when shopping, with the primary topics 

being spending, money management, saving, needs versus wants, resisting peer pressure, and 

advertising. 

Noting that the CFPB’s initiatives with the FDIC are focused on the concept of financial 

well-being, Mr. McDonnell explained that the CFPB’s research indicates that, in addition to 
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financial knowledge, there are other components of financial well-being, such as planning and 

problem solving, financial common sense, and decision-making skills; that these skills are 

developed during years in preschool (age 3-5), in middle school (age 6-13), and as 

adolescents/young adults (age 13+); that the building block for planning and problem solving 

was an executive function defined as having self-control, working memory, and flexible thinking 

that primarily develop in the preschool years; that the building block for financial common sense 

was a financial socialization that starts in the middle school years as children begin to experience 

advertising and peer pressure, and develop financial values and common sense; and that the 

building block for financial self-confidence develops in adolescence and early adulthood, when 

young people are likely to start earning their own money and making their own purchasing 

decisions. With respect to where and how these financial lessons are learned, he explained that 

parents and caregivers are the primary influence on their children during the very young, 

formative preschool years; that, as children enter school and develop a consciousness of 

community, other adults and teachers become a factor in addition to parents and caregivers; and 

that, during adolescence, young people begin to learn through their own experiences, in addition 

to learning at home, school, and within the community. 

Noting that parents and caregivers have the most important influence on their children’s 

financial future, Mr. McDonnell emphasized that parents and caregivers can help their children 

develop financial well-being by serving as good role models through their financial behavior and 

financial interactions with others. He concluded with a brief discussion of the CFPB’s website 

created in conjunction with the FDIC, noting that it provides a variety of tools and resources that 

are categorized by age to help parents and caregivers develop their children’s financial skills; that 

each of the categories has a hyperlink to access the FDIC’s Money Smart program tools; and that 

the website has been promoted throughout social media messages, public service announcements,

and other outreach efforts aimed at connecting parents and caregivers through a variety of 

channels to encourage them to discuss money and financial decisions with their children.

Mr. Reynolds then provided an update on the FDIC’s youth financial education initiatives 

to prepare young people for financial success through education and opportunities to learn firsthand how bank accounts work. He reported that the FDIC Youth Savings Pilot Program was 

underway to identify and highlight promising approaches for offering financial education tied to 

the opening of safe, low-cost savings accounts to school-aged children; that the nine banks 

selected for Phase 1 of the pilot were working with schools or nonprofit organizations through 

the end of the 2015 school year to help students open savings accounts in conjunction with 

financial education programs; that banks have been invited to participate in Phase 2 of the pilot, 

which targets banks that are beginning new or expanding existing youth savings programs during 

the 2015-2016 school year; and that the pilot would culminate in Fall 2016 with a report on the 

lessons learned and promising practices. In response to potential legal and regulatory concerns 

raised by financial institutions and others participating in the youth savings programs, Mr.

Reynolds noted that, in February 2015, the FDIC and other federal financial regulatory agencies 

jointly issued guidance to clarify existing guidelines in a manner that removes perceived 
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regulatory barriers and encourages financial institutions to develop and implement programs to 

expand youth financial capabilities. Before turning the discussion over to Ms. Gray, he outlined 

recent improvements to the FDIC Money Smart programs, noting that the new FDIC Money 

Smart for Young People series offers four curriculums that cover pre-kindergarten through grade 

12 and involve teachers, students, and parents and caregivers; that, in addition to the educator 

and student guides, the new Money Smart series offers parent and caregiver guides to highlight 

the key financial concepts within each lesson and provide resources to support parents in 

reinforcing and discussing those concepts; and that each of the curriculums includes multiple 

lessons that can be taught individually or together, provides ideas on how to integrate it into 

existing academic subjects, aligns with key educational standards, and provides real world 

examples and exercises. 

Ms. Gray continued the discussion, explaining that the FDIC, in collaboration with the 

CFPB, created the Teacher Online Resource Center, which is a suite of online resources to help 

teachers tailor information about youth financial education topics in the classroom; that, in 

addition to the Money Smart for Young People series, the Teacher Online Resource Center 

website includes a series of videos, links to other government sponsored financial education 

websites to help develop lesson plans and assignments, and interactive online tools to help build 

a better understanding of financial products and services. She noted that the website also 

provides links to a series of FDIC Consumer News articles on becoming a smarter, safer user of 

financial services, as well as links to the CFPB’s online resources related to paying for college, 

the federal government’s MyMoney.gov website, and other resources for parents and caregivers, 

such as the FDIC’s Money Smart for Young People guides. Following a viewing for the 

Committee of one of the videos available through the Teacher Online Resource Center, Ms. Gray 

concluded with a brief discussion of some of the efforts to promote these new resources to 

educators, noting that individualized support and training on the curriculum would be provided 

to a small group of educators through the 2015-2016 school year to gain insights and feedback to 

support future implementation plans; that membership-based organizations involving educators, 

such as teacher and school leadership organizations, were asked to share and promote these 

resources through their communication channels and networks; and that, in addition to 

continuing the existing relationship with the Jump$tart Coalition, the FDIC would be 

participating in educator-oriented conferences, particularly those in states with a financial 

education requirement and/or a high unbanked population.

In the discussion that followed, Committee members offered a number of comments and 

suggestions. Mr. Beck began by noting that collaboration and cooperation among organizations, 

such as the FDIC and the CFPB, and the focus on parents were both important to improving 

financial education resources; and that the focus on teacher training should continue as an 

important step to raise the core knowledge of teachers concerning financial education. 

Emphasizing that the CFPB’s and the FDIC’s research on these issues has been very useful, Mr. 

Cisneros suggested two areas for further research on providing financial education to young 

people: (1) whether it makes a difference if financial education is coupled with a bank account; 
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and (2) whether there is a difference between an “opt-in” versus an “opt-out” approach to 

opening bank accounts for young people. Noting that the Public Broadcasting Service (“PBS”) 

has an adult-oriented literacy program called “Learn to Read” that has been nationally televised 

with funding from the Corporation for Public Broadcasting, Mr. Boston suggested that a similar 

PBS program on financial education may provide an opportunity to leverage the Money Smart 

program on a national basis. Mr. Reynolds responded, noting that research by the CFPB on the 

impact of school-based financial institution branches found positive outcomes. Mr. Ortiz also 

responded, stating that another part of the CFPB’s research indicated a higher rate of 

participation in opening accounts in schools with populations of families that were recent arrivals 

to the U.S. and not all U.S. citizens; and that there may be other examples of programs involving 

an opt-out versus an opt-in approach. 

In response to Mr. Boston asking about plans to reach out to parents and caregivers in 

minority communities, Mr. Reynolds stated that the FDIC Money Smart program was being 

promoted as a potentially CRA-qualified tool and resource with a natural fit for low- and 

moderate-income communities; that the parent and caregiver guides are being translated into 

Spanish; and that the FDIC was reaching out to large membership-based organizations, such as 

United Way, with strong relationships in communities to disseminate the guides and other tools 

into the neighborhoods that need them. Ms. Levere said that the joint guidance to financial 

institutions on implementing youth programs and the emphasis on engaging parents to teach their 

children about financial decisions were critical to reaching the goal of expanding the financial 

capability of young people; and that there are other institutions, such as social service agencies 

and affordable housing developers, that could be partners to support these financial education 

efforts. Noting that grades K-12 education may be provided through channels other than public 

schools, Ms. McCoy asked about the challenges and opportunities in providing financial 

education through private schools, charter schools, and home schooling. In response, Mr. 

McDonnell outlined some of the steps the agencies are taking to develop relationships with 

organizations in independent and charter schools, as well as organizations focused on home 

schooling. 

Emphasizing that different economic groups present different challenges when 

implementing financial education information, Mr. McDonald suggested that, in addition to 

relying on parents as a resource for financial education of their children, it was important to 

pursue other channels for delivering financial literacy information; that it would be beneficial to 

have an implementation method with a matrix for measuring and tracking information to 

determine the success rate; and that, in addition to implementing financial literacy into state 

school systems, it was important to continue efforts toward a national level curriculum. In 

response, Ms. Ratcliffe noted that implementing a national mandate for financial education 

presents challenges, particularly since decision making with regard to education remains, for the 

most part, a state-based or local issue; that, in order to avoid duplicating what others are doing to 

advance school-based financial education in their states or local school districts, the CFPB 

decided to focus its efforts on providing policymakers and leaders with tools and resources that 
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can be implemented in their communities; and that the CFPB has been collaborating with the 

Department of Education and other participants at the federal level. Mr. Orozco stressed the 

importance of developing a financial education curriculum with topics for specific groups, such 

as immigrants, who may have some basic financial issues to address before they consider 

opening a bank account. With respect to banks engaging with young customers, Mr. Ryan 

suggested that it would be helpful to identify the potential barriers and requirements in state laws 

to facilitate a discussion of the issues that need to be addressed to promote financial education. 

Noting that the interagency guidance was very helpful with respect to the encouragement it 

offered for financial institutions to create youth savings accounts, Mr. Annibale emphasized the 

benefits of universal programs and the opt-out concept to ensure that the most vulnerable 

children are included in any program. In closing, Mr. Flake suggested that potential 

opportunities for financial education not be limited to those within schools, but should be 

expanded to include other groups involving young people outside of the school system. 

Chairman Gruenberg then announced that the meeting would briefly recess. Accordingly, 

at 10:40 a.m., the meeting stood in recess.

* * * * * * *

The meeting reconvened at 11:02 a.m. that same day, at which time Mr. Miller introduced 

the next discussion panel with Keith S. Ernst, Associate Director, Policy and Research Branch, 

DCP, FDIC, Karyen Chu, Chief, Consumer Research and Examination Analytics, DCP, FDIC, 

and Smith T. Williams, Acting Chief, Special Studies, Division of Insurance and Research, 

FDIC, to provide an update on the FDIC’s consumer research programs and a recent survey on 

small business lending by banks. 

Mr. Ernst began with a brief summary of how the FDIC’s consumer research through its 

national survey of households has progressed over its three iterations, noting that the first survey, 

in 2009, developed a baseline for estimating and describing the unbanked and underbanked 

population in the U.S.; that, in 2011, the survey revised the definition of what was considered an 

underbanked consumer, focused more on the composition of consumer segments, and analyzed 

the dynamic nature of banking relationships in households; and that, in 2013, new questions were 

included in the survey regarding mobile financial services and prepaid cards as emerging 

markets. He advised that, in 2015, the survey would continue to preserve those core elements of 

the previous surveys regarding estimates of the unbanked and underbanked population and the 

use of mobile financial services; that some changes would be made to the 2015 survey to bring 

certain areas of consumers’ decisions into focus, such as consumers’ access to bank credit, 

savings behaviors of households, payment activities, and payment methods; and that the changes 

to the 2015 survey should offer some insight into the market potential for banks’ efforts to 

expand access to financial services in regional communities.
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Next, Ms. Chu reported that, as a follow up to the past survey results and the FDIC’s 

white paper on mobile financial services, the FDIC launched a qualitative research project to 

further explore the potential for mobile financial services to bring more unbanked and 

underbanked consumers into the financial mainstream and identify potential obstacles to 

achieving that objective. She noted that research would be conducted in two phases using focus 

groups with unbanked and underbanked consumers; that the first phase would explore the 

methods currently used by unbanked and underbanked consumers to conduct their financial 

transactions, including their preferences and concerns regarding mobile financial services; that 

the second phase would focus on how certain features of mobile financial services, such as, 

mobile alerts or person-to-person payments, were being used by underbanked and unbanked 

consumers to manage their accounts; and that the FDIC also would explore bankers’ perspectives 

on the challenges and opportunities associated with increasing economic inclusion through 

mobile financial services offerings. 

Ms. Chu then briefly discussed the FDIC’s ongoing research to follow up on the 2008 and 

2011 surveys of banks’ efforts to serve the unbanked and underbanked, noting that a threepronged approach would be used in this year’s survey to gain a better understanding of these 

efforts. She explained that the first prong would involve the 2015 household survey, with 

consumers being asked whether they engage with banks for financial education and financial 

counseling, or to learn about products and services for managing their finances; that the second 

prong would be a new qualitative research project to identify and understand effective bank 

efforts to reach and engage unbanked and low- and moderate-income consumers; and that the 

third prong would be a new small business lending survey that includes questions concerning 

banks’ basic account offerings and loans to small businesses. Ms. Williams provided additional 

detail on the FDIC’s survey of small business lending, noting that small businesses play a vital 

role in the U.S. economy; that this new research initiative was being developed to provide data 

on banks’ lending to small businesses, including information on the amount of small business 

lending, types of loan products being offered, underwriting policies, the role of small business 

lending in banks’ business model, and types of quantifiable versus non-quantifiable information 

used in the loan review process; and that the survey would be conducted in 2016.

During the discussion that followed, Committee members offered a number of comments 

and suggestions, with Mr. Orozco commenting that the size of the firms considered to be small 

businesses in the survey was important because micro-enterprises with five or less employees 

were more likely to have problems with financial access than larger firms, particularly in 

immigrant communities. Mr. McDonald suggested that the survey include an update on the 

banks and entities that participated in the small dollar lending pilot to determine whether they are 

still offering the loan products and how new technologies may be providing incentives to 

participate; and that the FDIC should consider the ability of smaller financial institutions to 

compete against larger financial institutions and nonbank providers in marketing access to 

services. In response, Mr. Ernst noted that part of the FDIC’s research on mobile financial 

services focuses on understanding the importance that consumers place on accessing these 
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services through a bank versus a nonbank provider; and that, with respect to the small dollar 

lending pilot, the FDIC’s follow up with the participants found that participating banks 

considered this product to be one that aided their relationship with the target consumers, and that 

they have continued to offer it. Mr. Swagel commented that it would be helpful if the survey 

could provide information on whether banks’ interactions with the Small Business 

Administration was competitive or complementary, whether peer-to-peer lending was changing 

the competitive landscape, and whether there were particular issues with supervisors with respect 

to small business lending. 

In response to Ms. McCoy asking if the 2015 household survey would include questions 

on credit cards and overdraft protection, Mr. Ernst stated that the survey would ask about access 

to credit cards and personal loans or lines of credit, but not about mortgage credit, student loans, 

or other forms of longer term credit. Noting that there was limited research on the increasing 

numbers of nonbank, online lenders lending at extraordinarily predatory rates, Ms. Levere asked 

if the survey of small business lending would ask about nonbank lending to small businesses. 

Ms. Williams responded by explaining that the survey was limited to the banks’ lending, but 

would ask about their market competition and the product lines along which they compete. 

Noting that some alternative financial services, such as wire services, are becoming mainstream 

providers, Mr. Annibale suggested that the survey differentiate these alternative services from 

those that might be predatory in nature. Mr. Eakes commented that it would be helpful to have 

research that looks at the costs for community-based financial institutions when they are trying to 

provide services and compete with new technologies, particularly in view of the reduced number 

of community banks and branches. In response, Mr. Ernst emphasized that the purpose and goal

of the FDIC’s research was focused on understanding what services consumers are looking for in 

the marketplace, the choices they are making, and the extent to which banks or nonbank 

providers are providing those services. Chairman Gruenberg pointed out that, in addition to the 

work of the Committee, the FDIC has ongoing research on competing costs and other issues 

related to community banks and their important role in terms of access to the banking system, 

particularly rural areas and neighborhoods. Mr. Cisneros concluded the discussion by suggesting 

that it would be useful to gather additional information on the connection between direct deposit, 

or any form of electronic payment, and the impact that has on the unbanked and underbanked 

households’ behaviors toward their use of bank accounts.

Chairman Gruenberg then announced that the meeting would recess for lunch. 

Accordingly, at 11:48 a.m., the meeting stood in recess. 

* * * * * * *

The meeting reconvened at 1:22 p.m. that same day, whereupon Chairman Gruenberg 

introduced Mark E. Pearce, Director, DCP, FDIC, moderator for the afternoon session on 

potential areas identified for future work of the Committee. 
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Noting that he was joined on the panel by Mr. Ernst and Janet R. Gordon, Associate 

Director, Community Affairs, DCP, FDIC, Mr. Pearce opened the presentation by emphasizing 

that two underlying principles have guided the FDIC’s work on promoting economic inclusion: 

(1) that the FDIC’s mission to maintain public confidence in the financial system is enhanced by 

having insured financial institutions serve the financial needs of the broadest possible segment of 

the population; and (2) that a positive banking relationship is important to members of the public 

and to the insured financial institutions. He then outlined five key opportunities for directing the 

FDIC’s efforts to promote economic inclusion: (1) financial capability; (2) insured accounts; (3) 

financial resilience; (4) mortgages; and (5) small business. With respect to the key opportunity 

of financial capability, he emphasized that financial education helps consumers to understand 

bank products and sustain a positive banking relationship over time; that a financial education 

curriculum has been developed over the past decade and made available through the FDIC 

Money Smart programs, providing a free, comprehensive curriculum from a trusted objective 

source that can be customized by different stakeholders as they implement it with their 

constituencies; and that it was important to continue to explore ways the curriculum be leveraged 

and utilized to its fullest extent through teachers delivering the curriculum, as well as through the 

bundling of financial education with other life events that present transition points, such as 

getting a job or buying a house. 

Moving on to the opportunity of insured accounts, Mr. Pearce noted that access to a safe, 

affordable, and sustainable insured transaction and savings account improves the ability of 

individuals to manage their daily transaction needs safely to save money and build wealth; that 

the FDIC’s efforts to implement a pilot program with safe transaction and savings accounts has 

resulted in the availability of accounts that are consistent with the Safe Account template and can 

serve the needs of low- and moderate-income populations; and that, in an effort to connect 

individuals to those accounts, it was important to explore opportunities within the FDIC’s survey 

work to find other ways for insured financial institutions and other stakeholders to develop 

successful strategies to target to particular segments of the population. He continued, explaining 

that the third key opportunity of financial resilience was focused on developing the ability to 

absorb a financial shock; that, without an adequate savings cushion or access to a responsible 

small dollar credit option, households are vulnerable to unexpected emergency costs or income 

disruption; and that it was important to consider opportunities to encourage savings accumulation 

and access to affordable small dollar credit by looking at the best practices and successful 

strategies of financial institutions for delivering affordable savings accounts on a sustainable 

basis and employing alternative credit scores and other means to help individuals gain access to 

affordable small dollar credit. Turning to the fourth key opportunity of mortgages, Mr. Pearce 

explained that there have been significant changes in the mortgage market and the 

implementation of new regulatory requirements to address practices that had been present in the 

marketplace before the recent financial crisis; that home ownership remains a primary pathway 

for low- and moderate-income households to build wealth; and that it was important to ensure 

that financial institutions are aware of programs in the mortgage market and opportunities to take 

advantage of those programs to serve those markets. Finally, with respect to the fifth key 
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opportunity of small business, he emphasized the importance of encouraging entrepreneurs to 

start small businesses by ensuring their access to credit; and that it was important to provide 

financial education to emerging entrepreneurs and ensure that financial institutions understand 

the availability of small business lending programs, as well as the pros and cons of innovations in 

small business markets and alternative small business financing. 

Noting that a key component of the FDIC’s approach to promoting economic inclusion 

has been focused on how these five key opportunities connect together to build an economic 

inclusion ladder, Mr. Pearce explained that the foundation of a good financial education provides 

an understanding of how to manage money and access an insured account, which then provides 

the opportunity to build savings, as well as to gain access to credit and a range of financial 

products and services over time. He concluded by briefly summarizing some of the areas of 

focus raised by Committee members as the most promising strategic opportunities for promoting 

economic inclusion, including: developing research to understand the barriers and challenges 

facing unbanked or underbanked households, the products and services they need, and the 

opportunities for insured financial institutions to meet those needs; gaining a greater 

understanding of emerging technologies and innovations, particularly how this changing 

technology landscape affects economic inclusion opportunities; serving as a trusted source for 

accessing a financial education curriculum and other resources; collaborating with other agencies 

to leverage financial education efforts and research; and reexamining the role of the Community 

Reinvestment Act in providing incentives for financial institutions to engage in economic 

inclusion activities.

In the discussion that followed, Committee members offered a number of comments and 

suggestions. Mr. Beck emphasized the importance of financial education efforts, noting that 

research also was a valuable asset; and that two areas to consider for additional research were 

cybersecurity and peer-to-peer lending. Mr. Boston suggested that the concept of the financial 

inclusion ladder should be connected to the concept of financial wellness; that the models used 

for credit scores should be reexamined and replaced with alternative models if they are found to 

be outdated; and that the decline in the number of minority banks should be studied because of 

the role they play in the marketplace. Mr. Pearce responded by advising that the FDIC has done 

some research related to our minority depository institutions program in an effort to those 

institutions in the marketplace; and that the FDIC has recognized the importance of financial 

wellness and people managing their money with positive behavior. With regard to financial 

resilience, Mr. Annibale suggested that understanding credit transactions and payment solutions 

was as important as encouraging safe and affordable savings since prepaid cards and other 

alternative payment products are essentially processed through the banking system, in essence. 

Commenting on the key opportunities that have been identified for future work, Mr. McDonald 

suggested that additional research on cybersecurity and emerging technologies would be 

beneficial, particularly since both of these areas can potentially have a significant impact on 

community banks. 
421

Mr. Cisneros continued the discussion, suggesting that establishing partnerships with

cities, communities, and local governments, as well as programs such as the Bank On and Bank

On 2.0 programs, could provide opportunities for greater participation in safe accounts and safe

credit offerings. In response, Ms. Gordon noted that the FDIC does collaborate with local

government and community leaders to promote economic inclusion and the goal of connecting

people to the mainstream with respect to both building savings and access to credit. Mr. Eakes

suggested that it would be helpful to have more research data and transparency on financial

institutions' costs to maintain checking accounts, both the marginal, average, and overhead costs;

and that information security, emerging mobile banking technologies, and affordable mortgage

credit were other research topics that should be considered by the Committee in its future work.

With respect to financial capability, Ms. Levere emphasized the importance of building the

financial capability of small business owners by marrying the products to the knowledge; and

that more work could be done on the issue of credit scores, which serve as an important gateway

to the mainstream economy and economic inclusion. Ms. McCoy suggested that the issue of

mortgages be given a high priority Ion the research agenda, particularly to explore whether there

are innovative underwriting methods to widen the credit box while keeping default rates down,

and whether outdated credit scoring models are creating artificial barriers to broader access to

credit.

Following additional comments on which opportunities to focus on in the future, Mr.

Pearce concluded the discussion by emphasizing that these opportunities provide more of a

framework than an absolute set of categories that would be pursued. He advised that the FDIC

would solicit additional feedback from the Committee as it sorts through the specific

opportunities raised in the discussion; and that some flexibility would be required to take into

account that the challenges presented by opportunities in a particular category may change, or

become less salient, over a multi-year time frame.

Chairman Gruenberg then observed that the discussion at today's meeting has been

extremely helpful; that the Committee broadly endorsed the framework presented in the strategic

planning discussion; and that the Committee members provided some helpful additions and

suggestions. Chairman Gruenberg concluded by thanking the attendees for their participation.

There being no further business, the meeting was adjourned at 3:11 p.m.

~~

Robert E. Feldman

Executive Secretary

Federal Deposit Insurance Corporation

And Committee Management Officer

FDIC Advisory Committee on Economic Inclusion

May 15,2015
Minutes

of

The Meeting of the FDIC Advisory Committee on Economic Inclusion

of the

Federal Deposit Insurance Corporation

Held in the Board Room

Federal Deposit Insurance Corporation Building

Washington, D.C.

Open to Public Observation

May 15, 2015 ~ 9:02 A.M.

I hereby certify that, to the best of my knowledge, the attached

minutes are accurate and complete.

~j~b~ Chairman

Board of Directors

Federal Deposit Insurance Corporation