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FEDERAL DEPOSIT INSURANCE CORPORATION

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ADVISORY COMMITTEE ON ECONOMIC INCLUSION

+ + + + +

MEETING

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WEDNESDAY,

OCTOBER 24, 2018

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The Advisory Committee convened at 9:00 

a.m. in the Federal Deposit Insurance Corporation

Board Room, 550 17th Street, N.W., Room 6010,

Washington, D.C., Jelena McWilliams, Chairman, 

presiding.

PRESENT:

ROBERT ANNIBALE, Citi

MICHAEL BARR, University of Michigan Law School

JANIE BARRERA, LiftFund

TED BECK, National Endowment for Financial

Education

KELVIN BOSTON, Boston Media, LLC

JOSE CISNEROS, City and County of San Francisco

MARTIN J. GRUENBERG, FDIC Board of Directors

WADE HENDERSON, Leadership Conference on Civil

Rights

ANDREA LEVERE, Prosperity Now

PATRICIA MCCOY, Boston College Law School

ALDEN J. MCDONALD, JR., Liberty Bank and Trust

JOHN W. RYAN, Conference of State Bank

Supervisors

PHILIP SWAGEL, University of Maryland, School of

Public Policy

JOHN WEICHER, Hudson Institute

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ALSO PRESENT:

PAUL ADAMS, Head of Behavioural Economics & Data

Science Unit, FCA

DESMOND BROWN, Deputy Assistant Director,

Community Affairs, Bureau of Consumer

Financial Protection

KARYEN CHU, Chief, Consumer Research, Division of 

Depositor and Consumer Protection

THOMAS DAUGHERTY, Vice President, Eastern Bank,

Lowell, Massachusetts

HEATHER DONOVAN, Young Adult Department

Supervisor, Career Center of Lowell

KEITH ERNST, Associate Director, Consumer

Research, FDIC

KATHRYN FRITZDIXON, Senior Financial Economist,

FDIC

ALICIA LLORO, Senior Financial Economist, FDIC

JEFFREY MANNING, Community Affairs Specialist,

FDIC

JONATHAN MILLER, Deputy Director, Policy and 

Research, Division of Depositor and Consumer

 Protection, FDIC 

JEROEN NIEBOER, Technical Specialist, Behavioural 

Economics & Data Science Unit, FCA

LUKE REYNOLDS, Chief, Outreach and Program

Development, FDIC

JEFFREY WEINSTEIN, Senior Financial Economist,

FDIC

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 CONTENTS 

Opening Remarks, Jelena McWilliams, 

Chairman, FDIC........................... 5 

Presentation of the 2017 FDIC Household

Survey Data ................................... 8 

Moderator: Karyen Chu, Chief, Consumer Research, 

FDIC; Kathryn Fritzdixon, Senior Financial

Economist, FDIC; Alicia Lloro, Senior Financial

Economist, FDIC; Jeffrey Weinstein, Senior

Financial Economist, FDIC

Implications and Discussion of the 2017

Household Survey Data ........................ 72

Moderator: Karyen Chu, Chief, Consumer Research, 

FDIC; Kathryn Fritzdixon, Senior Financial

Economist, FDIC; Alicia Lloro, Senior Financial

Economist, FDIC; Jeffrey Weinstein, Senior

Financial Economist, FDIC

Review of UK-Financial Conduct Authority (FCA)

Mobile Study ................................ 131

Moderator: Keith Ernst, Associate Director, 

Consumer Research, FDIC; Paul Adams, Head of

Behavioural Economics & Data Science Unit, FCA;

Jeroen Nieboer, Technical Specialist, Behavioural 

Economics & Data Science Unit, FCA

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CONTENTS

Young Employment Programs and

Deposit Accounts ............................ 180

Moderator: Luke Reynolds, Chief Outreach and 

Program Development, FDIC; Jeffrey Manning,

Community Affairs Specialist, FDIC; Heather

Donovan, Young Adult Department Supervisor,

Career Center of Lowell; Thomas Daugherty, Vice

President, Eastern Bank, Lowell, MA; Desmond

Brown, Deputy Assistant Director, Community

Affairs, Bureau of Consumer Financial Protection

Closing Remarks, Jelena McWilliams,

Chairman, FDIC .............................. 263

Adjourn ..................................... 265

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1 P-R-O-C-E-E-D-I-N-G-S 

2 9:10 a.m.

3 CHAIRMAN McWILLIAMS: Good morning, 

4 everybody. It's a pleasure to have you here, and 

5 I'm actually really excited for today and for our 

6 discussion. And I was told that this is a very, 

7 very, very engaged group and a very, very, very not 

8 shy group. So I'm going to take that as a good sign 

9 and I think we have a lot of work to do in the areas 

10 in which this committee is focusing on. And for 

11 me, some of those topics are personal.

12 And I told my staff, I sound like a 

13 broken record, but I'll say it once and then I won't 

14 say it again. So when I first came to the United 

15 States, 26, 27 years ago, I had $500. I literally 

16 had $500 in my pocket and I couldn't get a credit 

17 card. I couldn't get a loan. I could open up a 

18 checking account and I did that on my second day 

19 in the United States. And I have that account to 

20 this day, same account. 

21 They used to send -- I don't know if 

22 people remember -- they used to send periodic 

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1 statements with a little write up about people who 

2 had 25 years with the bank, 50 years with the bank. 

3 So that statement never came for me, but that's 

4 okay. I'm not holding it against the bank. I am.

5 (Laughter.)

6 But I leveraged my $500 to open up a 

7 credit card because I really needed to become a part 

8 of the financial system and I secured my credit card 

9 with I think about $300 out of the $500 and then 

10 I was left with $200 which is not really easy to 

11 live on. But after 12 on time monthly payments, 

12 I was able to get my money back, $300 with some 

13 interest, and I had a credit card. And so when I 

14 went to a grocery store, it was Food For Less, to 

15 this day, when I see the yellow Food For Less signs, 

16 I just have this reaction.

17 I was able to pull a credit card out of 

18 my wallet, and I looked like everybody else. So 

19 for me, that credit card wasn't just a piece of 

20 plastic. It was my entry into belonging, because 

21 I looked like everybody else in the line. 

22 So with that, I just want to let you know that 

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1 I personally am very interested in the issues that 

2 all of you around the table, together with our 

3 staff, are addressing. And there's certainly more 

4 work to be done as we look to bring more people into 

5 the fold and ensure that they have safe consumer 

6 products and services. And I personally want to 

7 thank you and the FDIC staff on all the work that 

8 has been done in this area thus far. So with that, 

9 I don't want to take too much time.

10 Marty, would you like to say anything? 

11 All right. 

12 Jonathan?

13 MR. MILLER: Thank you very much, Madam 

14 Chairwoman. So I wanted to just we're handing over 

15 to the Karyen and the Survey Team, I just wanted 

16 to say for a quick second because they won't say 

17 it about themselves, I cannot underscore enough the 

18 hard work and dedication that under Karyen Chu's 

19 and Keith Ernst's leadership, this team, of the 

20 presenters and others that have worked with them, 

21 the effort that they put into producing this really 

22 monumental study and survey report that you have. 

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1 They work hard. 

2 At the same time that they're putting 

3 this report together, we're also developing the 

4 instrument that's going to be out in the field next 

5 year to do the next survey. It's really a non-stop 

6 process and their devotion and commitment is really 

7 incredible, and it comes through in the quality of 

8 the work. 

9 (Applause.)

10 Let me hand it over to Karyen for this 

11 section.

12 MS. CHU: Well, thank you, Jonathan. 

13 That was very kind. Chairman McWilliams, members 

14 of the committee, we are delighted to be here today 

15 to present the results of the 2017 FDIC National 

16 Survey of Unbanked and Underbanked Households.

17 As many of you know, this is the fifth 

18 time that we have done this survey. With each 

19 administration of the survey, we try to balance 

20 maintaining measurements over time, as well as 

21 adding new questions that broaden and deepen what 

22 we know about unbanked and underbanked households' 

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1 use of a wide range of financial services. 

2 In the 2017 survey, we have some new 

3 questions about credit and also some new questions 

4 about bank branch visits that you will hear about. 

5 And we also ask about mobile financial activities 

6 that we last asked about in 2013.

7 This survey, as Jonathan noted, is an 

8 undertaking that could not have been accomplished 

9 without the hard work and dedication of over a 

10 period of more than a year of an entire time of 

11 researchers whose names we have listed here. I 

12 would like to acknowledge their work.

13 I have with me today the three authors 

14 of the report. Jeffrey Weinstein at the end and 

15 Alicia Lloro right next to him, who are both 

16 economists in the FDIC's Division of Depositor and 

17 Consumer Protection. Next to me is Kate 

18 Fritzdixon. She is an economist in the FDIC's 

19 Division of Insurance and Research. I would like 

20 to thank Kate for stepping in and taking a lead role 

21 on very short notice earlier this year when we faced 

22 some staffing challenges. I would also like to 

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1 thank the leadership of the Division of Insurance 

2 and Research for making Kate available to take a 

3 lead role in the analysis and the writing of the 

4 report. 

5 It is my pleasure now to turn the 

6 microphone over to Jeffrey.

7 MR. WEINSTEIN: Okay, great. Thank 

8 you, Karyen. So just a brief background on the 

9 survey. In partnership with the U.S. Census 

10 Bureau, the FDIC conducted its fifth biennial 

11 household survey in June 2017. The first survey 

12 was conducted in 2009. The goals are the survey 

13 are to provide reliable estimates of unbanked and 

14 underbanked population as well as insights into how 

15 banks might better meet the needs of these 

16 consumers. 

17 The sample is nationally 

18 representative with over 35,000 respondents and 

19 estimates are available at the national and state 

20 levels and for larger metropolitan statistical 

21 areas. 

22 All right, so before we dive into the 

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1 results, I just want to give a brief overview of 

2 the agenda. This presentation is going to focus 

3 on the big picture results. Additional topics are 

4 covered in the full report. So we'll begin with 

5 banking status of U.S. households, then move to 

6 methods to access accounts, bank branch visits, 

7 alternative financial services, households with no 

8 mainstream credit, mainstream small dollar credit, 

9 and then economicinclusion.gov.

10 So in 2017, 6.5 percent of U.S. 

11 households were unbanked meaning that nobody in the 

12 household had a checking or savings account. The 

13 unbanked rate in 2017 fell to the lowest level since 

14 the survey began in 2009. And the 0.5 percentage 

15 point decline in the unbanked rate from 2015 to 2017 

16 can be explained almost entirely by changes in 

17 household characteristics across survey years, 

18 particularly improvements in the socio-economic 

19 circumstances of U.S. households, including 

20 income, educational attainment, and employment 

21 status.

22 In 2017, 18.7 percent of U.S. 

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1 households were underbanked, meaning that the 

2 household had a checking or savings account, but 

3 also used a product or service from an alternative 

4 financial services, AFS, provider in the past 12 

5 months such as a check cashing or payday loan. The 

6 underbanked rate declined by 1.2 percentage points 

7 from 2015, and approximately half of this decline 

8 can be explained by improvements in the 

9 socio-economic circumstances of U.S. households.

10 Turning to slide 7, as in previous 

11 years, unbanked and underbanked rates varied 

12 considerably across the population. For example, 

13 unbanked and underbanked rates were higher among 

14 lower income households, less educated households, 

15 younger households, black and Hispanic households, 

16 households headed by a work-engaged individual 

17 with a disability, and households with volatile 

18 income.

19 And just to focus on a couple of groups, 

20 moving to slide 8, so in general, unbanked rates 

21 in 2017 were lower than or similar to unbanked rates 

22 in recent years for most segments of the 

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1 population. Recent declines in unbanked rates, as 

2 shown on slide 8, have been particularly sharp for 

3 younger households. So for example, among 

4 households age 25 to 34, the second set of bars, 

5 the unbanked rate in 2017 was 8.5 percent, and 

6 that's down from 10.6 percent in 2015 and 12.5 

7 percent in 2013.

8 Moving to slide 9, which focuses on 

9 unbanked rates by race and ethnicity, unbanked 

10 rates among black and Hispanic households have also 

11 sharply declined in recent years. Specifically, 

12 16.9 percent of black households were unbanked in 

13 2017, down from 18.2 percent in 2015 and 20.6 

14 percent in 2013. And for Hispanic households, 14 

15 percent were unbanked in 2017, down from 16.2 

16 percent in 2015 and 17.9 percent in 2013. However, 

17 despite these improvements, unbanked rates for 

18 younger households and for black and Hispanic 

19 households remain substantially higher than the 

20 overall unbanked rate of 6.5 percent in 2017.

21 So moving to slide 10, which describes 

22 unbanked rates by state in 2017, so as in previous 

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1 years unbanked rates in 2017 varied widely across 

2 states. Unbanked rates ranged from 1.5 percent in 

3 Vermont and Minnesota to 15.8 percent in 

4 Mississippi. So if we look at the graph, the 

5 darker colors indicate higher unbanked rates. 

6 In general, unbanked rates were highest 

7 in the South, where 7.7 percent of households were 

8 unbanked, and that's compared with 5.4 percent in 

9 the Midwest and 6.0 percent in the Northeast and 

10 West. And then although not shown here, 

11 underbanked rates in 2017 also varied widely across 

12 states. The picture is quite similar.

13 So moving to slide 11, unbanked 

14 reasons. The 2017 survey asked unbanked 

15 households about the reasons why they did not have 

16 a bank account. Findings are similar to those 

17 reported in previous years. And so we can see from 

18 the graph here that in 2017 more than half of 

19 unbanked households, 52.7 percent, so looking at 

20 the top bar, cited do not have enough money to keep 

21 in an account as a reason for not having an account, 

22 and this is the most commonly cited reason. It was 

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1 also the most commonly cited main reason for not 

2 having an account, 34.0 percent, so the lighter 

3 blue bar directly below it. 

4 In terms of the second most commonly 

5 cited reason, three in ten unbanked households 

6 cited don't trust banks as a reason for not having 

7 an account. And this reason was also the second 

8 most commonly cited main reason.

9 So moving to slide 12, as in previous 

10 years, the 2017 survey asked unbanked households 

11 about their likelihood of opening a bank account 

12 in the next 12 months. And we can see from the 

13 graph here which gives the proportions from 2013 

14 to 2017, the proportion of households that were not 

15 at all likely to open a bank account in the next 

16 12 months, we can see that this is increased from 

17 40 percent in 2013, to 58.7 percent in 2017. This 

18 increase is fairly widespread across segments of 

19 the unbanked population.

20 And we also observed that 36.2 percent 

21 of households that were not at all likely to open 

22 a bank account in the next 12 months, cited don't 

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1 trust banks as a reason for being unbanked, 

2 compared with 21.0 percent of households that were 

3 very likely to -- unbanked households that were 

4 very like to open a bank account in the next 12 

5 months.

6 Moving to slide 13, bank account 

7 ownership is not static. Nearly half of unbanked 

8 households in 2017, 47 percent, had a bank account 

9 at some point in the past and this is very similar 

10 to previous years. In addition, interest in 

11 opening an account in the next 12 months was higher 

12 among unbanked households that had a bank account 

13 at some point in the past, compared with unbanked 

14 households that never had an account.

15 All right, and I will now turn the 

16 presentation over to Kate, who will discuss methods 

17 used to access bank accounts.

18 MS. FRITZDIXON: Okay, so now we're 

19 going to turn to banked households for a little bit. 

20 As in previous years, we asked banked households 

21 about all the methods that they used to access an 

22 account during the past 12 months. And the trends 

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1 we've seen this year have been similar to trends 

2 we've seen in the past. Mobile banking use 

3 increased sharply so in 2017, 40.4 percent of 

4 households used mobile banking as a means of 

5 accessing their account compared to only 23.2 

6 percent in 2013.

7 Online banking as a access method also 

8 increased. And we see the bank teller as an access 

9 method decrease. It fell to 73.6 percent of 

10 households in 2017, but this is still the most 

11 prevalent method used for accessing a bank account.

12 In addition to the questions about all 

13 methods households used to access a bank account, 

14 we asked specifically about their primary method 

15 of accessing an account. And again, we see similar 

16 trends, although the increase for mobile is 

17 sharper. So mobile, as a primary access method, 

18 almost tripled between 2013 and 2015. One in six 

19 households used mobile banking as their primary 

20 method. Online actually fell slightly between 

21 2015 and 2017. We can see it's up from 2013. And 

22 bank tellers similarly declined. Although the 

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1 bank teller remains the second most common primary 

2 method of accessing an account.

3 And one thing to point out with primary 

4 methods, you know, access methods varied across 

5 household demographics. But mobile banking, as 

6 the primary method of accessing your account, was 

7 more prevalent among underbanked households than 

8 among the fully banked. So those are households 

9 who have a bank account and do not use any of the 

10 alternative financial services.

11 So we wanted to look a little more in 

12 depth at some of these access methods. So like 

13 Karyen said, we asked questions about what mobile 

14 activities households performed which were last 

15 asked in 2013. And across the board, the use of 

16 the different mobile activities increased as we 

17 would expect with the rise of mobile banking. A 

18 few were particularly dramatic, so depositing a 

19 check electronically, the second from the lowest 

20 option on this list, you can see tripled between 

21 2013 and 2015. 18 percent of households deposited 

22 a check electronically in 2017.

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1 So next we looked in a little more 

2 detail at use of bank tellers to access an account. 

3 Like I said, it remains prevalent, kind of across 

4 household characteristics, but it was particularly 

5 prevalent among a few segments, particularly lower 

6 income households, less educated households, older 

7 households, and households located in a rural area. 

8 These groups of households were also 

9 disproportionately more likely to only use tellers 

10 to access their accounts.

11 As Karyen mentioned in the beginning, 

12 we added questions this year about bank branch 

13 visits. So households were asked how many times 

14 in the past 12 months they had visited a bank branch 

15 and spoken in person with a teller or other 

16 employee. Households may visit a branch to access 

17 their accounts which was asked about in the past, 

18 but also to learn about new products or services 

19 or to resolve an issue they have with their account. 

20 Overall, bank branch visits were very 

21 common. Eighty-six percent of households visited 

22 at least once in the last 12 months and more than 

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1 a third visited ten or more times in the past 12 

2 months. And we see this across different 

3 segments.

4 A few groups of households were 

5 particularly likely to visit a branch. Rural 

6 households, in particular, were more likely to 

7 visit a branch. And almost half of them visited 

8 10 or more times in the past 12 months. The rural 

9 households do seem to be relying on branches for

10 many activities.

11 We also, somewhat surprisingly, found 

12 that even for households who do not use tellers as 

13 their main access method for their account were 

14 likely to visit a branch. Households who used 

15 mobile as their primary access method, for example, 

16 more than 80 percent of them visited a branch in 

17 the past 12 months, and about a quarter of them 

18 visited 10 or more times in the past 12 months. And 

19 the patterns, as you can see, are family similar 

20 for households who use online as their primary 

21 access method.

22 So turning to a different topic now, we 

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1 also asked about alternative financial services 

2 use in the past 12 months. These are questions 

3 that have been asked over the past several surveys. 

4 We can categorize these services into two sets. So 

5 transaction AFS, these are good questions we asked 

6 about our nonbank money orders, nonbank check 

7 cashing, and nonbank international remittances. 

8 For credit AFS, the products we asked about are pay 

9 day loans, pawn shop loans, rent-to-own service, 

10 refund anticipation loans, and auto title loans. 

11 And overall, what we see is that AFS use 

12 continues to decline. Overall use fell from 24.9 

13 percent of households in 2013 to 24 percent of 

14 households in 2015, and 22.1 percent of households 

15 in 2017. We see a consistent downward trend in 

16 transaction AFS, but while credit AFS fell between 

17 2015 and 2017, it's at about the level it was in 

18 2013.

19 So we can also look at AFS use by banking 

20 status. For unbanked households who tend to use 

21 AFS more frequently, both transaction and credit 

22 AFS use declined. For banked households from 2015 

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1 to 2017, transaction AFS use declined.

2 Now I'll turn it to Alicia.

3 MS. LLORO: Thanks, Kate. So the 2017 

4 survey included some new questions to capture the 

5 full range of credit products that are likely 

6 reported to the major credit bureaus. So we call 

7 this credit "mainstream credit." These products 

8 include credit cards, auto loans, student loans, 

9 mortgages, home equity loans, and lines of credit, 

10 personal loans or lines of credit from a bank, and 

11 also personal loans or lines of credit from a 

12 company other than a bank, such as a finance company 

13 loan.

14 So in 2017, about 20 percent of 

15 households had no mainstream credit in the past 12 

16 months. So these households likely did not have 

17 a credit score and likely faced substantially 

18 reduced access to mainstream credit. 

19 Looking across household 

20 characteristics, several groups were more likely 

21 not to have mainstream credit: unbanked 

22 households, households with lower income, less 

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1 educated households, households headed by a 

2 working age person with a disability, black and 

3 household households, and foreign born, 

4 non-citizen households. 

5 Differences by income were especially 

6 pronounced. Looking at households with an income 

7 less than $15,000, over half of them had no 

8 mainstream credit. More than a third of 

9 households with income $15,000 to $30,000 had no 

10 mainstream credit. This is compared to only about 

11 4 percent of households with at least $75,000 in 

12 income.

13 There were also large differences by 

14 disability status and race and ethnicity. We 

15 showed disability status on the left, about 40 

16 percent of households headed by a working age 

17 person with a disability had no mainstream credit. 

18 Looking at race and ethnicity, about a third of both 

19 black and Hispanic households had no mainstream 

20 credit. This is compared to only about 14 percent 

21 for white households.

22 So digging into race and ethnicity a 

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1 little bit more, one of the things you might be 

2 thinking is maybe it's an income story because I 

3 showed you large differences by income, but one 

4 thing that was striking is if we look across income 

5 categories, the pattern remains. In fact, if we 

6 look at the two highest income groups, we have the 

7 $50,000 to $75,000, both black and Hispanic 

8 households were more than twice as likely as white 

9 households not to have mainstream credit. And for 

10 the highest income group, black households were 

11 nearly three times as likely as white households 

12 not to have mainstream credit. And Hispanic 

13 households were about twice as likely. In fact, 

14 even when we control for more characteristics, 

15 these patterns remain.

16 Turning to geography, we have no 

17 mainstream credit by state, so the patterns look 

18 somewhat similar to what we find for the unbanked. 

19 The rates of no mainstream credit are much higher 

20 in the South. The state with the highest rate of 

21 no mainstream credit was Mississippi and that's 

22 nearly 40 percent of households had no mainstream 

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1 credit, which was strikingly high. The lowest 

2 state was Minnesota with 8.1 percent. They also 

3 had the lowest unbanked rate, I believe.

4 So now we turn to mainstream small 

5 dollar credit. So we define mainstream small 

6 dollar credit to include credit cards from Visa, 

7 MasterCard, American Express, or Discover and also 

8 personal loans or lines of credit from a bank. 

9 So we classify the household as having 

10 unmet demand for mainstream small dollar credit, 

11 if any of the three situations apply. So the first 

12 one is if they applied for a credit card or personal 

13 loan or line of credit from a bank, and were either 

14 denied or not given as much credit as they applied 

15 for. The second situation is if they thought about 

16 applying for these products, but didn't do so or 

17 changed their mind because they thought they might 

18 be turned down. And then the third condition is 

19 if they used one of the credit AFS products that 

20 Kate mentioned.

21 So we find that 12.9 percent of 

22 households had unmet demand for mainstream small 

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1 dollar credit in 2017. So staying current on bills 

2 is one potential indicator of credit worthiness 

3 that we asked about in the survey. And we find that 

4 over half of these households did stay current on 

5 their bills in the past 21 months.

6 So that wraps up the contents, the new 

7 content for the presentation. As Jeffrey 

8 mentioned, we have more results and more things in 

9 the full report, which you can take a look at. And 

10 then finally, I'd just like to wrap up with a brief 

11 advertisement for our economicinclusion.gov 

12 website. So here you can find the full report, 

13 along with the executive summary and many, many 

14 appendix tables.

15 (Laughter.)

16 Probably took way too long to put 

17 together, but they are there for you. We also have 

18 a custom data table and a custom chart table, so 

19 if you're interested in making your own tables that 

20 you couldn't find in our big block of appendix 

21 tables, you can do so -- you can make your own 

22 charts. 

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1 Something new that we have this year are 

2 five-year estimates of unbanked and underbanked 

3 rates. So these estimates combined data from 

4 three consecutive surveys to give us a much larger 

5 sample. So since we have a larger sample, the 

6 estimates are more precise and we were able to 

7 provide them for more geographies and more 

8 subpopulations than we have in the past. So we 

9 have more documentation that describes the 

10 estimates and how to use them on the website as 

11 well, if you're interested in those. So this is 

12 something that's been a long time in the making so 

13 we're happy to finally have those out there.

14 And then finally for users who are 

15 interested in the raw data, we also have that 

16 available along with documentation. Thank you 

17 very much. I'll turn it back to Karyen.

18 MS. CHU: Thank you. Now we're happy 

19 to take any questions. Bob, and we'll just go 

20 around --

21 MEMBER ANNIBALE: Just one. First 

22 thing, just thank you again. I mean the report is 

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1 excellent. The data that's available allows us to 

2 do analysis down on a market basis, on a state 

3 basis, and regional basis, but also as Wade and I 

4 have talked about, this aggregating data, how 

5 critical it is. 

6 As we achieve numbers that -- when you 

7 see the number for whites, for example, especially 

8 on race at 3 percent. That's amazing. And that 

9 will include whites who are from the disability 

10 community as well, which are at a very high rate, 

11 right? Or self-disclosed, right?

12 So when you really look at and we 

13 disaggregate by sector, I'm talking about 

14 unbanked, let's call it from there. We really have 

15 our tasks that helps drive where we should spend 

16 more time. And I think it's important that we 

17 always disaggregate. Those last slides were 

18 really helpful. I will be doing it all of your 

19 categories. Because -- and the same kind of 

20 reasons for not having an account, I think it would 

21 vary enormously. If you do -- and I know we have 

22 it in the raw data because I always use -- we do 

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1 a lot of work with immigrant integration. So if 

2 I look at foreign born and then foreign born 

3 citizen, we always had a dramatic change in the 

4 amount -- the drop in the unbanked. It was like 

5 a third, I think of the -- so foreign born. And 

6 when you become citizen and why we push citizenship 

7 so much, we see a huge drop. 

8 And I think the reasons for being 

9 unbanked, if you do, for example, immigrants or 

10 foreign born if you use that as a proxy, will be 

11 things like documentation. We were concerned that 

12 they don't have documentation, but that didn't 

13 appear. So just as a sample, it would be a smaller 

14 part of the whole. 

15 And I think as we look at why black or 

16 Hispanic, what are the reasons by community, that's 

17 how I think we can then try to attack the causes 

18 because now our challenge should be the disparity, 

19 really the geographic and Mississippi didn't 

20 surprise me. I've never been --

21 (Laughter.)

22 -- so I self-disclose, but it usually 

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1 ranks amongst the poorest states in the country, 

2 right? I mean the other socio-economic 

3 categories. So it would correspond here. 

4 But I think as we disaggregate, we can 

5 then go deeper into what's our strategy for 

6 different communities.

7 MS. CHU: Thank you. So we do have, as 

8 Alicia mentioned, we have I think over 80 appendix 

9 tables on the site that do a huge amount of 

10 disaggregation. We show the rates and a lot of 

11 these measures by many, many, many different 

12 socio-economic and demographic groups. And also 

13 on the economicinclusion.gov, we have a custom tool 

14 where you can create your own tables and so you can 

15 disaggregate to different communities, different 

16 subgroups within communities. Now the caveat is 

17 obviously with 35,000 households, the smaller the 

18 community, the smaller the sub-population, right, 

19 we start to run out of sample. And that's actually 

20 where the five-year estimates are coming in to be 

21 particularly helpful because we recognize that 

22 that was a gap and that people really were hungering 

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1 for information at smaller geographies for smaller 

2 subgroups. And so we actually worked with the 

3 Census Bureau to develop weights, right, to 

4 correctly account for sort of the sampling over 

5 three different surveys so that we could actually 

6 combine the data, you know, statistically soundly, 

7 right, and produce sound estimates that would give 

8 us more geographies and importantly also more 

9 subgroups within geographies. Thank you.

10 Michael?

11 MEMBER BARR: Just to echo Bob in 

12 thanking you all once again for this really amazing 

13 report and set of data analytic tools. I've played 

14 around a little bit on your website over the years, 

15 and it's always getting better and it's really 

16 exciting to have that opportunity to play with the 

17 data and I'm deeply appreciative for the work that 

18 went into this.

19 I just -- continuing along the line with 

20 Bob, I mean I'm struck in this survey as I was in 

21 the previous ones about the concentration, the 

22 overwhelming weight of the rural African-American 

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1 South and producing the unbanked numbers and the 

2 lack of access to mainstream credit in the rural 

3 African-American South.

4 I think we ought to think about how to 

5 use that to drive resources to work on the problem 

6 in a much more concentrated way. I'm not saying 

7 there aren't other problems. Obviously, the 

8 issues with immigrants to our country is another 

9 big area of focus, but if we could think about what 

10 on the ground would actually move the needle on that 

11 in some more precise way. 

12 So for example, I'll make something up 

13 because I don't see it in the data, but let's say 

14 the problem of trust among rural 

15 African-Americans, southern population is because 

16 of the lack of diversity in tellers in banks and 

17 their communities. Again, I don't know from the 

18 data, but we could at least wonder whether that's 

19 part of the factor -- could there be a concentrated 

20 effort on improving diversity of tellers in those 

21 communities?

22 If it turns out it's driven by something 

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1 completely different, if it's driven by dispersion 

2 of the population that can't be readily fixed by 

3 building branches, that would be another issue. 

4 It would be useful to just put a ton of energy into 

5 figuring out what the answer or set of answers to 

6 that question is.

7 MS. CHU: Thank you, Michael. So one 

8 of the major goals of us putting out the survey, 

9 the data tools, et cetera, is to allow communities, 

10 groups, industry participants to dive deep into the 

11 data to answer the specific questions that address 

12 and help them think about how to address these 

13 issues in their communities. So you know, greater 

14 publicity for these and certainly we know from sort 

15 of being out in the community that community groups 

16 know about this. Banks know about this. They do 

17 use it, and we try, you know, as you mentioned, to 

18 improve the capabilities each time and to give more 

19 additional data points that are helpful.

20 Janie.

21 MEMBER BARRERA: Karen, thank you all 

22 for this work and just to follow up on that, I think 

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1 what I would like to do is how do we connect the 

2 CDFIs that are out in our communities with this data 

3 because it's the CDFIs who are the feet on the 

4 ground. They're the resources that are out there. 

5 So let's look at national organizations that work 

6 on CDFI issues, and I think in some way there's a 

7 way to connect dots with CRA on this with this data 

8 as well and we all know there is information or 

9 they're reflecting information on CRA right now. 

10 So if we use this data and connect the dots would 

11 be something that I would look forward to helping 

12 with.

13 MR. MILLER: I just -- to take a moment 

14 on that point specifically -- your first point, 

15 Janie. So we work closely with our consumer 

16 community affairs folks that are out in the 

17 communities.

18 MEMBER BARRERA: We see them out there 

19 right now.

20 MR. MILLER: Yes, you do. And with 

21 this data we bring it to the -- we have many, many 

22 meetings with local groups and talk -- use the data 

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1 tools that Karyen is talking about and make sure 

2 they understand what's going on and I think your 

3 point is well taken and Ms. Ortiz and her shop, and 

4 the folks you see behind me, are doing that, and 

5 always looking for ways to do it better, including 

6 connections to CDFIs. Great point.

7 MEMBER BECK: Very good work. Very 

8 important. I have two things, and they might be 

9 wish list items for the next edition. And for the 

10 first time I'm actually not going to ask an 

11 education question.

12 (Laughter.)

13 But I was struck by -- maybe two years 

14 ago we had a series of presentations about people 

15 with disabilities and the challenges they face. 

16 And those numbers are very evident here again. And 

17 I don't know if it could be fair to add to the work 

18 you've done or the next round, access to ABLE 

19 accounts. 

20 Is that going to be make a difference 

21 because that was a very specific barrier to what 

22 is obviously a very big challenge. So tracking 

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1 that access and how that translates into people 

2 then being comfortable in getting into the banking 

3 system and saying they have enough assets would be 

4 a really interesting number. And that again, 

5 might be for the future.

6 The second thing, the trend lines are 

7 good. But it's also -- it's very hard to figure 

8 out is that the economy, because people are 

9 working? Or is there any specific effort from the 

10 banking community that's actually improved the 

11 numbers? So I don't know if it's possible to say 

12 what has the change in the attitude of the banks 

13 offering a basic account, a safe account, marketing 

14 plans for inclusion, are they a part of the 

15 improvement or is it strictly the rising tide, all 

16 boats. So if there's a way to ferret out that 

17 marketing hopefully success, especially going 

18 forward on the communities we just talked about 

19 would be really helpful.

20 MS. CHU: So on your second question, 

21 our data we're presenting is at a national scale, 

22 right? What we do see is that the improvements 

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1 from 2011 when it was -- unbanked rate was the 

2 highest, to 2017 now, that much of the -- much of 

3 it, but not all of the improvement can be attributed 

4 to improving socio-economic situation of 

5 households. 

6 What was the percentage? Do you 

7 remember, Alicia?

8 MS. FRITZDIXON: It was about two 

9 thirds.

10 MS. CHU: So about two thirds of the 

11 decline in the unbanked rate could be explained by 

12 basically improvements and inter-economic 

13 conditions, but about a third could not be 

14 explained by that.

15 Now we can't tell you what that 

16 additional third is, but certainly, I think, lots 

17 of factors go into those improvements in the 

18 additional third.

19 MR. MILLER: I thought it was the work 

20 of the committee.

21 (Laughter.)

22 MEMBER BECK: That's kind of what I was 

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1 hoping to hear, actually.

2 MEMBER BOSTON: I think it's excellent 

3 work, as always. I have two thoughts. One is 

4 moving forward the next time, I think you may want 

5 to see if we can expand our survey base. I have 

6 a feeling that we may be missing many poor Americans 

7 who may not have access to the service. And maybe 

8 we may want to look at for some additional nonprofit 

9 organizations or some other way that we can add to 

10 this great work, because I hate for people to get 

11 the misconception that things are improving for 

12 everyone when we know there's a large group of 

13 Americans who are just a difficult time 

14 financially. And they may not be represented in 

15 this group. 

16 That's not to take away anything that 

17 you're doing. I think this is phenomenal work. 

18 It's just something, I think, maybe we might want 

19 to think about, how we can expand moving forward 

20 so we can get a broader look at this issue.

21 The second question I have I thought is 

22 always is my people who are at the top, 

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1 African-Americans, and we have to do some issues 

2 among our community. But I was really concerned 

3 about no mainstreamed credit. And the fact that 

4 even if your income rose, it seems that might be 

5 a real issue for people of color in the United 

6 States. They would look at why or do we have any 

7 -- or is it just because it's not in the banking 

8 system? Is that something we need to try to look 

9 more to? I'm just asking a question so I can get 

10 a better understanding.

11 And then also is there systemic issues 

12 which I believe there is, but -- that we might want 

13 to look at in terms of our credit scoring system 

14 in the United States where it becomes an issue for 

15 a person who does not have credit, who may choose 

16 to be debt free and still be -- have issues when 

17 it comes to no financial success in the United 

18 States. 

19 So these are just some questions that 

20 maybe we want to think about, but great report. 

21 Thank you.

22 MS. CHU: Thank you. Jose?

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1 MEMBER CISNEROS: Yes, thank you, and 

2 congratulations again, wonderful report and 

3 continued excellent data.

4 A couple of areas I wanted to comment 

5 on and the first one is really my continued 

6 satisfaction in seeing the information about use 

7 of bank branches. I think we're all very often 

8 excited about new and exciting technologies and 

9 patterns and practices of mobile or online and new 

10 ways of working with our bank branches that we might 

11 unfortunately forget that there's a large portion 

12 of folks that still do banking the old fashioned 

13 way and walk in and talk to a human being, and travel 

14 to a brick and mortar bank branch. And I don't want 

15 to forget those folks.

16 I may have mentioned this before, but 

17 in our children's savings account program in San 

18 Francisco, where we to date have opened 35,000 

19 college savings accounts for children in our public 

20 school district, I'm impressed, always impressed 

21 there that the large proportion of people that make 

22 their deposits into that account by again walking 

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1 themselves into a bank branch. A huge portion of 

2 first time deposits are made in the bank branch, 

3 and a significant number of all of the deposits --

4 even repeat deposits -- are still made by folks 

5 walking into a bank branch. And that program, much 

6 like the universe we're looking at here, we're 

7 looking at the lowest income, most underserved and 

8 vulnerable constituents. And I think that this 

9 just reinforces how important it is for us to see 

10 the value of bank branch access to these 

11 populations that we're trying to reach and trying 

12 to bring success to.

13 I have one other nuance on the bank 

14 branch access that I think we need to stay alert 

15 to and that is the value of services and the value 

16 of assistance that folks are getting when they do 

17 go into the bank branch. Our city, like many 

18 cities across the country, through our Bank On San 

19 Francisco and Bank On programs across the country, 

20 are now reorienting and focusing on the new safe 

21 accounts that many banks are offering thanks to the 

22 good work of the FDIC and the Coalition of Cities 

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1 for Financial Empowerment, has brought now upwards 

2 of I think close to two dozen banks that are 

3 offering truly safe accounts with no overdraft 

4 opportunities.

5 The story though I want to tell is that 

6 in the last year, we actually did some secret 

7 shoppers -- sent some secret shoppers out into bank 

8 branches in our city to banks that offered these 

9 now overdraft-free accounts. And we got, 

10 unfortunately, varying degrees of quality of 

11 information through our secret shopper efforts. 

12 In some places, that safe account was completely 

13 not discussed or even offered to someone who was 

14 clearly asking for it. And so we shared those 

15 results with our partner banks and to their credit, 

16 many have redoubled their training efforts in that. 

17 So it brings me to given the importance 

18 of bank branch -- of performance, folks in the bank 

19 branches, I wonder if we might want to find a way 

20 to see how people felt they were served when they 

21 went into those bank branches, and maybe that's a 

22 question we can ask across all the access levels.

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1 Are your banking partners, you know, 

2 giving you what you need? What's the quality of 

3 the service you're getting? No matter what method 

4 you're using and if you happen to be going into a 

5 bank branch, are you getting the assistance? Are 

6 you getting the support? Are you getting the 

7 information that's needed? Or was something 

8 missing? Did it become a deterrent in some way or 

9 lead to confusion or lack of options? So I just 

10 want to keep delving into that, and particularly 

11 don't want to forget how it works with bank 

12 branches.

13 And then I have one other area. I can't 

14 recall if we include this as well, but I wonder if 

15 we ask people about their overdraft experience. 

16 Again, particularly now when we finally have an 

17 option that's overdraft-free, I wonder how vital 

18 that could be and how much of a savings that could 

19 be for folks who are not in an overdraft-free 

20 account. I wonder if we could maybe gather some 

21 information about did you have an overdraft last 

22 draft or in the past year or whatever, and if so, 

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1 how many? Similar to the way we ask about the rates 

2 of other types of experiences that people are 

3 finding, how much did that cost you? You know, 

4 what kind of an impact did that have on you? What 

5 caused the overdraft? I can see where that would 

6 be really valuable and particularly in this world 

7 where now we have a safer alternative, I can see 

8 where that data could be very important and lead 

9 us towards the audiences we need to bring these new 

10 safe accounts to. Thank you again for your work. 

11 MS. CHU: Thank you. Director 

12 Gruenberg?

13 DIRECTOR GRUENBERG: Actually, I'll 

14 pass and give the members of the committee first 

15 dibs. I'll come back later.

16 CHAIRMAN McWILLIAMS: Oh, no, no. Now 

17 I have to give it to you.

18 (Laughter.)

19 MEMBER HENDERSON: Well, good morning, 

20 everyone. And again, I'm Wade Henderson, by the 

21 way. I'd like to add my congratulations to the 

22 remarks that you've gotten from all of the 

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1 committee. Great work, tremendous research. 

2 Thank you for doing it.

3 I want to do a bit of a follow up to a 

4 question that Michael Barr began raising about 

5 targeted assistance. And I'm looking at slide 7, 

6 slide 9, and slide 10. Seven lists the household 

7 characteristics, and I think you have six 

8 characteristics listed that it seems to me are 

9 higher among those households. And there's a lot 

10 of overlap, I suspect. If you were to put these 

11 characteristics together, it would produce a 

12 particular profile of an African-American or 

13 Latino household, lower income, less well 

14 educated, perhaps younger, indeed working age 

15 disability could be a factor, although I agree, it 

16 needs to be disaggregated, and the volatile income 

17 characteristics. So those factors seem to suggest 

18 a population of individuals.

19 Now this may be beyond the ability of 

20 your working group to assess, but I'm wondering 

21 whether you have an overall assessment of the 

22 number of individuals, not just the percentage 

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1 involved. What would you think would be the number 

2 of people in these categories? So that's one 

3 question. And if it's not possible to determine 

4 that from the survey data you assembled, is it 

5 possible that you could recommend an agency or an 

6 organization that might already have access to that 

7 data because they're looking at it somewhat 

8 differently.

9 Secondly, on number ten, you have the 

10 states, the unbanked states and it's clear that the 

11 South, the old South and dare I say it, the old 

12 confederacy, share certain characteristics that 

13 are clearly relevant to assessing where 

14 investments and additional resources are needed 

15 and so I would be interested in hearing your 

16 perspective on that because it ultimately goes to 

17 my over-arching question which is based on the data 

18 that you have assembled, what are the implications 

19 of this data going forward for the country as a 

20 whole? What do you think this data says about 

21 where we are at this moment in time and knowing what 

22 you do about the changing demographics of the 

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1 country, about the future of the American work 

2 force, about communities that we are putting 

3 together, what do you think this data suggests?

4 And then one last question, and I 

5 apologize --- just curious -- the last one is: have 

6 you been able to track data about bank branch 

7 closings between the surveys that you have done and 

8 the sort of here and now. I'm asking that in part 

9 because there is a proposal on the table to review 

10 the Community Reinvestment Act which from a 

11 personal standpoint gives me great trouble. And 

12 I'm curious about the degree to which there is some 

13 documentation of branches that have closed over the 

14 past year between surveys. So thank you.

15 MS. CHU: Let me try to address that, 

16 at least a couple of your questions.

17 MEMBER HENDERSON: Yes, sure.

18 MS. CHU: For the number of people you 

19 asked in these different categories, we can 

20 certainly give an estimate sort of broadly. The 

21 smaller the group, the less precise that estimate 

22 is going to be, but we can certainly give size 

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1 somewhat, in general, the estimates of the 

2 population sizes other than just shares.

3 Implications of the data actually we 

4 are going to talk about some implications that 

5 we've drawn. Certainly, they're not the only 

6 implications that can be drawn from the data, but 

7 they're the implications that we've drawn that are 

8 included in the report. We will cover that 

9 actually in the next panel.

10 MEMBER HENDERSON: Okay, fantastic.

11 MS. CHU: And are we able to track 

12 branch closings? We actually, so the FDIC does 

13 have a data set. It's the summary of deposit data 

14 which has, which comes out every year and that has 

15 bank branches and bank branch locations on it. And 

16 that's certainly a data set that can be used to look 

17 at bank branch locations over time.

18 MEMBER HENDERSON: Fantastic. Thank 

19 you so much. And again, tremendous work you guys 

20 should be very proud of what you've done.

21 MR. MILLER: We've been talking in 

22 terms of households, but we have the overall 

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1 numbers of the number of people who live in the 

2 households. Do we know that off the top of our 

3 head? Sorry.

4 (Laughter.)

5 MS. CHU: Andrea.

6 MEMBER LEVERE: So first I want to say 

7 that this work has really changed the national 

8 conversation around this issue. And I know we have 

9 implications conversation, so I'll save some of the 

10 ways that we see the implications every day and just 

11 focus on the data first. But it really has changed 

12 people's conversations and it changes who even 

13 knows this is an issue and how they change their 

14 practices across all the sectors.

15 You probably know that my applied 

16 research team is already sitting there figuring out 

17 how all of this goes into the 2019 Prosperity Now 

18 Scorecard. And just to echo Bob's point, this 

19 issue around disaggregation is absolutely 

20 essential. And so we've been able to integrate all 

21 of your data and disaggregate it by race and the 

22 new data we all have on disability and incredible 

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1 data we have on credit that's come from the New York 

2 Fed that we've been able to integrate looking 

3 across all of this work. And when we get to the 

4 implications, the role of this data and us being 

5 able to create these profiles by cities as small 

6 as a thousand has just been quite profound and every 

7 mayor looking at this work and other things about 

8 the data. We can talk about that next.

9 I want to just answer just a couple of 

10 questions going to my friend Michael. In the 

11 issue, I think, and I'm going to channel Bill Bynum 

12 and I can't do that very effectively, of hope, but 

13 it's all about the banking deserts. And if we look 

14 at what's happened to Mississippi, and a major 

15 regional bank shutting all their branches in all 

16 these rural communities, and I won't mention the 

17 name of the bank, but what they did is they gave 

18 Bill for dollar these branches, and then Bill 

19 opened credit unions in each of these areas. 

20 People were driving 50 miles just to cash a check 

21 because there's no ATM machines anywhere. 

22 And as we know, and I'm sure this is 

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1 connected, there's a whole group of CDFIs that 

2 Jamie knows that are working on this issue of 

3 persistent poverty, not just in the rural South, 

4 but in the colonus Native American communities and 

5 in Appalachia where this is all key. So I think 

6 these communities we all work together. CDFIs are 

7 absolutely critical in this, and I think we view 

8 playing an increasing important role.

9 When we get to these issues around race, 

10 and I think you know what I'm going to say, this 

11 issue around credit is all tied to wealth, right? 

12 We can't stop looking at income because income is 

13 not comparable when you look by race because wealth 

14 is so profoundly different that that is what is 

15 driving, not all -- there's never one factor -- but 

16 that is the factor that's driving all these issues 

17 around credit. And as you know in the scorecard 

18 we split everybody by who has subprime and who has 

19 prime credit and looking at these together. So 

20 those were kind of the big topics for us to think 

21 about.

22 I do have two data questions that I 

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1 wanted to ask. So going to page 12 where you look 

2 at unbanked households that are not at all likely 

3 to open an account in the next 12 months, this is 

4 a new data point for me and really fascinating. 

5 And so I wonder with the 58.7 percent, if you 

6 disaggregated that by geography and race, and that 

7 may be unfair to ask the team here, but to me, back 

8 to what Michael was saying before we look at that, 

9 how is that -- rather than you know, I've always 

10 been so dissatisfied by I don't have enough money 

11 to open an account and I'm totally convinced that 

12 there's reasons behind that, behind besides just 

13 not having enough money. It goes back to the 

14 issues of trust and who feels comfortable and where 

15 there's a bank branch? 

16 So I'm just curious, any --

17 MS. CHU: Not at all likely to open an 

18 account. Appendix Table A15.

19 (Laughter.)

20 MEMBER LEVERE: What your revenge is to 

21 me.

22 (Laughter.)

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1 MS. CHU: Appendix Table A15 breaks 

2 that out by all the household demographic factors 

3 and economic factors.

4 MEMBER LEVERE: I should just look at 

5 that excellent table.

6 MS. CHU: You could look at that. I 

7 don't believe we broke it out by geography, 

8 correct? Not in an existing appendix table.

9 MS. FRITZDIXON: The Census region is 

10 in the demographics.

11 MS. CHU: Census region. But not to 

12 fear, we have our excellent data tool that you can 

13 use on economicinclusion.com.

14 MEMBER LEVERE: The other data point 

15 that I'm curious about is when you said that the 

16 unbanked population, only 50 percent of it is using 

17 alternative financial service providers. What 

18 are the other 50 percent doing? Is it all just a 

19 cash economy? Do we know?

20 MS. CHU: So we don't actually know. 

21 So one possibility is certainly cash is one option, 

22 but it's also possible that there are just new 

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1 methods. The landscape, payments landscape is 

2 changing so quickly that it's possible that people 

3 are using mechanisms that we're not quite 

4 measuring. So that's another possibility for sort 

5 of seeing that transaction fold because exactly 

6 what are they doing.

7 MEMBER LEVERE: Those are millions of 

8 people, right?

9 MS. CHU: They don't have a bank 

10 account. 

11 MEMBER LEVERE: Thank you. And keep 

12 going.

13 MS. CHU: Pat.

14 MEMBER MCCOY: I want to first thank 

15 you and the team. Your research here and the fact 

16 that it has gone on back so many years is path 

17 breaking. It's so important and I applaud you.

18 I also wanted to echo the importance of 

19 the FDIC's commitment to putting the data out there 

20 so the public can use it. I'm fascinated by your 

21 new tools and the aggregation going back five 

22 years. But in addition, I just wanted to say the 

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1 FDIC's other data sets, I'm on the website every 

2 week. It's a treasure trove. My students are using 

3 it. It's just incredible. I'm not on the other 

4 regulators' websites nearly as often.

5 (Laughter.)

6 CHAIRMAN McWILLIAMS: Be careful. 

7 There are some of them in the room.

8 (Laughter.)

9 MEMBER MCCOY: I had three 

10 observations. I'll try to keep this brief. On 

11 the reasons why people might be unbanked, I know 

12 in the past we've had discussion of circumstances 

13 in which some people apply for bank accounts are 

14 turned down. And you have one question that may 

15 capture that imperfectly which is is your reason, 

16 ID, credit, or former bank account problems, but 

17 that doesn't perfectly map into have you been 

18 turned down, if you've applied for a bank account 

19 and been turned down. That might be interesting 

20 to pinpoint.

21 The second thing is, especially in New 

22 England, I'm quite mindful that there are many 

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1 geographic areas with really bad cell service and 

2 so the mobile penetration there is highly 

3 problematic. And I also grew up in Kansas and I'm 

4 sure there are places out there that have the same 

5 difficulty. So it would be interesting to have 

6 somebody map cell coverage and mobile penetration.

7 And then the last thing as a banking law 

8 professor, when I look at a map of states, and see 

9 such disparate outcomes, one of the things I wonder 

10 is what is the relationship between a particular 

11 state's banking law environment and the 

12 distribution of services. Is there a model state 

13 law environment to which we should aspire to help 

14 people become more banked?

15 That research is a little tricky to 

16 conduct because you have to tease out the effect 

17 of federal preemption, but I've certainly in other 

18 contexts worked on those types of studies and I 

19 think they can be eye opening. Thank you.

20 MEMBER MCDONALD: I would like to ditto 

21 everyone else's comments as far as the work that 

22 your committee has been doing for a number of years. 

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1 As I look around, I'm probably one of 

2 the most senior members of the committee and so it 

3 has taken me back to our original task and what we 

4 wanted to accomplish. The data we have here is 

5 very good, strong data and I would like to see the 

6 years also added to the credit side and whether or 

7 not we're improving in the area of extending 

8 credit. That was one of the major issues because 

9 when we talked about in the past about payday 

10 lending, etcetera, I think it would be very, very 

11 important to see whether or not we're making a dent 

12 in one of the most critical issues.

13 The second piece that brings me back to 

14 our initial intent was the fact that FDIC has done 

15 a tremendous amount of work in this area all the 

16 way from looking at policy on compliance side, 

17 policy on CRA, as well as the outreach work. I know 

18 a lot of the individuals with FDIC, they are more 

19 involved in outreach today than I've seen ever. 

20 And they continue to be involved in outreach. How 

21 do we measure that? How do we look at that to say 

22 that has been a success and whether or not we need 

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1 to put more resources in those areas. 

2 Someone talked about perhaps looking at 

3 and fine tuning some areas as to how we could make 

4 more progress in the areas that we're looking to 

5 change, and I think if we look back at what has been 

6 done with the FDIC outreach, it has been 

7 tremendous.

8 The third piece I want to talk about is 

9 that at the beginning of this task force we talked 

10 about whether or not we needed to refine or look 

11 at the whole CRA issue and how do we measure it. 

12 Thinking in terms of closing branches, how is that 

13 affecting a lot of the individuals we're talking 

14 about? A lot of the branches are being closed in 

15 low-income neighborhoods, right? And what effect 

16 do we have on that? So what can FDIC do to sort 

17 of reverse that trend? And of course, I have some 

18 suggestions that I won't put on the table today, 

19 but if you begin looking at what you want to 

20 influence, you increase the encouragement by 

21 changing some of the rules in CRA. If, for 

22 example, more credit can be given for these 

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1 branches that are unprofitable, let's face it, it's 

2 getting down to dollars and cents for a lot of these 

3 institutions, including mine, which is an 

4 African-American owned institution, let's begin 

5 looking at what type of credit an institution is 

6 given to keep these branches open. I think there's 

7 a lot of work -- there's some work that could be 

8 done in that area that perhaps changed the 

9 trajectory of having some of these branches either 

10 stay open or closed. That could be almost an 

11 immediate correction that could happen.

12 Again, the work that we're doing is 

13 phenomenal. And a lot of the members have said 

14 already, some of the thoughts that I had on how do 

15 we begin to use this information, and how do we 

16 begin to focus? And what are the objectives going 

17 forward for us? 

18 So we have all of this data now. So if 

19 we could begin putting this data together to match 

20 some objectives as to what it is we want to change 

21 because obviously the work that the FDIC has done 

22 in this area has changed a lot of the numbers. We 

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1 see it in the numbers in your report. We see it 

2 continuously each year. So if we could begin 

3 focusing in on some specific areas.

4 The African-American community and the 

5 Hispanic community suffers the most. What is it 

6 that we can do? What is it that we could point to 

7 this data that we need in order to change that 

8 dynamic? It would be very, very helpful.

9 MEMBER SWAGEL: Great. Thank you. I 

10 have two suggestions and maybe in trying to answer 

11 some of the questions, rather than asking questions 

12 and so many questions have been asked. And then 

13 one comment which you'll see is slightly critical. 

14 So working backwards, I was looking at 

15 Slide 27 first, and I think Pat and I were thinking 

16 about the same thing which is the state one and what 

17 struck me -- if we can flip to 27, was Minnesota 

18 does especially well, and is there something about 

19 that state and other states. And so you might in 

20 your analysis use the state as a level of 

21 observation and then can you identify things in the 

22 state?

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1 The Lutheran Church over the years has 

2 had a focus on financial literacy and education in 

3 their -- according to the men's club, that's been 

4 a big focus. And is there something there? 

5 Anyway, I don't know. I'm just having a little bit 

6 of a Minnesota --

7 (Laughter.)

8 -- but obviously Minnesota has a strong 

9 economy and high incomes, high education levels, 

10 but some of the comments, after controlling for all 

11 of that, what else is left over? So I wonder if 

12 looking at the state level might help you. 

13 And I think you probably identify what 

14 others have identified, Michael identified and 

15 Wade Henderson identified, as rural 

16 African-Americans, even after you control for all 

17 these things are still being left out. It might 

18 just help you focus -- sharpen that point.

19 And then on Slide 13, it's sort of the 

20 same thing, just a different way of cutting it is 

21 the idea was that -- it was interesting that some 

22 people -- I'm sorry, you might look at people who 

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1 have never banked throughout their lifetime. 

2 People cycle in and out of the banking system, 

3 there's probably some people who just are never 

4 banked. If everyone is banked, imagine everyone 

5 is banked, and there's some people whose incomes 

6 are just very volatile -- everyone here is pay 

7 grade, right? I mean FDIC and the banks are not 

8 going to solve the problem of inequities in our 

9 society and income volatility. But if you could 

10 way okay, even after taking this into account, 

11 there are some people who never get into the banking 

12 system. And as Michael and Wade and others have 

13 said, they have particular profiles. Well, that 

14 would be really interesting and then you can focus 

15 on that. 

16 So anyway, again, you obviously have 

17 the tools, you have the data. It's just another 

18 way of looking at it. And obviously, I agree with 

19 them. I bet you're going to end up with the 

20 profiles that the two of them suggested. That will 

21 suggest policy measures, et cetera.

22 So a very slight critical comment. On 

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1 page 6, it just struck me the word "underbanked" 

2 at the top, I know what you mean, but there's a sense 

3 in which these are people who are using 

4 alternatives to banks. It's not exactly that 

5 they're underbanked. They're using alternatives 

6 to banks. So it's just a -- I don't want to get 

7 hung up on the wording, but the words might be not 

8 exactly what you mean. 

9 And of course, the challenge to banks, 

10 their customers are going to other things and why 

11 are they doing that? Why are they letting them 

12 escape? That's just a comment. 

13 MS. CHU: Thank you. 

14 MEMBER WEICHER: I agree with the 14 

15 previous speakers.

16 (Laughter.)

17 John isn't here. On the quality of the 

18 research and I think it's extremely interesting. 

19 And I particularly have been impressed with the 

20 decline in the number of unbanked -- the proportion 

21 of unbanked households survey to survey. It's 

22 worth remembering that this is going on during the 

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1 weakest economic recovery we've had since the 

2 1930s, and yet banks have been reaching out to 

3 people who certainly in the earlier years were 

4 probably having a harder time using credit, having 

5 enough in a way of a record to be able to use credit. 

6 But it's come down very sharply. And I think 

7 that's quite impressive.

8 And I've also been looking at the people 

9 who say they don't trust banks, and I think at least 

10 in the slides the decline in the unbanked rate tends 

11 to be overlooked as you look at other questions or 

12 answers such as the unbanked households which are 

13 not at all likely to open an account in the next 

14 12 months, that's going up a bit as the proportion 

15 of the smaller number of households who are 

16 unbanked to begin with. And one has to do a couple 

17 of multiplications in your head or with your 

18 calculator to be sure you understand what's been 

19 happening in the aggregate.

20 Related to this is the question about 

21 the primary reason for not being unbanked, and I'm 

22 looking particularly at not trusting banks. And 

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1 12 percent who are unbanked primarily because they 

2 don't trust a bank, that's 12 percent of the 6.5 

3 percent who are unbanked which is less than 1 

4 percent of the total population of the United 

5 States, again, coming after an extremely weak 

6 economic period that we would not like to go through 

7 again during our lifetimes.

8 And indeed, also taking the proportion 

9 who say it is a reason that they don't trust the 

10 bank, that gives you about a little over one percent 

11 of the households who are unbanked because to some 

12 extent they don't trust a bank. And the total who 

13 don't trust a bank and who are unbanked works out 

14 to less than 2 percent of the population. It would 

15 be very interesting to know what that 2 percent 

16 looks like. Who are the people who don't trust the 

17 bank and are not banked and that ties into questions 

18 that a number of other people have been raising. 

19 The thought which occurred to me is that 

20 foreign born households might be especially likely 

21 from some areas not to be -- not to trust banks 

22 because it seems to me there are countries in this 

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1 world where it is prudent not to trust the banks, 

2 including the Central Bank, and the limited 

3 experience I have with immigrants I grew up with 

4 and who I've been related to, that attitude stuck 

5 through the first couple of decades of being here 

6 in the United States. And I didn't see a lot of 

7 evidence that foreign born showed up in a 

8 significant way in the slides. I haven't looked 

9 at the appendix tables, of course, and I'm going 

10 to look at them. 

11 And then let me go back to where I 

12 started, and I think this is an extremely 

13 impressive piece of work and extremely interesting 

14 results.

15 MEMBER ANNIBALE: I have one point on 

16 that point. I'm on an advisory for the Government 

17 of Mexico on financial inclusion education. When 

18 we looked at the survey of Mexicans in America on 

19 the immigrant particular group, those surveyed at 

20 the consulates, we're finding 70 to 80 percent 

21 never had a bank account in Mexico. So as the 

22 largest group of immigrants we're probably 

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1 speaking about, and we have programs with the 

2 Mexican Government here to try to get people to show 

3 that they could be opening an bank account and be 

4 documented. But if nearly 80 percent of the 

5 population of the largest immigrant community 

6 today are coming from a country without a banking 

7 history themselves, they suddenly come into the 

8 most complicated, as they would perceive it, 

9 financial center. And they have nothing to fall 

10 back on. And of course, language is a huge 

11 barrier, too. So amongst that group, I think we 

12 really have to go back to what you were saying, 

13 John. Think about there's perception and there's 

14 also experience. And the largest groups arriving 

15 today in the U.S. in that sense don't really have 

16 any bank experience, let alone a bad one.

17 MEMBER BOSTON: Also John brought 

18 something to my mind. Again, I'm going back to the 

19 issue of no mainstream credit, especially for 

20 people of color at the higher income levels. And 

21 maybe, I don't know if we asked this question, are 

22 they dealing with the aftermath of maybe losing 

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1 their home during the Great Recession on the 

2 mortgage crisis? Because many households have not 

3 come back from that and for many reasons, they are 

4 not engaged in trying to get a mortgage, maybe 

5 getting a subprime car loan if they can get that. 

6 And some just don't know if that was part of that 

7 issue, but that might help again to begin a look 

8 a little deeper into that, because especially among 

9 African-Americans home ownership is important and 

10 if they're not being represented here, there might 

11 be an underlying reason why we may want to find out. 

12 MR. MILLER: So Chairman McWilliams, 

13 we're about 20 minutes over the time for the first 

14 panel. We've got another hour devoted to this. 

15 We're scheduled to take a break and come back if 

16 that's all right with you.

17 CHAIRMAN McWILLIAMS: Sure. Let's 

18 take a break, and then let's continue. This has 

19 been a fascinating discussion, and I truly 

20 appreciate everybody expressing their views around 

21 the table, and I have some views of my own that I 

22 would like to share myself.

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1 MR. MILLER: 10:35, why don't we say? 

2 Thank you.

3 (Whereupon, the above-entitled matter 

4 went off the record at 10:23 a.m. and resumed at 

5 10:45 a.m.)

6 CHAIRMAN MCWILLIAMS: I just told the 

7 staff to prepare a Thanksgiving dinner, because at 

8 the rate at which we're going, we'll have to discuss 

9 until Thanksgiving.

10 (Laughter.)

11 Jonathan, please proceed.

12 MR. MILLER: Alright. So, I think 

13 that the same panelists, but now we're going to talk 

14 about the implications as we see them. And again, 

15 I think we'll have a pretty good discussion. So, 

16 Karyen?

17 MS. CHU: Thank you. Sorry, let me --

18 So, the 2017 survey results suggest a number of 

19 opportunities to continue to increase the use of 

20 mainstream banking services by unbanked and 

21 underbanked households, to sustain the 

22 improvements that we've seen so far, and to further 

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1 reduce the unbanked and underbanked rates, going 

2 forward.

3 There are five implications that we 

4 report -- that we describe in our report. The 

5 first focuses on expanding access to mainstream, 

6 small dollar credit for banked households. The 

7 second is about helping households build credit 

8 histories. The third focuses on using mobile 

9 banking to deepen banking relationships with 

10 underbanked households. The fourth implication 

11 relates to the continued importance of bank 

12 branches for banked households, and opportunities 

13 to reach unbanked customers through bank branches. 

14 And the fifth opportunity has to do with 

15 differential trends and continued high unbanked 

16 rates for some population segments.

17 So, the first survey implication is 

18 that new underwriting technologies could help 

19 expand access to small dollar credit -- mainstream 

20 small dollar credit -- for banked customers, 

21 including consumers with little or no credit 

22 history. So, we see from the results that 13 

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1 percent of households have unmet demand for 

2 mainstream small dollar credit.

3 As a reminder, these are households 

4 that in the past 12 months applied for a credit 

5 card, or a personal loan, or a line of credit from 

6 a bank, and were either denied or didn't get the 

7 full amount that they applied for. Or they felt 

8 discouraged about applying and didn't apply. Or 

9 they used a credit AFS in the last 12 months.

10 So, among these households that have 

11 unmet demand for mainstream small dollar credit, 

12 almost nine out of ten are banked. And most have 

13 an active banking relationship. As you can see, 

14 87 percent of them directly deposit their incomes 

15 into their bank accounts. Ninety-five percent of 

16 them directly pay bills from their bank accounts, 

17 using methods such as electronic bill pay, their 

18 bank debit card, or personal checks.

19 Yet, in spite of their active banking 

20 relationship, only one third of these banked 

21 households actually applied for a credit card, 

22 personal loan, or a line of credit from a bank.

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1 So, for banked households, these banked 

2 households with unmet demand for mainstream small 

3 dollar credit, account balances and transactions 

4 may provide information for underwriting small 

5 dollar loans.

6 We see that, as we've seen, almost all 

7 of them pay their bills and receive income using 

8 their bank accounts. And in fact, almost all of 

9 them have been banked for 12 months or longer, which 

10 suggests that, for at least some of these 

11 households, there may be enough transactions to 

12 provide information that would be useful for 

13 underwriting small dollar loans.

14 In addition, six out of ten of these 

15 banked households with unmet demand for small 

16 dollar credit, for mainstream small dollar credit, 

17 are current on their bills in the past 12 months. 

18 And while this is obviously an incomplete measure 

19 of credit worthiness, it nevertheless provides 

20 some insight into the financial conditions of these 

21 households.

22 Moving on to our second implication, 

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1 households with little or no credit history may not 

2 seek credit until a need arises. Helping these 

3 households build a credit history may particularly 

4 benefit Black households, Hispanic households, and 

5 households headed by a working age individual with 

6 a disability.

7 Our survey results show that one in five 

8 households likely have little or no mainstream 

9 credit, and therefore, consequently, little or no 

10 credit history. About three quarters of these 

11 households are banked, and they may not be aware 

12 of the importance of credit, and may not seek credit 

13 until a need arises.

14 In the previous panel, we showed that 

15 some population segments are significantly less 

16 likely to have mainstream credit, and consequently 

17 less likely to have a credit history. And we also 

18 showed that, even after accounting for household 

19 income, you'll recall, Black and Hispanic 

20 households remain less likely to have mainstream 

21 credit. This is also true for households headed 

22 by a working age individual with a disability.

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1 Helping banked households without a 

2 credit history build a credit history may 

3 particularly benefit these population segments 

4 which continue to have high unbanked and 

5 underbanked rates.

6 Our third implication focuses on mobile 

7 banking. Specifically, mobile banking holds real 

8 promise for deepening the connection between 

9 underbanked households and their banks, while 

10 increasing the safety and convenience of bill 

11 payments.

12 Forty-one percent of underbanked 

13 households pay some of their bills every month, or 

14 in a typical month, with cash or nonbanked money 

15 orders. Now, these same underbanked households 

16 have a high level of engagement with their banks 

17 and their bank accounts. As you see, 87 percent 

18 of them pay bills using their bank account in a 

19 typical month, and 82 percent directly deposit 

20 their income into their bank accounts.

21 That suggests that these underbanked 

22 households may be receptive to conducting a greater 

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1 share of their basic financial transactions within 

2 the banking system.

3 Banks could encourage and facilitate 

4 the use of mobile bill pay and mobile 

5 person-to-person payments. For example, as eight 

6 in ten of these households have access to a 

7 smartphone, in fact, more than four in ten of these 

8 households already use mobile banking to access 

9 their accounts, but only a quarter use mobile bill 

10 pay, and even fewer use mobile person-to-person 

11 payments.

12 Using mobile payments instead of cash 

13 and nonbanked money orders obviously increases 

14 convenience and safety, and potentially deepens 

15 the connection between the households and their 

16 bank.

17 It is possible that these households 

18 are using cash and nonbanked money orders because 

19 of payee requirements. In that case, efforts to 

20 encourage and make it easier for a range of payees, 

21 such as individual landlords to accept mobile 

22 payments could certainly help. And also, efforts 

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1 to increase customer and community awareness about 

2 innovations that have increased the speed and 

3 safety of mobile payments may help these households 

4 reduce their use of cash and nonbanked money orders 

5 to pay bills each month.

6 Our fourth implication, physical 

7 access to branches remains important for banked 

8 households. Opportunities may also exist for 

9 branch staff to inform unbanked households about 

10 products and services that can help meet their 

11 financial needs.

12 So, let's focus first on banked 

13 households. Earlier we saw that 74 percent, that 

14 first graph, of banked households used a bank 

15 teller to access their account in the past 12 

16 months. And we see from the bottom bar that more 

17 than one third of banked households visited a bank 

18 branch ten or more times. We also saw results that 

19 show that bank teller and bank branch use was 

20 prevalent, even for households that primarily use 

21 mobile banking to access their accounts.

22 In addition, there are some population 

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1 segments, as mentioned in the previous 

2 presentation, that disproportionately use bank 

3 tellers as their primary, and often only, method 

4 of bank account access. For example, one in five 

5 -- I'm sorry, 38 percent -- of banked households 

6 in rural areas primarily use bank tellers to access 

7 their accounts. One in five of them use only bank 

8 tellers to access their accounts. And almost half 

9 of rural banked households visited a bank branch 

10 ten or more times in the past twelve months.

11 So, bank branches clearly remain an 

12 important access point for many different segments 

13 of banked households. Our survey results also 

14 show that some unbanked households visited bank 

15 branches in the past 12 months. Specifically, 15 

16 percent of unbanked households visited a bank 

17 branch at least once in the past 12 months, and five 

18 percent visited ten or more times.

19 Unbanked households that visited a 

20 branch are much more likely to have been previously 

21 banked. Seventy percent of them were previously 

22 banked, and two in five of them say that they are 

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1 very likely or somewhat likely to open a bank 

2 account in the next 12 months.

3 These findings suggest that the 

4 unbanked households that visit branches find value 

5 in the banking system, and opportunities may exist 

6 for branch staff to inform these unbanked 

7 households about products and services that may 

8 meet their needs, such as low-cost checking 

9 accounts or safe accounts.

10 And finally, our fifth implication, 

11 unbanked rates for some population segments have 

12 declined, as you saw, as economic conditions 

13 improved, but they remain high.

14 Unbanked rates for other population 

15 segments stayed fairly constant through the 

16 economic expansion. Adopting targeted strategies

17 may help sustain those increases in bank account 

18 ownership in future economic downturns and 

19 increase access for more population segments.

20 So, earlier, we saw that unbanked rates 

21 for Black and Hispanic households declined quite 

22 a bit between the high in 2011 and 2017. Improved 

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1 economic conditions, particularly improvements in 

2 household income, in education and employment, 

3 explain most of the improvement in the unbanked 

4 rate for Black households between 2013 and 2017. 

5 These improvements also play a role in the 

6 declining unbanked rate for Hispanic households.

7 To reduce the likelihood that future 

8 economic downturns reverse some or all of these 

9 declines in unbanked rates for these populations, 

10 industry participants may consider ways to cushion 

11 the impact of adverse financial shocks on a 

12 household's ability or desire to maintain a bank 

13 account, such as, potentially, forbearance of 

14 fees, you know, having accounts that allow 

15 avoidance of fees through activities other than, 

16 say, direct deposit of income, for example.

17 Unbanked rates for some other 

18 population segments have stayed fairly constant 

19 through the economic expansion. For example, 

20 households headed by a working age individual with 

21 a disability, you see here that the unbanked rates 

22 have barely budged through the economic expansion. 

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1 And of note also is that, even with the 

2 declines -- going back to the Black, Hispanic --

3 even with declines in the unbanked rates, bank 

4 account ownership among Black and Hispanic 

5 households remain quite high. Also, an 

6 overwhelming majority of households -- of unbanked 

7 households, in all three groups, Black, Hispanic, 

8 headed by a working age individual with a 

9 disability, say that they are not very likely or 

10 not at all likely to open up bank accounts in the 

11 next twelve months.

12 More than half of Black households, 

13 unbanked households, and almost two thirds of 

14 Hispanic households, and more than two thirds of 

15 households headed by a working age individual with 

16 a disability say this.

17 MEMBER LEVERE: Do you have data on 

18 their use of mobile, for the disability population? 

19 MS. CHU: We do.

20 MEMBER LEVERE: I just wondered how 

21 that tracks to the numbers to show --

22 MS. CHU: So, these are the unbanked. 

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1 So, we have use on mobile banking.

2 MEMBER LEVERE: Next slide. No, the 

3 next slide that you showed.

4 MS. CHU: So, this is just the 

5 unbanked.

6 MEMBER LEVERE: Okay.

7 MS. CHU: So, these findings suggest a 

8 continued need for targeted strategies that 

9 address barriers to bank account ownership for each 

10 of these different populations with high unbanked 

11 rates. Thank you.

12 DIRECTOR GRUENBERG: Okay.

13 MS. CHU: Oh, and I wanted to comment 

14 --

15 (Laughter.)

16 DIRECTOR GRUENBERG: So, let me just --

17 one housekeeping matter before we get into the 

18 discussion. At the end of this panel, we're going 

19 to take a photograph of the group before you run 

20 off to lunch.

21 MS. CHU: Right. So, questions? 

22 Ted?

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1 MEMBER BECK: A couple of things. 

2 Anywhere in your data for the people with unmet 

3 credit needs, do you have statistics -- have they 

4 at any point been turned down for credit?

5 MS. LLORO: Yeah, so that's actually 

6 one of the ways they get put into that group, is 

7 if they applied for and were denied credit.

8 MEMBER BECK: And what component of the 

9 group has been turned down?

10 MS. LLORO: That I don't remember off 

11 the top of my head. It should be in the --

12 MS. CHU: Of which group? I'm sorry. 

13 MEMBER BECK: With the unmet banking 

14 need.

15 MS. CHU: Oh, the unmet small dollar 

16 demand?

17 MEMBER BECK: Yeah.

18 MS. CHU: We haven't -- We just don't 

19 have it right on us.

20 MR. WEINSTEIN: Overall, 2.8 percent 

21 of households were denied a credit card or a bank 

22 personal loan.

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1 MEMBER BECK: Of the 13 or 

2 approximately --

3 MR. WEINSTEIN: This is of the entire 

4 population. So, some of the 13 percent with unmet 

5 demand is contributed from the 2.8 percent.

6 MEMBER BECK: Okay, so there is a -- you 

7 know, once you're turned down, going back is a 

8 little less attractive.

9 A second question, if I could. I'm 

10 always amazed how my banks are perfectly willing 

11 to tell me what my credit score is, and I'm just 

12 wondering if there's -- and here it comes -- an 

13 educational opportunity here, so that if people are 

14 paying their bills and the credit score is such an 

15 important part of people's lives these days, is 

16 there an opportunity to say, for those people with 

17 unmet credit needs, let them know what their credit 

18 score is, and if it's poor, what are five things 

19 you can do to improve it? Like paying your 

20 bills on time and things like that, just as a, if 

21 you ever need this, here's an opportunity for my 

22 bank to show me how I will be eligible for credit 

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1 or better priced credit, because that data is --

2 if you don't know what your credit score is, you're 

3 not -- you know, applying for a credit card is a 

4 little intimidating. So, is there a way to link 

5 the two?

6 MS. CHU: So, we don't -- you know, we 

7 don't actually ask people their credit scores in 

8 the --

9 MEMBER BECK: Or if they know their 

10 credit score?

11 MS. CHU: We have not asked if they know 

12 their credit score. Certainly, a question worth 

13 considering.

14 MEMBER BECK: Okay.

15 MEMBER BOSTON: I wanted to follow up 

16 on some of the things that Ted was saying. I think 

17 particularly about the fact that some of the things 

18 we're talking about, even though we know unbanked 

19 and many Americans are paying their bills on time 

20 and paying their rent on time, these things aren't 

21 even taken into your credit score. I mean, it's 

22 been an issue for a long time, of debate, again, 

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1 people being put into subprime category when they 

2 really are not subprime.

3 And if some way we can tie in -- I always 

4 thought the benefit of having a safe account that 

5 can also demonstrate that you are paying your bills 

6 on time, if that could be reported to some type of 

7 credit bureau, that that could help many Americans, 

8 because it would help them to begin to be recognized 

9 in our credit scoring system -- which I think is 

10 flawed, but that's a different conversation.

11 But, I just wanted to bring that out. 

12 It might be something that the FDIC can begin a 

13 conversation about in some way.

14 PARTICIPANT: So just -- Oh, I'm sorry. 

15 MEMBER BOSTON: Yeah. The other thing 

16 I was concerned about, or interested in -- you 

17 mentioned that 50 percent of the people you talked 

18 to had no intention of having a bank account. Did 

19 I say that right?

20 MS. CHU: That was greater than 50 

21 percent of Black unbanked households.

22 MEMBER BOSTON: Right. And to go back 

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1 to a conversation that was happening during the 

2 break, have we looked at the impact of Walmart, and 

3 PayPal, and Amazon, and other people who are 

4 providing these type of services so people can pay 

5 their bills without getting into the banking 

6 system, and yet they feel, well, why do I need a 

7 bank? I'm just throwing this out as a question, 

8 as something maybe we'll come back to, because 

9 it's, you know, they're doing something, primarily 

10 to pay their bills, if nothing else, or to transact 

11 different transactions. And it seems like they're 

12 not in our system.

13 And then the last thing I want to say, 

14 I think we have a great website. I was interested 

15 in learning later on how you're marketing it, and 

16 I can find out later.

17 MEMBER HENDERSON: Thank you.

18 MR. MILLER: So, I just want to make a 

19 point, Kevin, on the issue of paying bills on time 

20 and rent on time. So, there is increasing through 

21 the use of technology, increasing interest, and in 

22 fact some products that are now using what they call 

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1 cash flow underwriting. And I think that's why in 

2 our data we asked, you know, have you been paying 

3 bills, getting direct deposits, paying bills from 

4 your account? Have you had an account for more 

5 than 12 months?

6 Because they can do underwriting and 

7 score you in that sense, based on the activity in 

8 your account. So, I think that is starting to get 

9 incorporated more, and I think commercial 

10 companies are starting to use that.

11 MEMBER BOSTON: I think my -- I have two 

12 points. One, I think -- I'm interested in what the 

13 banks are doing. Are we going to help people build 

14 their credit the same way if we have this 

15 opportunity and this information at hand?

16 And then the other thing I think we 

17 should recognize that -- I've been following the 

18 online lending industry a lot. And as far as I can 

19 see, they are just as discriminatory online, using 

20 the same type of credit scoring models, for the most 

21 part, that keep many people from getting credit, 

22 as if you were going to the traditional route.

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1 So, there's only a certain number of 

2 Americans who really have access to online credit. 

3 And that's not your issue, but I think it's 

4 something that, as we move down this, looking at 

5 the impact of online lending and the opportunities 

6 that it presents, we should also recognize that 

7 they're not regulated for the most part, and they 

8 can discriminate against who they want. And 

9 that's what they're doing, so -- I didn't mean to 

10 get off point there.

11 MS. CHU: Thank you. Wade and then 

12 Andrea.

13 MEMBER HENDERSON: Thank you. Again, 

14 Karyen, your team has done a great job. I 

15 appreciate the way you've broken down 

16 consideration of the implications of the data, so 

17 thank you for that.

18 There's an overarching, though, issue, 

19 that for me is relevant to how the banking industry 

20 and policy makers address the data that you've 

21 presented, with the continuing racial disparity, 

22 and a disparity based on poverty and class --

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1 there's a class disparity, education or lack 

2 thereof, income contributes to a decision whether 

3 to participate in the industry.

4 But the overarching question for me is 

5 why should Americans care? Why should the average 

6 American concern him or herself with the data of 

7 the unbanked? What is the issue? Why should we 

8 be concerned about states in the South having the 

9 highest percentage of the unbanked? And for the 

10 people involved, what are the implications of this? 

11 The reason I frame it that way is 

12 because I tend to think that policy makers in this 

13 area are largely ignorant of the implications of 

14 this data, long-term, to the health of the economy, 

15 the national interests, you know, the national 

16 security interests of the country. There are ways 

17 of framing this data that heighten the urgency of 

18 encouraging people to participate in the banking 

19 system.

20 The data is not self-evident -- it is 

21 not self-evident that one reaches conclusions 

22 based on the data we've presented. So, for me, the 

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1 question is, how do you develop a narrative which 

2 helps the policy makers at the federal and state 

3 level, and helps the individuals who perhaps are 

4 outside of the existing banking system reconsider 

5 their position and encourage them to participate? 

6 What is the incentive for doing so? Now, I tend 

7 to think that, given the changing demographics of 

8 the workforce of the future, where it is likely that 

9 more African American and Latinos will be taken 

10 into the workforce of the future, I'm looking at 

11 data around education, where that community is 

12 likely to be going forward. I'm looking at data 

13 about wealth acquisition.

14 And then, I'm looking at this data, and 

15 I'm concluding that we are growing a population 

16 that is less well-suited for the jobs of tomorrow 

17 and are outside of the existing mainstream of the 

18 economic system, and that that is a growing problem 

19 for the country as a whole.

20 But I need to articulate a rationale 

21 that would encourage policy makers to think of it. 

22 And what would you do? What do you see as the 

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1 implications of this data for those questions, 

2 which may go beyond your role as an economist 

3 specifically? But looking at the broader 

4 implications of this issue, politically and for the 

5 country as a whole, that's what I was really trying 

6 to get to.

7 MR. MILLER: So, that's really the job 

8 of the people on that side of the table.

9 (Laughter.)

10 MEMBER HENDERSON: Come on, don't 

11 throw that to us. I mean, come on, you've got to 

12 give us leave, Jonathan. It's unfair to simply 

13 throw this data out and say, okay guys, what do you 

14 think it means? I'd like some guidance because I 

15 do think -- No, no, I'm serious here. I really 

16 believe that it does have negative implications for 

17 the future of the country as a whole, and that more 

18 policy makers should be concerned about what these 

19 numbers suggest than are.

20 But I don't think we are motivated to 

21 look at the issue with the kind of depth required, 

22 because I don't think people really understand why 

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1 this is an issue to begin with. So, I'd welcome 

2 responses from anyone who can address this.

3 MEMBER BARR: Let me just say a small 

4 thing about that. I think you're exactly right, 

5 and I want to bring us back to Chair McWilliams' 

6 comments at the outset. It has -- being part of 

7 the system has important implications, obviously, 

8 mechanically, for people's ability to get their 

9 work done, but it also does have this, I think 

10 broader implication -- and I completely agree with 

11 your way of characterizing it -- this sense of 

12 belonging to a broader community, that is important 

13 for the country to address.

14 So, we have a mechanical problem, but 

15 we also have a cultural and a spiritual problem that 

16 this is unveiling.

17 PARTICIPANT: And I think Marty wanted 

18 to go, so I'll go after Marty.

19 DIRECTOR GRUENBERG: I was just going 

20 to say -- it's tough to put Karyen on the spot here, 

21 in this manner. In fairness, it's just a little 

22 bit above her paygrade. I would say implicit in 

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1 undertaking the survey by the agency, by the FDIC, 

2 was a belief that this was central to our mission, 

3 that the FDIC is about public confidence in the 

4 financial system, about access to the banking 

5 system, and giving people a sense of security to 

6 participate, on the implicit assumption that 

7 participation has a value in and of itself, that 

8 being part of the mainstream, being part of the 

9 mainstream economy is in the general public 

10 interest, which is our basic underlying mission.

11 So, I think that's implicit in the work. 

12 And I think, if I may say, this survey in some sense 

13 has framed and laid an information base. Somebody 

14 said it helped define an issue and explain its 

15 existence in a way that was not appreciated before, 

16 and in many ways, that's the starting point. 

17 You've got to know an issue exists and have some 

18 credible handle on the scope before you can even 

19 think about addressing it.

20 So, I think part of our job here, and 

21 the work that these folks have done so well has been 

22 to, in a sense, identify an issue, frame its scope 

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1 in a credible way. And it is a substantial issue 

2 with, I think, real consequences for the people who 

3 lack access, and consequences for the country, in 

4 frames of public policy debate.

5 And you, know, we can have a pretty 

6 robust discussion around this table about how best 

7 to address that, but I think the value brought here 

8 is these folks have laid the numbers on the line 

9 --

10 MEMBER HENDERSON: Oh, I love the data. 

11 DIRECTOR GRUENBERG: -- and told us the 

12 dimensions of the issue, and then we can talk about 

13 how to address it. But these folks have done their 

14 job, I think, pretty well.

15 MEMBER MCDONALD: I would like to add 

16 to the conversation, if you may, the data can be 

17 and should be a developing tool for policy. As 

18 Wade mentioned, even on the banks that are -- bank 

19 branches that are closing down in neighborhoods, 

20 in looking at the map, we are in some of these 

21 communities where the map is showing the unbanked 

22 numbers et cetera. And if we were to just take that 

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1 data and break it down and see what has happened 

2 to those communities economically, I will tell you 

3 what we see because we're there.

4 We see, first of all, when the branches 

5 are being closed, the community continues to 

6 deteriorate. The communities deteriorate on 

7 every economic downturn. So, when the community 

8 continues to deteriorate, the value of 

9 homeownership takes a negative hit. So, which 

10 means individuals who own properties in these 

11 neighborhoods are not getting any appreciation and 

12 equity value.

13 As a matter of fact, they're getting a 

14 depreciation in their equity, which then further 

15 brings down the minority community, as far as their 

16 ability to borrow money and to improve their 

17 lifestyle, whether it's for them, or their kids, 

18 or their grandkids, because individuals who have 

19 purchased a home in these communities -- and your 

20 maps, I think, can point that out, to create the 

21 economic value.

22 We have seen in a lot of these 

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1 neighborhoods, our corporate office is in the 

2 neighborhood that was hit by an economic downturn 

3 and Katrina, and we were fortunate -- and it's not 

4 a good thing, and I'm not proud to say this, but 

5 we were able to get our taxes reduced because the 

6 land value and the property value has declined so 

7 significantly.

8 So, when people are now looking to 

9 acquire homeownership, and there's no incentive, 

10 and there's every indication that the community is 

11 in decline, what happens? Which I think the 

12 information that you have in your survey, if we 

13 began digging down deeper, and began putting it 

14 around the economic items and issues, we're going 

15 to come up with the information that we need for 

16 policy makers to begin reinvesting, to bring those 

17 communities back economically, and for the 

18 financial institutions to either keep their 

19 branches open, or to reopen them to rebuild the 

20 community.

21 So, I think what we have here is a very, 

22 very good start of developing information for 

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1 policy issues to begin to take place.

2 MS. CHU: Thank you, Alden. Andrea's 

3 been trying to --

4 MEMBER LEVERE: I want to just make --

5 go back to your implications and connect it, and 

6 then I'll take a little stab at answering Wade's 

7 minor question.

8 So, I wanted to pull out implication 

9 number three and four, and remind you how your own 

10 research is making a very important case of how the 

11 financial services industry is being transformed 

12 by technology.

13 So, go back to number 3 and 4 of 

14 implications. That's page 3.

15 MS. CHU: Oh, you wanted to go back to 

16 the original --

17 MEMBER LEVERE: Yeah, page 3, just on 

18 the overall --

19 MS. CHU: I see, okay.

20 MEMBER LEVERE: So, one of things that 

21 I remember being incredibly struck by your mobile 

22 banking survey was people identifying all the 

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1 advantages of mobile banking, but then saying, what 

2 did they miss, if you remember this. That they 

3 still wanted contact with an individual or a 

4 person, to help them make some of their financial 

5 decisions. And we talked about that in the context 

6 of the whole emergence of the financial coaching 

7 field and how that integrates.

8 So, when we look at number 4, right, we 

9 think about the bank branches being the main, but 

10 not sole, place where that contact happens. And 

11 I have to say the most surprising data point was 

12 the rural data point, because in many ways it 

13 contradicts some of the other findings we see, that 

14 because of these banking deserts, folks in rural 

15 communities don't have access to the banks that 

16 they used to.

17 So, to me, it's looking at how we 

18 connect. The very important -- I don't know if 

19 there's the next mobile banking survey coming next, 

20 or -- but to me, those two points have very powerful 

21 connections, and understanding the implications 

22 for how we think about bank branches, which is an 

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1 extraordinarily heated conversation today, with 

2 the CRA modernization that we're all in the midst 

3 of. But also how we think about linking mobile 

4 banking services, as we've talked multiple times 

5 around the table is, what can banks do to strengthen 

6 mobile banking and helping people make these 

7 choices.

8 So, just to give you laurels for two 

9 pieces of research you do, that have had, I think, 

10 very powerful insights for the broader field.

11 And that just goes to my point, which 

12 is I think that over the last several years, as the 

13 whole field of financial inclusion, financial 

14 capability, and savings has grown, and brought in 

15 folks from every sector, they increasingly 

16 understand that this issue is often at the heart 

17 of their ability to achieve their own outcomes, 

18 whether it's folks in the healthcare industry 

19 talking about the social determinants of health,

20 whether it's our affordable housing developers who 

21 understand that if they don't deal with the basic 

22 financial insecurity of their residents, they're 

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1 not going to achieve their own goals.

2 And I think the third greatest change 

3 that I'm seeing is employers, at the workplace, 

4 looking at this. And our ability to share your 

5 data with employers -- Next week I'm going to a 

6 meeting of 500 people at Prudential. All they want 

7 to see is some of this data for the communities 

8 they're serving, to think about what are the 

9 implications of this for all the employers whose 

10 employees are coming to them with huge issues, with 

11 income volatility and need for short-term credit. 

12 So, I do think our allies are growing, 

13 but your point about the extraordinary importance 

14 of bringing them into the conversation to help find 

15 solutions, I think is key.

16 MEMBER HENDERSON: Well, I think --

17 Thank you, Andrea. And again, I think the data is 

18 incredibly powerful and very well documented, in 

19 a way that gives us assurance that this is really 

20 something we can rely on in developing our 

21 analyses.

22 I think that -- and perhaps, again, this 

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1 goes beyond what your working group can do, and 

2 perhaps, Jonathan, as you pointed out, it is for 

3 us to develop. But here's a part of the 

4 specificity that I'm looking for.

5 I see many of the states that have been 

6 identified as those with the largest population of 

7 the unbanked at the bottom of the economic rung. 

8 I have to assume that there is some correlation 

9 between the population of the unbanked, the racial 

10 dynamic and class dynamic of that group, and their 

11 overall economic circumstance.

12 I see policies being adopted now that 

13 are making their circumstance worse, not better. 

14 I am deeply concerned about CRA proposals, which 

15 tend to obscure the import of closing bank branches 

16 in some of these communities and what the 

17 implications are.

18 I think Alton has talked about that and 

19 has good examples of how banks that seek to stay 

20 open, to serve communities where teller 

21 interaction is so critical to moving things 

22 forward, are being denied that benefit, in favor 

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1 of less directly related services, and that thus 

2 justify closing bank branches, which might 

3 otherwise stay in place.

4 I'm very concerned about the growth of 

5 payday lending and instances where people are 

6 denied access to short-term credit that some of the 

7 banks could provide if they were more sensitive to 

8 the broader set of dynamics.

9 Pulling all of this together, 

10 aggregating this, in a way that allows those of us 

11 who are nongovernmental organizations to speak to 

12 these issues, to prod banks and others to provide 

13 services requires an articulation of the risks that 

14 are not readily apparent from the data alone.

15 So, perhaps it is for those of us who 

16 are in that field to really reach those 

17 conclusions, but what I'm looking for is a sort of 

18 a narrative that says, look guys, it is not in the 

19 country's interest to allow this population to 

20 remain in its current size, or to allow forces that 

21 are not shaped by policy decisions to affect how 

22 it is reduced, and that if we are really interested 

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1 in affecting the national interest of the country 

2 that we are all committed to serving, then we have 

3 an obligation to engage in intervention, and the 

4 interventions are drawn from some of the data that 

5 you presented.

6 MS. CHU: Pat?

7 MEMBER MCCOY: Thank you. I had a 

8 couple of comments. I seem to recall from the FDIC 

9 separate studies on mobile banking, which talk to 

10 this study, that the FDIC may have looked at the 

11 potential of mobile to entice people who are 

12 unbanked to open a bank account. And that topic 

13 and potential is actually, I don't think at least, 

14 mentioned in this abridged discussion, but that 

15 might be worth flagging.

16 The other thing is, in our discussion 

17 today, we've been noting several institutions that 

18 affect access to the banking system. So, the 

19 credit scoring system obviously is one. But let 

20 me just highlight two others.

21 I think this question that Kelvin 

22 raised about alternative payment systems, the 

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1 newer ones, the FinTechs and such, outside of 

2 traditional banks, is really worth looking at 

3 because bank payment systems, for somebody who 

4 needs to get money to somebody very quickly, 

5 basically an equivalent of wiring it, have been 

6 behind what FinTech, outside of commercial 

7 banking, is doing.

8 And my suspicion is that people use the 

9 alternative services because they work better. 

10 They're faster, they're cheaper. Commercial 

11 banks are slowly getting into this space, but 

12 they've been slow. And so, we have to understand, 

13 if the alternative outside of the banking system 

14 really is more attractive, we have to grapple with 

15 that.

16 The other thing I'd just like to also 

17 underscore is, in the banking deserts, the need for 

18 a physical banking presence, whether we call it a 

19 bank branch -- certainly ATMs are extremely 

20 important, or if there's something that is short 

21 of a formal bank branch that nevertheless allows 

22 people to talk with a bank representative in person 

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1 -- is so important.

2 Our system currently provides 

3 incentives for all of that through CRA, and it's 

4 really, really important to preserve that. Not 

5 all of us live in big cities on the coast. We have 

6 to remember all those other people.

7 MS. CHU: Great. Thank you.

8 MEMBER SWAGEL: I was just going to 

9 talk a little bit about the policy implications. 

10 I thought that some of the implications are on the 

11 value of competition in financial services. And 

12 just picking up where Pat left off, I mean, the 

13 corporation could boost competitive pressure if 

14 all the board members go on TV and Venmo each other 

15 --

16 (Laughter.)

17 -- and say to the banks, hey, look, this 

18 sure works well.

19 (Laughter.)

20 The things we learn from our teenagers. 

21 CHAIRMAN MCWILLIAMS: Marty, how much 

22 can I send you?

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1 (Laughter.)

2 MEMBER SWAGEL: Exactly. So, I gather 

3 that the payment stream is sort of quasi-public, 

4 so we'd all know anyway. TMI.

5 (Laughter.)

6 But it was the value of competition. 

7 And I though, in substance here, the first point 

8 also, expanding access to mainstream small dollar 

9 credit for banked households, that also goes to the 

10 value of competition, that it's a policy 

11 implication, that, you know, having regulated 

12 depository institutions providing small dollar 

13 credit would not just benefit households directly, 

14 but put pressure on payday lenders and the like to 

15 lower their rates. So, it's sort of a double 

16 benefit. Again, it's just the value of the 

17 competition.

18 And then I was thinking about the 

19 implication for banks versus nonbanks. And it's 

20 always seemed to me that we want households in the 

21 banking system, in the regulated depository 

22 systems, you know, for several reasons. But, you 

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1 know, one is a macro reason, that it's better 

2 regulated, that it's -- you know, sort of all the 

3 things we learned about the problems with shadow 

4 banking during the financial crisis.

5 There's better consumer protection, or 

6 there should be. And then some of these other 

7 things, it seems to just go in the other direction, 

8 the competition. If there's more competition 

9 outside of the banking sector, well, that's going 

10 to push people out, in some sense in the, what I 

11 think you're saying is, in the wrong direction.

12 Anyway, it's just another way of, maybe 

13 long-winded way, of coming back to competition, 

14 that allowing more competition in the banking 

15 sector will help bring people back in.

16 I'm sorry, I had one more point. 

17 Sorry. But totally unrelated then, which is on --

18 sparked by some of the other comments here, about 

19 ways to -- policy focuses that could help low income 

20 families. And here I'm thinking of payments, of 

21 moving to real-time payments, which I know the Fed 

22 is working on, seemingly not in real time.

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1 (Laughter.)

2 So, my friend Aaron Klein at Brookings 

3 has written, I think very persuasively, about the 

4 benefit of real-time payments for low income 

5 households. And it seems like that's something 

6 where the FDIC could maybe light a fire, you know, 

7 within the Fed.

8 MEMBER ANNIBALE: I'll go quickly 

9 then, and follow right on that, as I always do. 

10 Clearly -- and I even take out my iPad to show people 

11 here -- in London or elsewhere, real-time payments 

12 -- and in Europe -- are real. And in other 

13 countries I know of, in Brazil, it's immediate.

14 Even if you put a check in one branch 

15 in the Amazon, you'll get credit the next day in 

16 Rio. I mean, this system, in a hyper-inflationary 

17 environment, learned to either crash or become 

18 efficient. And in Europe it didn't go hyper --

19 it's amazing, it got efficient though, even though, 

20 with all it has.

21 The other experience is, it's not 

22 always one or the other, I think. For mobile, in 

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1 many places, we can't always recreate our past. 

2 So, as much as I opened a savings account at a local 

3 community bank, and I went to the drive-in window, 

4 and my neighbor was the teller -- I mean, that 

5 scenario may not be what we can actually cause to 

6 happen always.

7 And I don't know rural well enough. 

8 We're an urban, largely based, bank. I'm an urban 

9 person.

10 (Laughter.)

11 I think of other examples, where, even 

12 if I used Brazil, the postal system. Look, from 

13 a political perspective, we're not going to close 

14 the post offices in rural areas, even if it makes 

15 no sense to deliver an envelope, you know, for the 

16 same stamp as it is across the street.

17 Now, and I'm not even going to go as far 

18 as Wade yet, in saying, yeah, I need a Postal 

19 Savings Bank. But in places like Brazil, the post 

20 office, as a physical presence, is a location where 

21 even banks or credit unions -- in that case, a bank, 

22 or whatever -- has a window. They almost use it 

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1 as an access point. It could be a point of ATMs, 

2 and ATMs that are collectively used.

3 And I know, because some congressman's 

4 staff in Vermont asked me to think about, like, all 

5 their rural -- the fact that branches are leaving 

6 rural Vermont as well. It just economically can't 

7 make it work. But couldn't we have, you know, 

8 again, common platforms, just as we do in SWIFT and 

9 our payment platforms. It's what we build 

10 MasterCard and Visa around, right? They're 

11 collectively owned by the banks.

12 When you have interoperability of 

13 something like ATMs, that could be in other places, 

14 where it's one form -- it may not be the full branch 

15 you're looking for, but again, it's getting access. 

16 The third one, I just wanted to say 

17 quickly, there was -- I think as we look at the 

18 racial issues here and the numbers, we cannot help 

19 but to say we also have to target. And that may 

20 have implications for -- and thoughtful ones -- for 

21 those who are lawyers, who are better than I, on 

22 fair lending and other approaches.

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1 If we look, and we look at the Whites, 

2 who are, you know, 3 percent unbanked, for example, 

3 right? And now, if we even took out those who might 

4 identify having disabilities, or foreign-born, or 

5 other impediments they feel at first entry into 

6 banking, that's probably even lower, right, than 

7 you would say for those who don't have any other 

8 category that we segregate for. It'll be below 

9 three.

10 And if we look at Black and others, and 

11 we look, it's five times the level. We have to have 

12 a concerted, targeted approach to certain 

13 communities, and that may be even geographically 

14 concentrated.

15 So, I think it might have for those on 

16 this side of the table, too, closer to those issues 

17 of fair lending and all the implications, of, well, 

18 we've always worried about the other aspect of 

19 that, of, we really do need to be targeted in how 

20 we try to create access now, because the numbers 

21 have such disparity.

22 So, I think we need to challenge 

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1 ourselves on a policy level too, of how do we do 

2 that.

3 MEMBER BOSTON: Can I just add -- to 

4 your point, one of the things that's alarming me 

5 is some of the new research that suggests -- I think 

6 it might be Andrea breaking down the number -- in 

7 about 20 years, the net worth in the African 

8 American communities, it'll be zero. And this 

9 goes back to why this study is so important to me, 

10 and to your point, to look at the trends.

11 And to go back to Marty's point about 

12 why this work is important to the mainstream 

13 economy. And then I want to tie back to, again, 

14 the importance of wealth building. In our 

15 economy, you need credit to go to college, to buy 

16 a car, so you can get a job, to get a business, to 

17 own a business and own a home, where people build 

18 wealth. If they don't have access to that wealth, 

19 then they will be going to a zero net worth, as a 

20 race, which I find amazing.

21 So, I bring that point up to suggest, 

22 I remember on a number of times, the FDIC has 

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1 thought it was important enough to have certain 

2 issues, that we may embark on some type of public 

3 campaign. I'm just going to throw this out as an 

4 idea. And maybe we might want to have some type 

5 of conversation about where we can tie in this 

6 important research, Money Smart, which I think is 

7 one of the best financial education programs, this 

8 new website inclusion, and maybe even tie in CBA 

9 together.

10 Because, to get back to Wade's point, 

11 there is some marketing that needs to happen. And 

12 I know that, you know, there are some things the 

13 FDIC can do and certain things that we can't do, 

14 but there might be some type of public campaign to 

15 help people at least understand the importance of 

16 what you have done, because this is great work, and 

17 valuable work, that people can then, whether you're 

18 nonprofit, an educator, or just a community person, 

19 or a politician, can use, if they are aware of it. 

20 But if we don't even know that it 

21 exists, then it's hard for us to use this great 

22 research. So, I was just going to share that, that 

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1 maybe we might have a conversation to see how we 

2 can at least put this into some type of public 

3 campaign over a certain period of time, and take 

4 all these resources, because, you know, I know is 

5 there some limited resource when it comes to FDIC 

6 and marketing.

7 But you have so many great services that 

8 I think are connected, and if we can use them 

9 effectively in a national marketing campaign, it 

10 may help.

11 MS. CHU: Or a TV show.

12 (Laughter.)

13 MEMBER BOSTON: You never know.

14 MS. CHU: Jose?

15 MEMBER CISNEROS: Yeah, well, as a 

16 government person that's used some of this data to 

17 roll out programs to try and make a difference in 

18 addressing some of these issues, I still come at 

19 this with a hunger for more information. And I 

20 think all of us do.

21 And I think what I've heard over and 

22 over again in today's conversation, and the many 

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1 times we've had these same conversations, is more, 

2 and more, and more information about what's going 

3 on on the ground. This survey and the newest 

4 update of it is fantastic, in terms of relating the 

5 impact we see on the population.

6 But what I guess I feel like I still have 

7 a hunger for are what are the elements that are 

8 helping produce this. One of the things we've 

9 talked about a lot today is bank branches, 

10 declining number of bank branches, bank branch 

11 deserts, things like that. One of the things I 

12 know the Federal Government has is very, very, very 

13 detailed information about where every single bank 

14 branch in this country sits, every single one. And 

15 you've had it for decades.

16 So, there is no reason why we couldn't 

17 bring together with this information, what has 

18 happened in these, you know, states, better yet in 

19 these communities, even in these neighborhoods 

20 where we're seeing these impacts? What has 

21 happened to the bank branches there in the last five 

22 years, 15 years, and even 50 years? And how has 

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1 that weighed in? That's information that's 

2 actually at our fingertips, so that would be 

3 interesting.

4 But let's talk about some not quite so 

5 easy information. You talked about folks maybe 

6 attempting to have accounts or attempting to get 

7 credit and being denied. I'd love to see what are 

8 the banks offering? What are their practices? 

9 What's going on? What banks are using credit 

10 scores, or which credit score's cut-offs are they 

11 using? What, when it comes to checking accounts, 

12 which banks are declining for any check system 

13 history at all? Which banks are only offering 

14 sizable opening deposit requirements? What IDs 

15 are banks using?

16 I know these are not currently 

17 collected, but I think if we could get a handle 

18 around more of that, we could have a better 

19 understanding of why are the impacts we're seeing 

20 happening. As we go forward, which banks are 

21 offering safe accounts? And trying to factor all 

22 that in I think could make a whole lot of 

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1 difference.

2 If we can bring all those different 

3 pieces of information to the table, as, again, a 

4 practitioner, I think that really helps us because 

5 we've not been shy about trying to tackle both sides 

6 of this equation. In our Bank On programs, we go 

7 out and we educate the public, but we also reach 

8 out to our partner banks, and we say, we need you 

9 to do a better job, we need you to change your 

10 policies, we need you to modify your annual fee, 

11 or whatever the case may be.

12 So, we're not shy about that, and as we 

13 go forward, we're going to start collecting more 

14 and more data from how the safe account experiences 

15 are going. With our children's savings accounts, 

16 we actually worked with, in our case, our great 

17 partner Citibank, but every city's worked with a 

18 lot of different banks to open up these accounts 

19 for thousands of kids across the country. One of 

20 the things we're looking at is how many of those 

21 children's savings accounts are engaged with by 

22 families where the parents don't even have a bank 

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1 account, and what can we do to take that 

2 introduction we've had with a bank branch visit, 

3 and turn it into a bank account for an adult.

4 So, I think we have a lot of still 

5 unanswered hunger out there. And I think some of 

6 it we could actually tackle pretty easily, and 

7 others we might need to do a little work on.

8 MS. CHU: Thank you. Janie?

9 MEMBER BARRERA: So, from a 

10 practitioner's point of view, you know, LiftFund 

11 serves all of these dark, dark blue states, you 

12 know, from New Mexico to South Carolina. And our 

13 experience has been that the funds are just not 

14 there for us to be able to serve these poor 

15 communities in the rural areas. It's easier to 

16 find funds for urban areas.

17 And so, one of the things when we talk 

18 about with bankers is that, in those areas, is that 

19 why aren't we helping -- why can't we go out and 

20 dive deeper into these communities. And they say 

21 it's because the examiners. You know, the 

22 examiners are going to come in, and they're going 

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1 to ding us for making this kind of a transaction. 

2 So, how do we look at those -- you know, let's look 

3 at what the examiners are looking for when they're 

4 going out in our communities, and giving them 

5 credit for doing something.

6 I know, you know, banks have been doing 

7 small dollar loans, but it doesn't make them any 

8 money too. And so, that's another issue. And so, 

9 I know it probably sounds self-serving, but again, 

10 CDFIs can work in these areas because we are not 

11 regulated to a certain point, that we can -- I mean, 

12 we have a terrible business model, right? We lose 

13 our best customers. So, that's our role in the 

14 industry, is to prepare people that are right 

15 underneath the radar screen of the bank, and get 

16 them ready for the bank.

17 So, how do we tell that story again, 

18 marketing, let's go out and tell the world that this 

19 is an issue, and there is a way to be able to, 

20 hopefully, find a solution.

21 PARTICIPANT: Any other --

22 CHAIRMAN MCWILLIAMS: I wanted to add 

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1 something. I thought the discussion on the trust 

2 in banks and banking -- and I really appreciated 

3 John's comments, and comments from Michael and Bob. 

4 The trust in banks comes from people knowing what 

5 banks do, right? And knowing that they can rely 

6 on banks. This is where the FDIC plays an 

7 important role.

8 Some communities -- and I think this was 

9 very effectively pointed out -- some immigrant 

10 communities come from systems where there are cash 

11 economies. You would never put your money in the 

12 bank. So, when they come to the United States, 

13 they don't understand the value of banks. So, I 

14 have a hundred bucks, I put it in a bank, and then 

15 I have to go to the bank to get my hundred bucks, 

16 right? So, to me it looks like work. It doesn't 

17 look like a benefit.

18 So, I don't know if we can come up with 

19 some kind of a solution where people see value in 

20 banking. So, there's one thing that -- Wade, you 

21 mentioned value to the society and the nation as 

22 a whole, but it is also the value to the consumers, 

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1 right? It's a long road from me understanding that 

2 my 300 dollars being blocked for a whole year from 

3 access would actually benefit me in the long run, 

4 right? For a year, all I know is that the bank is 

5 holding my 300 bucks, and I'm borrowing from 

6 myself, which is painful, right?

7 So, there is not really benefits. I 

8 don't know if there is a way for us to take a look 

9 at, do people understand value of banks and 

10 banking, right? So, there is the value to the 

11 nation, but there is also the value to the consumer. 

12 And that has not been perhaps as well articulated 

13 to the working poor, because, as you are looking 

14 at different issues, the last thing you want to do 

15 at midnight is, you know, go to a branch or an ATM 

16 and pull your money.

17 Another thing is a trust in banks. I 

18 wonder if our data can be more granular to see if 

19 minority depository institutions lack or suffer 

20 from the same mistrust in their institutions by 

21 their consumers, right? So, as you point out, 

22 Wade, you know, you want to see -- you tend to 

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1 associate yourself better with a teller that looks 

2 like you, right? Or a person -- And so I wonder 

3 if the MDIs have a role to play here and maybe teach 

4 us a little bit about how we can make sure that 

5 consumers can trust banks again.

6 And then, also wondering if our data can 

7 focus a little bit more on, somebody mentioned, 

8 foreign-born, and also look at the languages spoken 

9 in the household. Because, even if they are not 

10 foreign-born -- I lived in the San Francisco Bay 

11 area for a long time, and even if -- there are 

12 multiple generations that are no longer immigrant, 

13 that stem from an immigrant family two or three 

14 generations later, and they have the same adherence 

15 to the principles of that immigrant family that 

16 first came here.

17 So, I don't know how granular our data 

18 can be in this area, but I think it could help us 

19 understand, is the mistrust in banks driven by the 

20 proximity of their cultural understanding about 

21 banks to -- I know my parents don't have a checking 

22 account, and they don't have credit cards. But 

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1 their banking needs are well served because every 

2 day, I say, do you need any money?

3 (Laughter.)

4 And every day, they tell me, no because 

5 you are barely surviving. There is something to 

6 be said about the immigrant mentality that, no 

7 matter how much you can afford at some point in 

8 time, they cling on to the first perception of, 

9 things could change tomorrow, and you want to have 

10 your money in your pillow, right?

11 So, I think we need to focus a little 

12 bit more there. And the only other thing that I 

13 wanted to add is for our survey. You mentioned, 

14 Wade, I think, that some consumers in rural 

15 communities, and especially in African American 

16 communities, drive 50 miles to get to a branch 

17 because there are no ATMs. The use of ATMs, right? 

18 Can we focus a little bit more there?

19 There are ways to access the banking 

20 channels, right? And it's not just that you go to 

21 a bank, or you go online, somebody has to give you 

22 your cash. And it's either an ATM, or you go to 

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1 a grocery store, or you go to Walmart, and if you 

2 swipe your debit card, if you're underbanked, you 

3 know, you can get 20 bucks, if you have 20 bucks 

4 extra in the account. So, maybe focus a little bit 

5 more on what do ATMs do for the consumers, and then 

6 the proximity of ATMs in the communities that have, 

7 you know, branches that are spaced out. So, thank 

8 you.

9 MEMBER BOSTON: Can I just add -- I 

10 think it's important -- One of the biggest 

11 misconceptions, and this is in my work as an 

12 educator, is that many people believe that just 

13 because you live in a capitalistic society, that 

14 you understand capitalism. And we find this 

15 especially among African Americans, the poor. We 

16 think that, just because they live here, that they 

17 really understand how to build wealth. Even 

18 entrepreneurs may have a business, and never take 

19 time to save or buy a home or invest in the stock 

20 market.

21 So, I'm saying this to say that, using 

22 the study and getting back to your point about how 

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1 we help people build value, is helping millennials, 

2 new people in this country, the poor, the 

3 underbanked really begin to understand that 

4 they're not a victim in this society. They just 

5 don't understand how to live in an economic 

6 society. And that might be a way we can tie in this 

7 work that's so important to their lives, and bring 

8 it to the meeting. So, I just wanted to share that. 

9 CHAIRMAN MCWILLIAMS: Excellent 

10 point, if I can just add, the financial system can 

11 work for them. It doesn't have to work against 

12 them, right? So, I don't know how we can maybe get 

13 to the point of understanding, do people understand 

14 how the financial system can work for them. And 

15 I think you went to the point of saying, do people 

16 know what their credit scores are, right? 

17 Because, if you know where you are lacking, and you 

18 have the tools of knowing how to fix it, maybe you 

19 will fix it, right. So, I whole-heartedly agree 

20 with that.

21 MR. MILLER: Any other comments or 

22 thoughts?

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1 PARTICIPANT: We're back on time.

2 MR. MILLER: Yeah, we are, we're back 

3 on time. So, before we break for lunch, I think 

4 I'd have the --

5 MEMBER HENDERSON: Well, before you do 

6 that, let's give them a round of applause.

7 (Applause.)

8 (Whereupon, the above-entitled matter 

9 went off the record at 11:46 a.m. and resumed at 

10 1:12 p.m.)

11 CHAIRMAN MCWILLIAMS: The afternoon 

12 panel is just about to begin. They don't give me 

13 gavel for this reason, I just like to use it. So 

14 they lock it up in my office and hide the key. But 

15 good luck to this panel, because the last one was 

16 so good.

17 (Laughter.)

18 I don't know how you repeat that, but 

19 good luck.

20 MR. MILLER: The moderator of this panel 

21 is Keith Ernst, whom the members of the committee 

22 know well. He's the Associate Director for Consumer 

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1 Research and Examination Analytics. Keith?

2 MR. ERNST: Great, thank you Madam 

3 Chairman, Director Greenberg, members of the 

4 committee. If you recall, we've dedicated some time 

5 in past agendas to exploring the economic potential 

6 of mobile financial services. These discussions 

7 have been grounded in our survey research, some of 

8 which we were reminded of this morning, but also 

9 in qualitative research through which we engage 

10 consumers in a series of in-depth conversations. 

11 As Pat reminded us this morning, that 

12 research identified three dimensions in particular 

13 along which consumers saw mobile banking as 

14 particularly well-positioned to enhance their 

15 banking experiences relative to what they had come 

16 to expect from traditional banking channels. Those 

17 dimensions were control, convenience and 

18 affordability.

19 For consumers, control meant that they 

20 felt that they themselves were in charge of their 

21 finances as opposed to their financial 

22 institution. Convenience meant that consumers felt 

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1 like they were able to take advantage of 

2 opportunities to save time or effort. And when 

3 discussing affordability, consumers specifically 

4 cited the desire to increase the predictability of 

5 fees and to minimize avoidable fees.

6 This committee has observed in the past 

7 that while mobile seemed to deliver on these 

8 benefits, we didn't have specific evidence of the 

9 guidelines as to how mobile technology might be 

10 best applied to obtain economic inclusion and to 

11 promote that goal.

12 At the FDIC we were in the process of 

13 exploring potential ways to do research into this 

14 area, to find out how this technology could be shown 

15 to specifically deliver on its potential when we 

16 came across what we believed and still believe is 

17 quite useful and high-quality research from the 

18 Financial Conduct Authority in the United Kingdom. 

19 In many ways, the research that we'll hear about 

20 on this panel goes to the heart of what we were 

21 looking to learn next. 

22 So in just a minute, I'll hand the floor 

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1 over to our guests Paul Adams and Jeroen Nieboer, 

2 and let them share their findings and expertise 

3 with you. I won't read their complete bios, but I 

4 will observe that Paul is actually the co-founder 

5 of the FCA's Behavioral Economic and Data Science 

6 Unit, and Jeroen is an accomplished behavioral 

7 economist in his own right. We feel very fortunate 

8 indeed to have them with us. 

9 After their presentation, I think 

10 you'll have ample time for discussion and your 

11 questions. As you listen to their presentation, I 

12 would invite you to consider whether you would 

13 expect similar outcomes in the United States. Think 

14 about where you see parallels and where you might 

15 expect there to be potential for differences in 

16 what we talk about. 

17 So with that brief introduction and my 

18 thanks to our panelists for making the journey to 

19 join us today, let me get out the way and let them 

20 get started.

21 MR. ADAMS: Great, thanks, Keith, and 

22 thanks to the committee for having us and for 

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1 listening to this research. It was a very 

2 fascinating presentation this morning. Hopefully 

3 we'll keep up the standard. Let's see.

4 And also, thanks to Keith and the FDIC, 

5 we met a lot of the FDIC staff yesterday. It was 

6 a really fascinating day and thanks to Keith for 

7 setting that up. Really informative, and hopefully 

8 this is the start of a relationship, so that's 

9 really good.

10 The research that we're presenting 

11 today was conducted to inform rule making, policy 

12 making in the checking accounts market in the UK. 

13 I have to say the authority of the Financial Conduct 

14 Authority is still considering that rule making. 

15 It's currently under consultation with the public 

16 and other stakeholders, so we might not be able to 

17 say everything we would like to but we will try our 

18 best to talk to the research and as far as we can 

19 into the policy discussion that follows.

20 To set the scene for today, I'm going 

21 to give you a little bit of context about the U.K. 

22 checking account markets and the various 

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1 developments over the last decade or so, and then 

2 Jay is going to go into the details of the study 

3 and let you get into the nuts and bolts. Hopefully 

4 there will be plenty of time for questions, 

5 although I'm conscious we're running a little bit 

6 over.

7 So, the sort of big picture here is text 

8 messages sent to people when they're approaching 

9 or when they're at their overdraft, and I'd like 

10 to make clear these aren't text messages that banks 

11 offer, they do offer them but the policy that we're 

12 investigating is that these banks should also 

13 enroll their customers to receive these messages. 

14 It's an important distinction of not just offering 

15 them, but actually making the proactive step to opt 

16 people in.

17 If we just sort of set the scene for the 

18 Financial Conduct Authority in the U.K., we 

19 regulate, supervise and enforce in pretty much all 

20 financial services within the U.K. This includes 

21 checking accounts, lending, investments, 

22 insurance, pensions, the list goes on and on. 

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1 Payday loans, very niche small providers as well 

2 as the largest banks. So that accounts for 56,000 

3 individual firms that we regulate. We also have 

4 some prudential regulation that we're responsible 

5 for as well.

6 Now our objective are set by the U.K. 

7 parliament, and they include consumer protection, 

8 competition, and market integrity, so trust in the 

9 markets. 

10 On to the next slide. These are the two 

11 papers that we'll be discussion today. One is a 

12 historical investigation whereas one is what we 

13 call a field trial or a recognized control trial, 

14 which seeks to evaluate the impact of the policy.

15 On to the next slide. This is a little 

16 bit of background on the U.K. overdrafts market and 

17 I'm aware that there's a language barrier here so 

18 I'm going to translate some of the terms that we 

19 use for overdrafts are somewhat different to what 

20 you think about so here we see, I think if you read 

21 from the heading the two types of credit that we're 

22 talking about. 

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1 We call an arranged overdraft what I 

2 think you call a line of credit. After they've gone 

3 through a line of credit, or perhaps they don't even 

4 have a line of credit, a customer will enter an 

5 unarranged overdraft, and that I think is what you 

6 guys term overdraft or overdraft protection.

7 That will be up to a limit, in the U.K. 

8 at least, is up to a limit that's set by the bank 

9 but not told to the customer, so the customer has 

10 no idea how big that unarranged limit will be.

11 Lastly and finally, we have what we call 

12 unpaid item fees. You phrase them as nonsufficient 

13 fund fees, NSF. 

14 So in the U.K., we have estimates here 

15 from 2014 where we see that these overdrafts, 

16 including all these three types of charges, account 

17 for 2.9 billion per year in revenue for the main 

18 banks, covering 90 percent of the market. The U.S. 

19 estimate, I think we have to hold our hands up and 

20 say is actually slightly wrong. I think it should 

21 be 15 billion dollars, and that's a figure that 

22 we've found from the CFPB.

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1 In terms of incidents in the U.K., we 

2 see that in 2016 19 million people used a line of 

3 credit, 13 million people used an overdraft and 

4 seven million people used both of these types of 

5 credit within a given year. There's a large level 

6 of incidents, and it's a large revenue stream for 

7 the banks. 

8 If you think why people would incur 

9 these fees, well, in some instances these borrowing 

10 facilities are bundled with other features of the 

11 product. They may be borrowing on a current 

12 account, could be the best available option to 

13 them, and it provides them with a liquidity buffer. 

14 And consumers want to know that key 

15 expenses are covered despite the fact that they 

16 might not be paying attention to their balance. 

17 Which may be rational or may be, in the language 

18 of behavioral economics, may be irrational.

19 Much of the policy research in the U.K. 

20 has focused on this issue of attention. How do 

21 people pay attention to their accounts and to their 

22 overdraft charges that they face.

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1 Turning to the next slide, just very 

2 quickly a brief overview of some of the academic 

3 research, and this is based on U.S. and U.K. 

4 research, suggest that there's two main things 

5 going on. One is whether people are aware of their 

6 overdraft charges to start with. Do they know how 

7 much they're going to get charged, so that if they 

8 do make a conscious choice to go into their 

9 overdraft, do they know how much it's going to cost 

10 them.

11 And the second is attention to account 

12 balance. Do people know their account balance at 

13 any given time so that they can make that informed 

14 choice that says yes, I want to push through into 

15 that overdraft.

16 So there's academic research and 

17 there's also policy research from other 

18 organizations within the U.K. The Office of Fair 

19 Trading in 2008 found that only seven percent of 

20 people made an active choice to go into their 

21 overdraft, their unarranged overdraft, and they 

22 did it because they knew they wanted to make that 

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1 payment. So that's 93 percent of people who are 

2 making some other choice which might not be 

3 informed by their active decision.

4 The Competition in Markets Authority, 

5 which is a competition regulator within the U.K. 

6 and has just completed a very large investigation 

7 into the banking market, found that half of 

8 overdraft users were unaware that they'd used their 

9 overdraft. They were able to match survey 

10 information with actual transactions from these 

11 individuals and find that half had no clue that they 

12 had incurred an overdraft, which is really 

13 striking.

14 On to the next slide, slide 8, a little 

15 bit of background and history and I'll try and skip 

16 over this in the interest of time, but there has 

17 been some effort to change this. In 2012, banks were 

18 asked that they must provide an annual summary of 

19 charges, including overdraft charges, every year, 

20 very clearly stating how much an individual was 

21 charged.

22 An STA evaluation of that later found 

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1 this had no effect on behavior and overdraft 

2 charges did change as a result of these annual 

3 summaries.

4 In 2013, banks started to offer text 

5 alerts and notifications on your balance levels and 

6 potentially overdraft incidents, but these were on 

7 an opt-in basis and we find that very few people 

8 opt in. Between three and eight percent of people 

9 made the active choice to get these alerts. 

10 Potentially, these are the most savvy customers, 

11 maybe they need helping the least.

12 I mentioned the Competition in Markets 

13 Authority earlier. They ran a three year 

14 investigation into the banking industry, into 

15 checking accounts, looking at competition as well 

16 as consumer protection issues and as a result of 

17 that their final report in 2016 ordered that banks 

18 must auto-enroll their customers into text message 

19 alerts for unarranged overdrafts.

20 That's one of the alerts that we'll be 

21 talking about today, and we try and evaluate what 

22 is the effect of automatically enrolling these 

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1 people into these alerts.

2 That's kind of the setup. We, as a 

3 financial regulator we're interested to see what 

4 is the impact of that policy, that auto-enrollment 

5 policy, and so that's one of the studies we talk 

6 about. But in addition, as I said earlier, we run 

7 a further field experiment, very large scale field 

8 experiment with two banks, to investigate further 

9 different alerts and to see the effect of those 

10 alerts.

11 So that's the scene-setting. Hopefully 

12 I've left enough time for Jay to go through the 

13 details.

14 MR. NIEBOER: Thank you, Paul. I'm going 

15 to be talking about what we actually did, so there's 

16 two sides to this study, the historical data and 

17 then the field experiment. I might not speak to all 

18 the detail that's in this slides but if you want 

19 to ask questions about exactly how things went 

20 procedurally, we can do that afterwards.

21 We looked at two types of alerts. Just 

22 in time alerts, which, and I'll explain them in a 

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1 bit more detail, and second, which give people the 

2 opportunity to act after they've received the 

3 alert, typically by transferring the funds into 

4 their account, and early warning alerts which is 

5 essentially a fancy name for low balance alerts. 

6 We set them at 100's and 50 pounds for the purposes 

7 of our field experiment.

8 We look at the following consumer 

9 populations: People with an arranged and an 

10 unarranged overdraft, so people with a line of 

11 credit and the protection, which is, as you can see, 

12 over half of the U.K. adult population. It's a very 

13 common product. Then people with only the overdraft 

14 protection, a slightly smaller sample and then a 

15 slightly bigger part of the population. People who 

16 do not have any kind of borrowing facility, but 

17 they're not exempt from these unpaid item charges 

18 either. Yes

19 MEMBER MCCOY: Just as a point of 

20 clarification.

21 MR. NIEBOER: Sure.

22 MEMBER MCCOY: I take it the difference 

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1 between the two alerts, the just in time alert 

2 essentially tells the consumer, you are about to 

3 commit an overdraft and we give you an opportunity 

4 to avoid that. And the other one says nothing about 

5 there's a pending risk of overdraft, but just says, 

6 you're very close to your limit.

7 MR. NIEBOER: Correct. Yes. 

8 MEMBER MCCOY: Okay. That's the 

9 difference.

10 MEMBER ANNIBALE: When you say limit, do 

11 you mean the unadvised limit? What do you mean by 

12 limit?

13 MR. NIEBOER: I have a sort of slide with 

14 some visuals that probably explain it a bit better, 

15 but it could be zero, if you don't have a line of 

16 credit then that's your limit, or it could be 

17 whatever line of credit you've agreed to.

18 MEMBER LEVERE: Whatever forces you to 

19 go negative.

20 MR. NIEBOER: Sorry?

21 MEMBER LEVERE: Whatever forces you to 

22 go negative.

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1 MR. NIEBOER: Yes, exactly. This is an 

2 overview of the alerts we tested and I appreciate 

3 there's a lot going on in this slide, but the idea 

4 is that we have two types of evidence. RCT, the 

5 field experiment, and SR, which is the staggered 

6 rollout, which is the historical data that we 

7 analyzed. 

8 The columns in the table show you the 

9 three different customer populations we looked at, 

10 and then the rows show you the type of alerts we 

11 looked at. 

12 We looked at just in time alerts for 

13 arranged overdrafts, AOD, then there is a 

14 combination of unarranged overdrafts and unpaid 

15 item alerts, and then there's unpaid item alerts 

16 only so for that third population that I just spoke 

17 about. We then offered the early warning alert. 

18 So the low balance alerts, we looked at 

19 the same three consumer populations and again, we 

20 looked at early warning alerts and in this case we 

21 only used RCT so we only used field experimental 

22 evidence, and you'll actually see the levels, the 

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1 low balance levels for each RCT so you can see for 

2 each population we set at 100 or 50 or both because 

3 we did that in one case as well.

4 Perhaps a bit more intuitive is a 

5 graphical illustration, so it's again for the three 

6 populations and then you can see if you're that 

7 consumer with an arranged overdraft line of credit 

8 and the overdraft protection, you could be 

9 receiving a lot of alerts. 

10 So, and we tested all of these, there's 

11 the arranged overdraft early warning, then the just 

12 in time alert, which just kicks in when your account 

13 goes below zero, and then there's an early warning 

14 for unarranged overdraft and unpaid items, and then 

15 there's the unpaid overdraft warning and then 

16 separately the unpaid item.

17 So what that actually means in terms of 

18 what happens when you receive these alerts is this. 

19 The arranged overdraft just in time alert, as I 

20 said, you get it when your balance drops below zero. 

21 The unarranged overdraft just in time alerts, that 

22 actually has something called a grace period built 

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1 in, so the idea is your balance is in unarranged 

2 overdraft, your bank knows that at the start of the 

3 day and they send you a text message.

4 Then you typically have until two or 

5 three in the afternoon, and that cutoff is actually 

6 in the text message, to transfer funds and to avoid 

7 being charged for an unarranged overdraft. And all 

8 of that is explained in the message itself, so you 

9 just know okay, if I have the money, I can transfer 

10 it and I won't get charged.

11 Then for the unpaid item just in time 

12 alert, it's something very similar where the bank 

13 knows that money is going to come out of the account 

14 at some point during the day but you don't have it. 

15 So they're giving you, and that's why sometimes 

16 it's also called a retry alert. They're basically 

17 giving you, again, until two or three in the 

18 afternoon to transfer the funds so the transaction 

19 can go through and you will avoid the fee. 

20 And then finally, the early warning 

21 alerts, all of them, they're sent in real time as 

22 your balance drops below the warning level. And 

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1 there doesn't tend to be a huge lag in the U.K. 

2 between the balance that you observe and the 

3 balance that your bank knows about. So that real 

4 time is actually quite important.

5 So just to quickly cover the natural 

6 experiment, what we call a staggered roll out, 

7 these were two banks who in advance of the CMA's 

8 policy on these two alerts, the one that Paul 

9 alluded to earlier, had actually automatically 

10 enrolled their consumers into these alerts. This 

11 is what it looks like. 

12 So on the next slide you see for Bank 

13 A that for the sample that we looked at, 26 percent 

14 of customers were automatically enrolled into 

15 these unpaid item alerts over a 12-month period, 

16 and for Bank B, it was a larger proportion. It was 

17 49 percent of customers. And they were both 

18 enrolled into unpaid items and the unarranged 

19 overdraft alerts.

20 That allowed us to, that natural 

21 experiment if you will allowed us to get a nice 

22 causal estimate of what this was actually doing to 

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1 people's behavior and how it was changing their 

2 charges. 

3 Just a few more details on the bullet 

4 points. I think the key one is that we obviously 

5 know when people are automatically enrolled. 

6 People are not notified in this case, so the banks 

7 automatically enrolled their customers but they 

8 didn't send them an email explaining these things. 

9 Obviously their customer service center caught 

10 --- and staff were trained, etc. etc., but it wasn't 

11 a notification as such, which is different from the 

12 field experiment we ran. 

13 And they could at this point in time 

14 only opt-out using their internet banking, so the 

15 mobile app wasn't updated yet to switch off these 

16 alerts if people wanted to.

17 And now, sort of high-level on the field 

18 experiment, this is where we did quite a lot of 

19 things. We tested arranged overdraft just in time 

20 alerts and then all of these early warning alerts 

21 but in brief, we worked with two banks. One estimate 

22 on the just in time alerts is for a two-month period 

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1 because that was actually the two months right 

2 before the CMA's policy came into force so we 

3 basically convinced one of the banks to enroll some 

4 people early and then we had sort of a treatment 

5 in the control group there. For all the other 

6 trials, it's a five-month period. 

7 In this case people were notified that 

8 they're being automatically enrolled. We thought 

9 that was very important, especially considering it 

10 was an experiment and we need to be transparent 

11 about this. And the opt-out, what's interesting is 

12 that both banks allowed opt-outs online again. I 

13 think there was no mobile app opt-out here. One of 

14 the banks allowed people to opt-out immediately by 

15 replying to a two-way SMS message. So it's the kind 

16 of text yes if you want to opt out, that kind of 

17 message. And you'll see in the results in a moment, 

18 that actually makes quite a big difference.

19 It's a bit more detail here on the 

20 sample but I'm going to, in the interest of time, 

21 skip over this. We decided to focus on people who 

22 were more likely to incur overdraft charges. That's 

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1 roughly the gist of it. 

2 On to the results. Perhaps 

3 unsurprising, if you offer these alerts on an 

4 opt-out basis, then a lot more people get them. But 

5 what's interesting, sort of going back to that 

6 opt-out opportunity, the two-way SMS, if you offer 

7 that opportunity nearly ten percent of people opt 

8 out on average across the treatments. 

9 If you only had an online opt out, or 

10 I think people had phone banking or other 

11 opportunities as well to opt out, if you have to 

12 actually go and do something, actively opt out 

13 rather than just texting no, the opt-out rates are 

14 a lot lower. The difference between two percent and 

15 ten percent, we thought, was quite striking. 

16 We actually looked at, for Bank 1, how 

17 people opted out and the vast, vast majority opted 

18 out through that two-way SMS. So we know for certain 

19 that it was that mechanism that sort of increased 

20 the opt-out rate there.

21 I guess the bottom line is still more 

22 than 90 percent of people receive these messages 

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1 after they've been notified and it's been explained 

2 to them. So they elect to stay opted in.

3 So again, I appreciate there's quite a 

4 bit going on in these slides, but I've just 

5 highlighted the main findings there. In the top 

6 column, the two numbers are for the arranged 

7 overdraft just in time alert. This is the one that 

8 tells you, you are now using your line of credit, 

9 and we have an estimate from Bank 1 and Bank 2.

10 For Bank 1, it's 7.3 percent reduction 

11 in total charges per month. For Bank 2 it's 2.7, 

12 and the actual estimate is in pence, so 45 pence 

13 a month, 29 pence per month. These are always the 

14 averages, so there are some people who are not 

15 necessarily helped by these alerts but we consider 

16 these quite good indicators that these alerts are 

17 really helping people.

18 For the unarranged overdraft and the 

19 unpaid item alerts together, that's the second 

20 column so that's those four figures, and the reason 

21 we put all those figures together is because we 

22 thought it was very important that we had both the 

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1 experimental evidence, which is in a sense the 

2 strongest standard of evidence, right next to our 

3 staggered roll-out experiments. Just to check that 

4 our early estimates, historical estimates, were 

5 correct and robust.

6 And here you find some quite big 

7 effects, especially if you look at the unarranged 

8 overdraft only population, so people without a line 

9 of credit. Very similar for the RCT and the 

10 staggered roll out, about 18 percent reduction of 

11 monthly fees, which is mainly driven by the fact 

12 that for the arranged overdraft population, people 

13 with a line of credit, obviously they have both the 

14 line of credit charges and the overdraft charges. 

15 So it's going to be, the percentage is 

16 going to be a smaller part of their total charges. 

17 But specifically for this unarranged overdraft 

18 only population, we see this quite big effect.

19 And then lastly in the bottom right 

20 corner there's the effect of just the unpaid item 

21 alerts only population, and we also find for those 

22 people it makes a big difference to the fees. So 

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1 even for people who don't have a borrowing 

2 facility, avoiding these fees is very useful. 

3 This is, I've just been talking about 

4 the just in time alerts, this is for the early 

5 warning alerts. And I haven't actually highlighted 

6 any of the findings. You'll see that effectively 

7 the estimates with the stars next to it, that's 

8 statistically significantly different. There are 

9 not as many significantly different findings here. 

10 It's quite patchy. 

11 Effectively, what you find here is that 

12 there's no evidence across all the banks we looked 

13 at that these alerts are useful. So even though 

14 it's, in a sense, you get a warning before, you get 

15 more time to respond to the alert because you know 

16 that you're at 50, you're not at zero yet, but there 

17 must be something about the way this alert is set 

18 up. 

19 Maybe people don't worry about it just 

20 yet because they think, well, I still have money, 

21 but these early warning alerts are actually less 

22 effective than the alerts that happen just in time. 

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1 We thought that was really striking. 

2 Then, sort of very quickly on the survey 

3 that we did as well. So, looking at people's 

4 transaction data is obviously only part of the 

5 story. We also wanted to speak to people, we wanted 

6 to find out what they did and we also wanted to check 

7 whether they supported being automatically 

8 enrolled into these alerts, whether they were 

9 perhaps getting tired of getting too many alerts. 

10 The highlights of this survey are that 

11 the most common actions are to transfer savings 

12 from your savings account, you cut back on spending 

13 if you can, or you borrow from friends, family or 

14 an employer. Those were by far the most common 

15 responses. We were worried that people might say, 

16 oh, I took out a payday loan to pay off my overdraft, 

17 and that they ended up in more trouble than they 

18 were in to begin with, but that wasn't the case. 

19 Then the second bullet point tells you 

20 that people are overwhelmingly in favor of being 

21 automatically enrolled. That doesn't mean that 

22 there weren't people who said, you know what, I 

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1 prefer to sign up for this kind of thing myself, 

2 but the majority of people preferred to be, they 

3 didn't have a problem with being automatically 

4 enrolled.

5 And then finally, this question about 

6 alert fatigue. The question was, is the frequency 

7 with which you receive these alerts about right, 

8 or not often enough, or too often, and we have a 

9 very small percentage of people saying, we receive 

10 these too often. And then even so, people could 

11 obviously opt out quite easily. So we didn't think 

12 it was too disruptive.

13 Just to summarize the research, the CMA 

14 policy alerts, so the unarranged overdraft and 

15 unpaid item alerts, reduced total charges by 45 

16 percent for people with a line of credit and 

17 overdraft protection, then about 18 percent for 

18 people with just the overdraft protection. 

19 The arranged overdraft and just in time 

20 alerts were also consistently effective. Early 

21 warning alerts, much less consistent and not so 

22 effective, and the survey indicates, well, I've 

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1 just gone through the survey, but it sort of 

2 indicates that there's nothing necessarily to 

3 really worry about when it comes to automatically 

4 enrolling these people and that we could not find 

5 strong evidence of unintended consequences here. 

6 That, I think, sums it up quite well. 

7 We have one more slide which gives you -- which I 

8 won't talk to, but it's this one, which is the wider 

9 policy context, and that tells you what the FCA's 

10 been doing more broadly and as you can see, alerts 

11 is in that box that is for consultation, as Paul 

12 said at the beginning. 

13 There are also some bit more drastic 

14 measures that are currently discussed, so that's 

15 some of those for discussion. Interventions are 

16 currently in a discussion paper, but that is much 

17 less finalized so I wouldn't say that that is FCA 

18 policy. And that is it. Thank you very much.

19 MR. ERNST: Great. Thank you for the 

20 presentations. Members, I couldn't help but note 

21 your response to the early warning alerts and their 

22 lack of clear effectiveness, and I think that for 

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1 me really highlights the utility of not just going 

2 with intuition but putting in the hard work that 

3 our guests have done to conduct research and sort 

4 of understand, do our intentions play out the way 

5 we expect or do they not? 

6 It's entirely intuitive and easy enough 

7 to assume that an early balance alert would lead 

8 to changed behavior, and I think the fact that the 

9 research doesn't bear that out says, goes all the 

10 more into demonstrating the value of investing in 

11 those strategies. 

12 I'm going to turn the floor over to the 

13 committee at this point and start by inviting your 

14 initial responses. What are you taking away from 

15 the research, what questions does this raise? So 

16 Bob and Michael, I think. 

17 MEMBER ANNIBALE: Thank you very much. 

18 As somebody who lives in London and has accounts 

19 in both countries, the real challenge here and this 

20 is very helpful to us, is of course the very slow 

21 clearing payment system we have still in the 

22 States, where I know in London when my goddaughter 

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1 calls me and says she's going into overdraft, I can 

2 get online and cover it at two in the afternoon or 

3 something. If I transfer funds from one bank to 

4 another it's in her account.

5 So probably the learnings also around 

6 the early warning are going to be most important 

7 for us here, and we know that most clients don't 

8 always know where their accounts are especially 

9 because our payment system is slow, and clearing 

10 system, and we still have more prevalence of checks 

11 than you do in the U.K. as well. So that clearing 

12 time of a check is particularly a mystery. Years 

13 ago it used to be if it was an out-of-state check 

14 ---

15 (Laughter.)

16 My father used to say, and look at the 

17 bastard, they gave us an out-of-state check. It was 

18 going to the moon for clearing, I don't know where 

19 it was going. Today, that's -- or I hope it's not 

20 the same. But this is really important and I think 

21 for us, those of us who have, we have the systems 

22 at Citi, we have these systems that allow our 

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1 clients to set these themselves. You can set when 

2 your balance goes to a certain level, whatever 

3 threshold you want. 

4 I think it just reaffirms that still the 

5 opt out is, at least for certain categories of 

6 product, probably is the way to go. Your results 

7 are not as strong on that as the other, but we don't 

8 have the option. I think that that learning is still 

9 validating for us.

10 MEMBER BARR: I'm just going to pick up 

11 exactly where Bob left off. First of all, this is 

12 just terrific and I'd love to see this kind of work 

13 being done regularly in the U.S. policy context as 

14 policies are being formulated, and then rolled out. 

15 Either you have more flexibility to do that in your 

16 regulatory structure than we do, and I think it's 

17 a real problem that really inhibits good policy 

18 making in lots of ways.

19 Secondly, as Bob said, our regulatory 

20 structure both on faster payments and on good funds 

21 availability, is a real hindrance to consumers 

22 having actual empowerment, ability to control 

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1 their own financial situation. So our underlying 

2 problem is worse, and some of the ways that you 

3 fixed or are working on fixing your problems aren't 

4 currently available to us. 

5 That's a choice that we're making as a 

6 country and it doesn't make any sense. I'd really 

7 love for the FDIC and the Fed to be pushing this 

8 process much faster forward so that we could, both 

9 on good funds availability and on instant payments, 

10 be where the rest of the world is or is heading more 

11 rapidly than we are, and with devastating 

12 consequences for households and for businesses, 

13 for that matter.

14 I have two questions for you. One is, 

15 did you think about doing real-time alerts before 

16 the payment is actually made? That is, let's say 

17 you're wandering into the store and you whip out 

18 your debit card and you want to buy a pair of $200.00 

19 jeans or whatever it is you are going to do, 

20 integrating into the payment system itself the 

21 alert to you that that would cause you to overdraft 

22 or to reach your limit in some other way.

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1 That might be an additional effective 

2 tool, particularly for the people who could choose 

3 not to spend but don't have the option to move 

4 savings over to cover, which is a big group of 

5 interest.

6 The second question is about the 

7 distribution of costs and the distribution of 

8 effectiveness across the population. At least in 

9 the U.S. context, the overdraft usage tends to be 

10 concentrated with, to make up a number but it's 

11 pretty close, 80 percent of the cost is incurred 

12 by 20 percent of the population.

13 So what's the distribution of costs 

14 here, and is the distribution of effectiveness, 

15 does it track the distribution of costs, or are your 

16 prompts more effective for people who need it the 

17 least, or are they most effective for people who 

18 need it the most? What have you learned about that? 

19 MR. ADAMS: Sure. I guess I'll take the 

20 first question and Jay perhaps can handle the 

21 second. One thing to note on these grace period 

22 alerts. If the bank can see a -- we call it a 

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1 standing order or a direct debit that's going to 

2 be coming out the next day or towards the end of 

3 the day, then that will trigger the notification. 

4 So in some instances ---

5 MEMBER BARR: A preplanned. Like 

6 utilities and things like that.

7 MR. ADAMS: Precisely. So that is one 

8 step towards I think where you are heading. We did 

9 consider the idea that you might have point of sale 

10 notification. I think partly it was feasibility 

11 constraints in running an experiment in that 

12 environment and having to have payment systems 

13 adapted to do that, which would be a real big task. 

14 I also think it's, all of our work and 

15 all of our policy has to run through a cost-benefit 

16 analysis and adding that extra layer of tech change 

17 maybe is one step too far even for our payment 

18 systems. So yes, I think it would have been a great 

19 idea, and it's just what's feasible and realistic 

20 in the environment.

21 MR. ERNST: You want to respond to the 

22 one then Pat will come to you?

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1 MR. NIEBOER: I don't know that sort of 

2 a comparison of distributions is on this arranged 

3 overdraft and line of credit, but I had a few 

4 conversations over the last couple of days about 

5 unarranged overdraft, overdraft protection. I 

6 think the distribution's very similar.

7 So, actually the first paper, policy 

8 paper that we put out, has the distribution figures 

9 in it and we find that 80, more than 80 percent of 

10 people over a year period don't use this overdraft 

11 at all and it's the remainder of the people that 

12 pay all the fees, and then the more you go towards 

13 the higher end of costs, the more striking that 

14 concentration becomes.

15 So you will have something like, I don't 

16 know, ten percent of users pay 70 percent of fees, 

17 that kind of distribution.

18 And then second, your question about 

19 was it more effective for infrequent users or 

20 frequent users, it differs a little bit but for the 

21 unarranged overdraft and unpaid item alerts we saw 

22 a very strong relationship between usage and 

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1 effectiveness, and as you might expect, the people 

2 that are infrequent users can avoid these charges 

3 a lot more often than the people that use them 

4 frequently.

5 MR. ERNST: Thank you. So Pat, and then 

6 Andrea?

7 MEMBER MCCOY: Thank you. This is 

8 absolutely fascinating and really provocative as 

9 we think about these issues in the United States. 

10 I had a couple of thoughts. One is, as we've seen 

11 with our experience with automatic enrollment in 

12 workplace pension savings systems here, automatic 

13 enrollment is highly successful at increasing 

14 rates of participation but that's just the 

15 beginning of the story. 

16 And one of the implications I'm drawing 

17 from your research is the same, that then there's 

18 the question of the timing of the content of how 

19 the opt-out opportunity is the channel through 

20 which it's operating, et cetera. And I think it's 

21 a, it reminds us that there are many more design 

22 issues to work out after we institute automatic 

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1 enrollment.

2 I do have a question that follows up, 

3 Jay, on our earlier colloquy which is, I'm trying 

4 to parse these really dense tables and I did have 

5 the pleasure of reading your materials on the plane 

6 last night, but I'm still struggling with how much 

7 of this is a story about the substantive message, 

8 which is either you have an item pending that's 

9 about to put you in a negative position versus 

10 you're a hundred pounds from running out of funds. 

11 In the latter scenario the reader might 

12 think, well, I have no pending items so I don't have 

13 to worry about that. Is it substance, is it timing 

14 of the message, is it an interaction of both? I'm 

15 having trouble sorting through that.

16 MR. NIEBOER: It's a bit of a cop-out, 

17 but we're working on that, is the real answer.

18 (Laughter.)

19 As a policy paper, I guess we've 

20 answered the main question we believe, which is 

21 which one of these is more promising for automatic 

22 enrollment, but as to the mechanisms, that's 

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1 something that we're currently working on with our 

2 academic coauthors. I don't have the answer at the 

3 moment, but stay tuned.

4 MR. ERNST: Can we go to Andrea and then 

5 to Phil?

6 MEMBER LEVERE: Thank you for doing this 

7 work. I'll just echo my colleague Patricia's 

8 interest in this, and so I want to ask you a question 

9 you probably can't say specifically, we're not 

10 going to have an RCT about this, but when you were 

11 talking about the alert and perhaps the unexpected 

12 harm of people going to payday lenders, my sense, 

13 and I don't know this, is you have vastly superior 

14 regulation of payday lenders than we do. And so I

15 wonder if that is a factor in folks not using payday 

16 lenders that may not be the same here, if you have 

17 any thoughts on that.

18 MR. ADAMS: The payday market in the U.K. 

19 is a little bit, or quite a lot different and as 

20 you say, is very heavily regulated and supervised 

21 by us. In fact, the government has created an 

22 opportunity that we should put a price cap on payday 

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1 lenders.

2 MEMBER LEVERE: Throughout the whole 

3 country?

4 MR. ADAMS: Yes. Throughout the whole 

5 country. Doesn't matter whether it's in-store or 

6 online, there's a cap on the interest charged. That 

7 said, it's much more mainstream than it is here, 

8 and possibly that's because of this regulation. 

9 I think it is an interesting question 

10 to know, are these people substituting between 

11 overdrafts and potentially other forms of credit, 

12 and that might be credit cards, might be the most 

13 obvious choice, or it could be payday lending. 

14 Again, we have no, apart from the 

15 survey, which we think is informative, we have no 

16 way of really telling what people did in these 

17 situations. 

18 MEMBER CISNEROS: What is the price cap? 

19 MR. ADAMS: The price cap is a 

20 combination of a daily fixed fee of 0.8 percent plus 

21 an overall envelope that you cannot repay more than 

22 you have borrowed. So it's 100 percent cap on the 

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1 entire thing.

2 MEMBER LEVERE: Thank you.

3 MEMBER SWAGEL: I just want to follow up 

4 and ask a similar question. I've been trying to 

5 translate this into the U.S. experience, and I 

6 think at one part, Jeroen, it's the obvious thing 

7 for us to do. And of course the U.S. regulatory 

8 system is, I think balkanized is the term of art. 

9 CHAIRMAN MCWILLIAMS: Take it easy, 

10 Phil.

11 (Laughter.)

12 MEMBER SWAGEL: Some of my best friends 

13 are Serbians. And anyway, it's striking that the 

14 FCA, if I understand it, regulates small, well you 

15 know, small banks, non-banks, auto lending. I was 

16 here when Michael Barr designed our regulatory 

17 reform, I guess you didn't want auto loans to be 

18 regulated or something.

19 (Laughter.)

20 MEMBER SWAGEL: No, no, we tease each 

21 other. Bush versus Obama. I mean, it seems like it's 

22 a big advantage since your system doesn't have some 

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1 of the challenges of the U.S. That was just my 

2 first thought. 

3 And I was wondering if you know to what 

4 extent, and you will see this is where I'm following 

5 up on Andrea, that this sort of overdraft, routine 

6 overdraft, the planned overdraft as you call it, 

7 substitutes for things that in U.S. context would 

8 be the choice of, say, credit card versus debit. 

9 Someone has two pieces of plastic and they choose 

10 one or the other, or I guess on some screens you 

11 can choose is this debit or is this credit?

12 And maybe another piece of the same 

13 question is, what percent of British households 

14 have credit cards? Do you know how that compares 

15 to the U.S., which I don't know those numbers 

16 offhand. So I just wonder if it touches that, you 

17 know, how much the institutional context 

18 translates over?

19 Oh, and I should also say, it's a really 

20 neat paper. So I started here, it's a really neat 

21 paper.

22 MR. ADAMS: I'm not going to give you 

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1 numbers because I'd probably get the precise 

2 figures wrong, but credit card debt in the U.K. is 

3 very large and significant. We have a similar 

4 pattern to you guys that credit cards, auto loans 

5 and personal loans are by far the biggest consumer 

6 credit products in the U.K. 

7 And there's, we've got actual research 

8 on credit cards. We could talk another hour about 

9 that but there are policy measures in the credit 

10 card space as well to try and reduce that debt, help 

11 people make better decisions when they're using 

12 their credit card.

13 Certainly I think many individuals will 

14 have both a line of credit and a credit card and 

15 will be maxed out on both of them. That, I 

16 understand, is a similar picture.

17 MEMBER ANNIBALE: It's very prevalent. 

18 Even students in the U.K., students can get 

19 overdrafts in checking accounts and get credit 

20 cards so it's very, very prevalent to have both. 

21 MR. ERNST: Thank you. I want to go to 

22 Calvin.

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1 MEMBER BOSTON: Yes. I have three 

2 burning questions. The first was, does the 

3 Financial Conduct Authority have an advisory 

4 board?

5 (Laughter.)

6 MR. ADAMS: Are you offering your 

7 services?

8 MEMBER BOSTON: Take your time. The 

9 other thing, really the question was --- I'm 

10 thinking about some applications in the Unites 

11 States, and we do have FinTech companies trying to, 

12 looking at sending these messages out, I think, 

13 though, for banks and financial institutions in the 

14 United States.

15 Have you looked at the costs as related 

16 to sending extra texts in as many of the texts that 

17 you're doing, and then also, do you have a mobile 

18 partner that you're trying to identify that might 

19 help you, one mobile company that's better than 

20 others that will help you keep the costs down? Just 

21 curious about that.

22 MR. ADAMS: We have, as part of our 

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1 consultation process, we have to do a cost-benefit 

2 analysis, so we have done that and looked through 

3 whether this is net beneficial. I'm looking at Jay 

4 to see if he remembers now. Presumably that has 

5 shown that these alerts are helpful over and above 

6 the costs of firms to implement. 

7 In terms of that cost, most of it is in 

8 systems changes for the banks themselves. The 

9 marginal costs of sending text messages to 

10 10,000,000 people or 20,000,000 people is very 

11 small. I mean, there's really no cost in that. It's 

12 really up to the banks in a way and the financial 

13 services providers to go away and implement this. 

14 They can either work with third parties and mobile 

15 phone providers or just through existing systems. 

16 It is telling that these banks already 

17 had this option, they were offering these alerts 

18 to their customers, but not auto-enrolling them. 

19 So the tech was there, just not used.

20 MR. NIEBOER: Just want to add one quick 

21 thing, also the cost of a message is going to go 

22 down really quickly with push notifications 

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1 through mobile apps starting to replace text 

2 messages. So we, already one of the banks that we 

3 work with had that option for people to say no, I 

4 don't want these as a text message, I want these 

5 through my app. That's really the future. All banks 

6 are building those platforms at the moment. And 

7 then the cost effectively goes down to zero.

8 DIRECTOR GRUENBERG: I do want to be 

9 conscious of the time, but I didn't want to let the 

10 opportunity pass without saying it's great that 

11 we've established this relationship with the 

12 United Kingdom. We have a lot of relevant 

13 experience to share with you and I just hope, as 

14 they say, this is the beginning of a beautiful 

15 relationship.

16 And too, the work here that you've done, 

17 while I really think you are to be commended for 

18 being so forward-leaning in this area and finding 

19 a way to assist consumers to manage their accounts 

20 in ways to reduce the fees, and in a way that the 

21 banks themselves can apparently have the ability 

22 to provide these notices without undue burden.

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1 It's very much in line with some focus 

2 group work we've done, where we've looked at 

3 customers and how they utilize mobile technology, 

4 and what was clear from the focus groups is that 

5 the low-hanging fruit that the consumer most 

6 frequently utilizes is to use the mobile phone to 

7 check the balance in their account to avoid fees. 

8 What you are doing here is providing a 

9 little bit of assistance to the customer in doing 

10 that, and there's real cost savings and value to 

11 the customer, so I really do think there's relevant 

12 experience here for us too.

13 MEMBER RYAN: Do the banks continue with 

14 the program, I would imagine they've lost revenue 

15 compared to competitors, and so how is that playing 

16 out?

17 MR. ADAMS: We actually gave them the 

18 choice after the field experiment whether people 

19 would remain enrolled in these alerts or not. I 

20 would guess from a customer service perspective you 

21 probably wouldn't switch them off for people after 

22 the trial, especially not after they've gotten used 

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1 to them.

2 But that choice is really the bank's, 

3 so when we had the initial discussion about the RCTs 

4 and the parameters of those, it was up to them to 

5 tell us how many consumers or customers they could 

6 allocate to different treatment arms, so I'd like 

7 to think that they went into that with their eyes 

8 wide open. I think, and to be honest if you look 

9 at the samples compared to their entire customer 

10 base, they're really tiny. 

11 MEMBER RYAN: Did the Bank A and Bank B, 

12 were they self-identifying? Did they, what was the 

13 selection? You had your own selection process and 

14 identifying how to --- okay.

15 MR. ADAMS: We went to the whole market, 

16 which is only six major banks in the U.K., they 

17 cover probably about 90 percent of the market, and 

18 went to them and said, these are the parameters of 

19 what we want to do in terms of the field experiment, 

20 who is willing to partner with us? And these two 

21 banks were well placed to do that in terms of their 

22 size and their systems.

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1 MR. MILLER: I think we're almost back 

2 on time, so why don't we take a ten-minute break 

3 and come to the last panel?

4 (Applause.)

5 (Whereupon, the above-entitled matter 

6 went off the record at 2:05 p.m. and resumed at 2:22 

7 p.m.) 

8 DIRECTOR GRUENBERG: Jelena got stuck 

9 on a phone call. So, we're going to proceed. 

10 She'll be with us in just a moment.

11 So, Jonathan?

12 MR. MILLER: Great. Thank you very 

13 much Marty. So, our last and most exciting 

14 panelists --

15 (Laughter.)

16 MR. MILLER: You can explain your 

17 program in a positive cast. This is where all the 

18 research gets real.

19 And it will be moderated by Luke 

20 Reynolds, again, a familiar face to this group. A 

21 Chief -- who's a Chief of Outreach and Program 

22 Development here at the FDIC.

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1 Luke?

2 MR. REYNOLDS: Thank you. For this 

3 afternoon's panel, my goal is to create greater 

4 awareness of opportunities to promote banking 

5 connections for low income young people, and what 

6 is often their first formal job. And then get your 

7 insights on how we can strengthen our work in this 

8 area.

9 After very brief remarks, my 

10 colleagues, Jeff, Heather, and Tom, will bring to 

11 life how a local collaboration came together. And 

12 then Desmond will share some key findings from a 

13 relevant research pilot.

14 Over four million young people are out 

15 of school and not working. These are generally low 

16 income. Not low and moderate income, but low 

17 income. Young people who come from low income 

18 families.

19 One federal response is the Workforce 

20 Innovation Opportunity Act. Which through 

21 formula-funded programs, provides federal funds to 

22 Workforce Development Boards through the states.

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1 The law requires that these programs 

2 offer -- or make available a financial literacy 

3 element. And in particular, the law encourages 

4 age appropriate financial education that provides 

5 opportunities for young people to put their 

6 knowledge into practice, such as through safe and 

7 affordable financial services.

8 The Workforce Innovation Opportunity 

9 Act also funds some grants. Financial education 

10 is not required to be offered for those grants. 

11 But practically speaking, many of those grant 

12 funded programs do so.

13 Examples here include Youth Build and 

14 Job Corps. Then practically speaking on the 

15 ground, state and local governments set up their 

16 own programs that combine federal funds with state 

17 and local dollars.

18 Other times you'll see public and 

19 private partnerships where government monies are 

20 leveraged with private sector dollars. And then 

21 you also see completely private sector led 

22 initiatives such as the Hundred Opportunities 

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1 Initiative.

2 Shortly after the passage of the 

3 Workforce Innovation Opportunity Act, we began 

4 collaborating with our partners on the Financial 

5 Literacy and Education Commission to assess what 

6 our next -- best next steps would be.

7 We soon began doing two things. First, 

8 we improved our toolbox. We created crosswalk 

9 tools to help youth employment programs know how 

10 elements and money smart relate to the requirements 

11 of the Workforce Innovation Opportunity Law and 

12 Regulation.

13 Which I think everyone here knows, 

14 Money Smart is the FDIC's free financial education 

15 program. We also created a conversation starter 

16 tool to help youth employment program leaders know 

17 how to effectively talk to banks and engage banks. 

18 For example, we encourage them to call 

19 out the low income nature of families they serve. 

20 And discuss available opportunities.

21 We created a supplement to our popular 

22 Selecting a Bank Account Checklist, to help young 

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1 employment -- youth employment program leaders 

2 lead an informed discussion with young people about 

3 using the checklist to select the best deposit 

4 account.

5 And then we worked with our colleagues 

6 on the Financial and Literacy Education Commission 

7 to develop two new guides.

8 One is focused specifically, targeting 

9 specifically to financial institutions. Alerting 

10 them of the opportunity to work with youth 

11 employment programs.

12 The other is for youth employment 

13 programs alerting them of the opportunity to work 

14 with financial institutions.

15 And in addition to improving our 

16 toolbox, we made youth employment pri -- youth 

17 employment a priority for our outreach.

18 Speaking engagements including those 

19 conducting collaborative with the Bureau of 

20 Consumer Financial Protection and the National 

21 Credit Union Administration, include us speaking 

22 at National Assoc -- National Workforce 

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1 Association Board conferences, National 

2 Association of Workforce Development 

3 Professionals, and State Workforce Boards.

4 And then through our community affairs 

5 function, which we've shared previously, where we 

6 work through our field staff to bring together 

7 banks and nonprofits and state and local government 

8 leaders and others to advance economic inclusion 

9 and promote community development.

10 We identified opportunities in some 

11 communities to bring together youth employment 

12 programs with financial institutions.

13 Jeff, can you tell us a little bit about 

14 how a collaboration to connect financial 

15 capabilities' services to youth employment 

16 programs can come together?

17 MR. MANNING: Sure. Thank you Luke. 

18 Good afternoon everyone.

19 This came from the initial discussion 

20 with Greater Lowell, came back from the 2016 Bureau 

21 of Consumer Financial Protection's 24 city pilot 

22 program.

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1 From that the 24 cities were shared with 

2 my area manager, a gentleman by the name of Tim 

3 D'Alessio in the Boston area office. He reached 

4 out and spoke to both the Bureau and the Department 

5 of Labor regarding the type of assistance that 

6 Greater Lowell was looking for as part of their 

7 summer job's program.

8 From that, Mr. D'Alessio and I had 

9 several conversations with Greater Lowell. 

10 Heather was involved in those conversations as 

11 well.

12 They asked them exactly, what did they 

13 need? And what would they need us to do for them? 

14 Part of the discussion and what came out 

15 of it was, we decided we could put together a banker 

16 roundtable. So what the FDIC did was organize a 

17 banker roundtable.

18 And reached out to 12 institutions, all 

19 financial institutions in the City of Lowell 

20 itself, and invited them to this session.

21 At that point, the goal of the 

22 opportunity was to raise awareness to promote safe 

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1 and affordable bank access to the participants. 

2 Participants are between the ages of 15 and 21 in 

3 the summer job's program.

4 Part of it is that they are required, 

5 the City of Lowell requires all employees to get 

6 part time, full time, or interim, to have direct 

7 deposit. Thus, creating the conversation between 

8 Greater Lowell and the FDIC as far as how can we 

9 give the kids bang?

10 The program is all low income 

11 individuals from the city. The intake process 

12 normally starts sometime in February.

13 And then it goes on through the year. 

14 And then it culminates with the orientation that 

15 they've had. And then the summer jobs program 

16 starts in August.

17 So we usually go in in June. And we 

18 will speak with the Greater Lowell Board, the 

19 organization and their summer interns.

20 So what we did was the result of the 

21 roundtable. We had several of the institutions in 

22 the city agree to assist us with financial 

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1 education and offering accounts for the kids.

2 Most importantly, we had several 

3 meetings and discussed the account parameters as 

4 far as identifications. The check systems was 

5 discussed because it's a minority/majority city, 

6 with some of the fraud that maybe obvious or 

7 prevalent in that area.

8 And the biggest thing that came out of 

9 it was, everyone agreed that there would be no 

10 overdrafts allowed in this program. The younger 

11 participants under 17 -- excuse me, under 18, would 

12 be offered a statement savings account with access 

13 with just an ATM card. Not a debit card.

14 So all they could do is go to the bank 

15 when they needed funds. The older participants 

16 between 18 and 21 could have either a checking 

17 account or a savings account. And were allowed to 

18 have a debit card.

19 And again, the biggest thing was, and 

20 all the institutions agreed, there would be no 

21 overdrafts. Thus to a degree, even though most of 

22 the banks did not have what they called "a safe 

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1 account," without allowing overdrafts, in a way it 

2 served as a safe account for the individuals.

3 Part of what we did was, I had gone in 

4 that first summer, and we provided Money Smart 

5 Trainer the training to the summer interns of the 

6 Lowell folks. I was, I believe, 12 -- 12 college 

7 students that were their interns.

8 We did a half day Money Smart Train the 

9 Trainer. Which in turn, those interns went back 

10 to the classes, and they have an orientation piece 

11 that lasts about two weeks.

12 And during those two week periods, they 

13 were all given Money Smart training as far as from 

14 a bank owner's standpoint, credit, things of that 

15 nature. It was fairly high level. But it was to 

16 introduce them to it.

17 They were also given a little worksheet 

18 for -- a questionnaire if you will, to interview 

19 the banks when did the Fair itself.

20 So, we encouraged them to go to each of 

21 the individual institutions, not just walk to one 

22 and open the account. We encouraged them, and 

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1 Heather can get into that as far as encouraging the 

2 kids to speak with all of them.

3 They interviewed the banks for their 

4 accounts. That's kind of what it came down to. It 

5 was a chance for them to have a piece of paper and 

6 ask them questions one on one.

7 It was actually quite something to see, 

8 a bunch of, you know, 15 to 21 year olds 

9 interviewing a bank person for their account.

10 So what we did was working with Heather 

11 and Lowell, we organized the Financial Institution 

12 Products Fair that culminated the end of their 

13 orientation two week period.

14 So we had one at the end of the first 

15 week for the first 125 participants. And we had 

16 another bank fair the following week for the second 

17 125.

18 Pretty much we laid out exactly what we 

19 said we would do. This is what's going to happen. 

20 These are the types of accounts all the 

21 institutions agreed to offer.

22 In the first year, out of the 250 

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1 participants, there were 185 accounts opened. 

2 Some of the kids it was typical, their parents told 

3 them they could not have an account.

4 So we talked to them why. And they 

5 explained it to us. Other kids already had 

6 accounts. Which was great to see. And they were 

7 in some of the institutions that were in that room. 

8 So they went over and just talked with 

9 them about, you know, gee, what else can I do for 

10 my account? Can I -- some kids actually had 

11 checking accounts, and then got savings accounts.

12 So, it was nice to see, you know, the 

13 interaction between the young people and the 

14 financial institutions themselves.

15 And with that, I'll pass it onto 

16 Heather. Thank you.

17 MS. DONOVAN: Okay. Thank you. Do I 

18 have to turn this on?

19 MR. MANNING: Oops, sorry.

20 MS. DONOVAN: Well okay. Thank you. 

21 So just a little background. So, I am with the Mass 

22 Hire Lowell Career Center and the Mass Hire Greater 

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1 Lowell Workforce Board, which falls under the 

2 Department of Labor in the Executive Office of 

3 Labor and Workforce Development.

4 These programs are all that I've ever 

5 done. And I am very passionate about it. So, when 

6 this opportunity arose, we really jumped on it.

7 So, we run a number of programs. The 

8 summer programs and the year around programs. 

9 Just really quickly about our year around programs. 

10 We run federally funded, state funded and locally 

11 funded programs, including the WIOA program that 

12 you heard a little bit about.

13 And a disability employment initiative 

14 specific to young people right out of our office. 

15 And each of our programs does have a work experience 

16 component.

17 So we provide paychecks to young 

18 people, which really helped push in the direction 

19 of incorporating financial education. Because, 

20 as you know, if you give a young person money and 

21 don't explain to them their options of what to do 

22 with it, they're probably going to make some bad 

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1 choices.

2 So, in regards to the summer program 

3 that we're mainly talking about today, over the 

4 past two summers, we have served over five hundred 

5 young people, all between 15 and 21. And all 

6 Lowell residents.

7 So they do have to live within the city 

8 to qualify for the program. One hundred percent 

9 of that population is low income. So, you cannot 

10 get into our program unless you qualify as a low 

11 income individual.

12 And we really, even before WIOA, we were 

13 working on getting involved in financial 

14 education. But, we really wanted to push for young 

15 people to be capable instead of just to be literate. 

16 We really wanted them to be able to 

17 understand what to do when they received money, how 

18 to set financial goals. All of the things that 

19 sometimes we take for granted. We wanted them to 

20 be able to do that themselves without us when we 

21 weren't there.

22 So, as Jeff said, we run in the summer, 

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1 day long workshops in regards to financial 

2 education. Part of that was a questionnaire that 

3 we went over with young people ahead of time so that 

4 they felt comfortable in their ability to speak 

5 with banking professionals about what was best for 

6 them in regards to their location, the services 

7 that they were interested in.

8 We wanted them to choose an institution 

9 that was close to them. So that when they weren't 

10 working, they could still go down the street and 

11 walk to it if they needed to.

12 So, we hold our workshops at a local 

13 community college. Which is very familiar to 

14 everyone in the area. And we do that on purpose 

15 so it's really easy just to go to the big brick 

16 building and we'll be there.

17 It's a way for us to partner with the 

18 community college that gets young people access to 

19 the college on the education side, who might not 

20 have walked into that building any -- without us.

21 But it also is a great space for us. 

22 And it's a community space that allows us to make 

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1 the young people feel comfortable in situations 

2 where they know.

3 So, we're not asking them to go into 

4 some place that's unfamiliar with them. And if 

5 you've ever asked a young person to go somewhere 

6 they don't want to go, it's not happening.

7 So, --

8 (Laughter.)

9 MS. DONOVAN: I have two small 

10 children. And I don't go places all the time, so.

11 So, we really worked as a team. This 

12 roundtable that was brought together, was really 

13 inspiring.

14 There were so many people who really 

15 wanted to jump onboard and help these young people 

16 to understand, and you'll hear more about that from 

17 a banker's perspective in a minute. Help them 

18 understand that, you know, you didn't have to be 

19 a professional to walk into a bank and get great 

20 service.

21 So, we did agree that we would open 

22 accounts specifically for young people with no 

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1 parent or guardian's signature on the account.

2 And we did that specifically because we 

3 wanted young people to be able to utilize their 

4 funds and set their goals without having a parental 

5 or non-parental guardian able to access the funds. 

6 Because in our area, the research that we've done 

7 shows that unfortunately the case is that sometimes 

8 young people don't get to spend their money or do 

9 what they wish with their funds.

10 So, we did. We all sat around and 

11 agreed on that. We also agreed that anyone who 

12 came to the financial product fairs would be 

13 accepting a birth certificate and a social security 

14 card as the two forms of identification. And a 

15 photo ID if they had it. But if they didn't, it 

16 wasn't a deal breaker for anyone.

17 So, everyone at the roundtable and on 

18 the council that we then decided to convene from 

19 this roundtable, and that we still convene to this 

20 day around financial literacy and capability and 

21 products that in order to participate, you had to 

22 be able to accept these items and these items only. 

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1 And one of the things that my staff did 

2 to make that easier, is we copied all of those 

3 documents. So, we have a really strict enrollment 

4 process. You have to prove eligibility, because 

5 they're a federally funded program.

6 And because of that, we had what was 

7 needed in order to open the account. So, we set 

8 up packets for each young person so that they felt 

9 that they were prepared when they walked into the 

10 financial products fair.

11 That if they found some place that they 

12 felt comfortable, all they had to do was go apply. 

13 And speak to them. And give them their 

14 documentation and not worry about all that backside 

15 stuff.

16 So, we really took care of that for 

17 them. In the hopes that it would make them feel 

18 more comfortable.

19 But also make the process easier, and 

20 show them that it didn't have to be a tedious 

21 process to open an account. And that you could do 

22 so rather quickly if you really wanted.

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1 So, -- and then we already spoke about 

2 the -- the questions. But, I think one of the big 

3 things in Lowell is that we work really well 

4 together as a team.

5 If anybody needs anything, no matter if 

6 it's nonprofit, government, financial, everyone 

7 sort of rallies. Which I think is great.

8 And that's really one of the things that 

9 really got this program off of the ground. Was the 

10 ability for everyone to work together. Which also 

11 shows young people how important it is to make those 

12 connections early.

13 So, I did -- I have a little bit of data. 

14 So, why is it so important that we teach young 

15 people to be capable?

16 So, I'm going to speak to the first two 

17 -- first two after, because I think that they're 

18 the most pronounced. But, comfortable with 

19 banking institutions, we see that that rose pretty 

20 highly.

21 Understanding paychecks. Now, these 

22 were the paychecks that we were already giving 

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1 them. And so if they didn't understand them, what 

2 were we teaching them really?

3 We're just giving them some money to go 

4 -- go pay a big fee on and cash. So, that jumped 

5 pretty well. The pre is the dark green. And post 

6 is light green.

7 And then creating goals. I was 

8 actually really pleased to see that many already 

9 felt like they could create goals. But, the fact 

10 that we were able to add onto that, I think, made 

11 a huge difference.

12 The two that I just wanted to mention, 

13 so credit. You can see a lot of them felt like they 

14 understood credit to a degree.

15 Almost 62 percent of them felt like 

16 that. But at the end, 100 percent felt that they 

17 understood about credit.

18 And 100 percent in anything is like a 

19 magical unicorn, right? Like you never get 100 

20 percent.

21 (Laughter.)

22 MS. DONOVAN: So, that --

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1 PARTICIPANT: Not in this life.

2 MS. DONOVAN: Yeah. That's really --

3 it really speaks to me about the curriculum that 

4 was taught.

5 We did do an amended version. Which I 

6 thought was great. That we amended for our 

7 population and the time frame that we had.

8 And then the importance of financial 

9 relations, I think, is the most striking to me. 

10 Nobody believed they were important.

11 And that, to me, as somebody who has had 

12 a bank account since a child, was amazing to me. 

13 And the fact that that rose to 60 percent feeling 

14 that it was important, is a huge -- even if that 

15 was the only thing we measured, I felt like that 

16 would have been enough.

17 But knowing that, you know, over five 

18 hundred young people didn't understand why they 

19 should care about a financial institution, or why 

20 it mattered for them in their life, is probably the 

21 most striking statistic I've ever seen in anything 

22 that I've done.

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1 And then also on the flip side, every 

2 summer we pay out over 350 thousand dollars in young 

3 adult wages. That money is going somewhere.

4 So if you're participating at the 

5 financial institution, that money could be going 

6 to you. And we'll hear more about funds and where 

7 they go and what happens to them.

8 But, it's a significant amount of money 

9 that we're putting back into the community. And 

10 to be able to have that go into financial 

11 institutions rather then check cashing, or 

12 Walmart, or wherever else they're going, Burger 

13 King, I don't -- wherever they eat, is -- it's 

14 outstanding.

15 It's a significant amount of money. 

16 And that doesn't take into account the funds that 

17 we put in the year round programs. Because we pay 

18 work experience wages through the year round also. 

19 These are two photos of our financial 

20 product fairs. The reason I love these photos is 

21 that there are bankers in these photos, as well as 

22 young people.

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1 And if you look at it, you really can't 

2 tell the difference. So, --

3 (Laughter.)

4 MS. DONOVAN: One of the -- we also prep 

5 the financial institutions prior to these, you 

6 know, with some comments about, don't wear a 

7 three-piece suit. Bring some swag. Young people 

8 love things, you know.

9 (Laughter.)

10 MS. DONOVAN: So, we do work on all 

11 sides. We prep the young people. But we also prep 

12 the banking community with these young people are 

13 coming from a place where they might not be 

14 comfortable because somebody used their name 

15 before.

16 Or, they might not be comfortable 

17 because their mom and dad tell them not to put their 

18 money in a bank. And we've actually had some 

19 situations where young people come in saying that.

20 They walk around. And by the time they 

21 walk out the door, I'm like, oh, where'd you get 

22 that bag from? Oh, I opened an account. Oh, 

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1 that's great.

2 You know, so just feeling comfortable 

3 enough to trust that somebody in the banking world 

4 is okay, regardless of what happens at home, I think 

5 is huge.

6 So, I just wanted to share a couple of 

7 these real life photos. And then we had some just 

8 comments.

9 So, some more results. Young people 

10 who enrolled in direct deposit felt like they were 

11 more successful in saving money for larger term 

12 goals.

13 And as you heard, direct deposit is 

14 something that was -- is something that is 

15 mandatory. Sure.

16 I might have said it was mandatory and 

17 it might not have been. But, we will just let that 

18 go.

19 (Laughter.)

20 MS. DONOVAN: But, they're able to, 

21 along with opening accounts, they enroll in direct 

22 deposit at literally the same time. So, they walk 

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1 out of there having an account and a direct deposit. 

2 Or if their financial institution is 

3 there, they walk over, fill out their direct 

4 deposit paperwork. So, they don't have to worry 

5 about it after that day. So, it's convenient for 

6 them.

7 Shopping for banks, which is sort of 

8 what it was, and financial institutions opened up 

9 communication at home about financial 

10 responsibilities. So, young people went home and 

11 talked to their parents or guardians about their 

12 experience, the financial institutions they talked 

13 to, the ones they choose, and why.

14 And you know, financial 

15 responsibilities, like taking care of some of the 

16 bills. And how that would look for them now that 

17 they had an account and things like that.

18 And they felt more comfortable in this 

19 setting then walking into a bank. I think as a 

20 young person sometimes they feel like their 

21 business isn't as valued.

22 And I don't think it's necessarily a 

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1 reflection of anyone person, place, or thing. 

2 It's just a culture that they've sort of come to 

3 know.

4 So they felt really comfortable in this 

5 setting. And they felt that their business was 

6 valued by the staff that they spoke to. Which I 

7 think is huge also.

8 So, that's my piece.

9 MR. DAUGHERTY: Thank you. Good 

10 afternoon everyone. You want to take a quick 

11 photo?

12 (Laughter.)

13 MR. DAUGHERTY: Awesome. Just trying 

14 to help you out.

15 (Laughter.)

16 MR. DAUGHERTY: So good afternoon. My 

17 name is Tom Daugherty and I'm a Vice President with 

18 Eastern Bank.

19 Eastern Bank can really be summed up in 

20 a kind of three bucket perspective. We're a full 

21 retail bank, and insurance company, and we also do 

22 philanthropy.

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1 I'm very proud that Eastern Bank just 

2 earned top marks in our 2018 corporate equality 

3 index. And several other awards that we 

4 consistently win.

5 So, looking at a little background 

6 about Eastern Bank, we are the oldest and largest 

7 mutual bank in America. And we are headquartered 

8 in Boston, Massachusetts.

9 We have just a little over 11 billion 

10 in assets. And about a little more than 120 

11 locations in eastern Massachusetts and southern 

12 New Hampshire. And we actually just started going 

13 into Rhode Island with some of our insurance.

14 Just last week it was announced that we 

15 were the number one SBA lender in New England for 

16 the ninth year in a row. And the number one SBA 

17 lender in Massachusetts for the last ten years in 

18 a row. We worked very, very hard on that.

19 And something that I absolutely love 

20 about the bank, and this is why I will remain with 

21 this bank until the day I retire, is it's actually 

22 in our charter that 10 percent of all our profits 

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1 that we make go back to the community.

2 So believe it or not, as a branch 

3 manager, part of my job is to find nonprofits that 

4 are worthy enough to give money away to. It's a 

5 really interesting thing that we're giving money 

6 away. I love it.

7 And this year, one of the things that 

8 we also did, besides doing the 10 percent, we do 

9 a thing called targeted grants. And every year our 

10 targeted grant is a little different.

11 Last year it was about immigration. 

12 The year before that was about domestic violence. 

13 And this year it was about women advancing women. 

14 So we set aside 1.5 million dollars in 

15 honor of Rebecca Sutton. She was our very first 

16 depositor back on April 15, 1818. So, we just 

17 celebrated our 200th birthday.

18 So, our very first customer was a woman. 

19 Now, she was allowed to have a checking account, 

20 but she was not allowed to go into the bank.

21 MEMBER LEVERE: I was just going to 

22 ask. Right.

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1 (Laughter.)

2 MR. DAUGHERTY: So, her attorney 

3 actually had to go in to make the deposit, believe 

4 it or not.

5 MEMBER LEVERE: Could she have it in 

6 her own name?

7 MR. DAUGHERTY: She could have it in 

8 her own name. But she could not go into the bank. 

9 Yeah. Unbelievable.

10 So, I think it's important to 

11 understand how I got to where I am today and here. 

12 So, I'm heavily involved in doing financial 

13 literacy throughout Merrimack Valley, which is 

14 where I'm from.

15 And it all started by, believe it or 

16 not, attending a nonprofit event. Just like all 

17 of you who attend nonprofit events, they tell you 

18 how great they are.

19 They tell you a sad story. You pull out 

20 the checkbook and start writing a check. Well, 

21 they were doing the exact same format.

22 And then all of a sudden they said, hey, 

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1 congratulations. We're going to be expanding. 

2 And five hundred people of the most prominent 

3 people in our area stood up and started applauding. 

4 And all of a sudden my banking brain 

5 kicked in, and I said, well wait a minute. Although 

6 it's great that they are expanding, and there is 

7 definitely a need for this organization to expand, 

8 this is wrong.

9 So if these five hundred people in the 

10 room, if we could find the root cause, and focus 

11 on that, we don't have to expand this organization. 

12 So, in some regards, we should be trying to put this 

13 nonprofit out of business.

14 So, I went home that weekend, and I 

15 tried to find any and every study that I could find 

16 on poverty. And every single study I read, which 

17 was kind of disconcerting, there's so many of these 

18 studies that keep just saying the same thing.

19 The cause of poverty in America comes 

20 basically down to four things. Drug use, medical 

21 bills, loss of a job, and lack of financial 

22 literacy. Now, if we go across the seas, then you 

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1 also include war and you include famine.

2 So, that Monday, I went back and I said, 

3 you know what? I cannot prevent somebody from 

4 doing drugs, losing a job, having too many medical 

5 bills, but I can certainly teach my community 

6 financial literacy.

7 So I went to my boss, and I was very new 

8 to Eastern Bank at the time. And I said, what do 

9 we have as far as financial literacy? Do I have 

10 to write my own?

11 And they said no. We have Money 

12 Smarts. So my team, we created a strategy, and 

13 ever since then my branch has been very 

14 aggressively teaching financial literacy 

15 throughout the Merrimack Valley and the great City 

16 of Lowell.

17 Right now about 40 percent of all the 

18 checking accounts that I open on a yearly basis, 

19 actually come from financial literacy. And I 

20 think your board will be very happy to know, about 

21 10 percent of those are coming that are nonbank. 

22 So, when Jeff and Heather called, it was 

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1 just a natural fit. Absolutely, I want to be in 

2 the room. I want to have that discussion.

3 I want to see what we can do to help out. 

4 But, naturally, being a bank, we did have some 

5 concerns.

6 So, one of the concerns was the lack of 

7 financial literacy that these kids are going to 

8 have. If these kids are under 18 and the account 

9 goes bad in one way or another, how are we going 

10 to be able to collect on that account?

11 Just the pure maturity of the students. 

12 Lack of using the accounts after the summer. This 

13 was a big concern for me. And I'm happy that I was 

14 completely wrong.

15 I predicted that we were going to have 

16 a 95 percent closure rate. That an account was 

17 going to be opened up for the summer. We're going 

18 to do direct deposit.

19 Their job is over. And they're going 

20 to come in and close the account. And all of a 

21 sudden I have on my books a whole bunch of accounts 

22 that were just opened for a short period of time 

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1 that closed out.

2 However, the other concern that I had 

3 was Eastern Bank does not have youth accounts. 

4 But, the great thing is, in Massachusetts we are 

5 governed under 1865 law. Which is very similar to 

6 your Safe Account.

7 So if you're 18 years or younger, it is 

8 a free account. If you're 65 years or older, it's 

9 a free account.

10 You can technically get an overdraft. 

11 Checking -- or the checks are free as well. So, 

12 we used that governance to be able to use this for 

13 this program.

14 At age four -- we will actually go all 

15 the way down to age 14 at Eastern Bank. But we do 

16 need to have a parent or a guardian sign.

17 So again, with the idea that no parents 

18 were going to be signing this, it created an 

19 enormous amount of trepidation with me going over 

20 and trying to open up these accounts.

21 At Eastern Bank we do -- we have no fee 

22 accounts. And we also have no inactivity fees. 

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1 Because that was my other concern that we would 

2 have, these kids open up the account.

3 They leave $1.75 in it. And it just 

4 sits there forever. Not very profitable for the 

5 bank obviously.

6 However, as Jeff talked about, all the 

7 accounts had direct deposits. We were issued, and 

8 they were -- all accounts weren't opted out.

9 And this is the part that I've very 

10 happy about. Over 50 percent of the accounts are 

11 still open, and aggressively still being used.

12 There was literally only one account 

13 that went bad. And believe it or not, it was a 

14 recurring gym membership. So I was glad the 16 

15 year old is out there getting some exercise.

16 (Laughter.)

17 MR. DAUGHERTY: And again, the 

18 accounts are open. And they are definitely 

19 actively being used.

20 And looking through all the accounts, 

21 we actually have several accounts that have well 

22 over 27 hundred dollars in their checking and their 

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1 savings accounts. And we're talking about 15, 16, 

2 17 year old kids that have almost three thousand 

3 dollars.

4 Which is fantastic. Especially in the 

5 City of Lowell, where it's low income people that 

6 we're dealing with.

7 So, some of the key findings that we 

8 have, and I apologize for the key up there. During 

9 the account opening the youths asked some great 

10 questions.

11 And they really did. It was -- I've 

12 never been drilled so many times by young kids just 

13 walking in. But, how many ATMs do you have? Where 

14 are all your locations?

15 How much is this going to cost me to 

16 open? I've never received those questions before. 

17 And for the very first time, I have millennials 

18 coming into my branch.

19 I almost fell over. You're a 

20 millennial.

21 (Laughter.)

22 MR. DAUGHERTY: So, during the -- one 

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1 of the key findings that we also did have, is when 

2 you're dealing with a low income section of the 

3 demographics, unfortunately sometimes parents 

4 will take the information from their kids.

5 So you'll pull a check systems on a 15 

6 year old kid, and they have six thousand dollars 

7 in charge offs. And so as a group, we decided that 

8 we are going to ignore that.

9 And we went ahead and opened up the 

10 account, knowing that the 15 year old kid has not 

11 already established three or four thousand dollars 

12 in charge offs. And again, it's -- proper 

13 safeguards are important for youth accounts. 

14 Direct deposit is a key.

15 Of course, renewing activity, opt out 

16 is a must. Ted, I couldn't agree more with you, 

17 financial literacy is purely the key. And again, 

18 they are incredibly confident coming into the 

19 branch and finally asking questions.

20 And with that, I'll turn it over.

21 MR. BROWN: Excellent. Good 

22 afternoon everyone. First I just want to thank 

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1 Luke and the FDIC team for inviting us to be a part 

2 of this conversation.

3 And also for being a thought leader, a 

4 thought partner as we embark on this work from 

5 several years ago. But the FDIC and Treasury and 

6 NCUA have all worked closely with us in this line 

7 of work. So, really appreciate the collaboration 

8 guys.

9 MR. REYNOLDS: Thank you.

10 MR. BROWN: So my name is Desmond 

11 Brown. I'm the Deputy Assistant Director for the 

12 Office of Community Affairs at the Bureau.

13 The Office of Community Affairs is the 

14 office that focuses on low income and under-served 

15 consumers. Primarily consumers who have limited 

16 access to affordable financial products and 

17 services to meet their needs.

18 Many of these consumers have low 

19 income. Many of these consumers are facing 

20 difficulty with credit invisibility, meaning that 

21 they might have thin or no credit files. And 

22 they're trying to borrow at affordable rates, 

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1 trying to get into the financial services space. 

2 So, our office collaborates with 

3 organizations across the country both inside of the 

4 government, state, federal, local governments, to 

5 work with them. We also work largely with 

6 nonprofit organizations. And if you think about 

7 the population that we serve, it's quite large.

8 And so how do we structure the work to 

9 really reach all of these different segments of the 

10 community? We do that in three areas.

11 First, we work to build capacity of 

12 organizations. Working with nonprofits. 

13 Working with municipal organizations. Really 

14 trying to get them to figure out the ways to 

15 integrate financial capability services into what 

16 they do. Many of the people we work with are 

17 experts in workforce development or experts in, you 

18 know, different things.

19 But they want to do this, but they don't 

20 know how to go about structuring financial 

21 capability in a way that's actually impactful and 

22 will last.

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1 We also spend a good bit of our time 

2 focusing on advancing research. So looking at the 

3 field and figuring out what are some of the best 

4 practices that are taking place out there?

5 What are some of the innovative 

6 programs and products that are taking place? For 

7 example, credit builder loans are one of the issues 

8 that we looked at to explore how they can help 

9 people improve their credit ratings.

10 And we share those learnings from 

11 opinions and from research papers with the general 

12 public. I think part of our work is to get more 

13 people to start talking about these issues across 

14 the spectrum, whether they're in government or 

15 nonprofits, or whatever.

16 If they're working with this population 

17 segment, we really want them to be able to 

18 understand how financial capability works. And 

19 how to get it integrated more efficiently.

20 And finally, the third bucket, or 

21 circle around expanding inclusion, really looks at 

22 barriers to access to financial services. What 

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1 are some of the challenges that are keeping 

2 individuals from accessing and using affordable 

3 products to meet their needs?

4 And I think when we think about these 

5 three different buckets, you know, one of the 

6 populations that jumps to mind, is young adults. 

7 And the population that we focus on are squarely 

8 in the 16 to 24 year age range.

9 So, many of these individuals are head 

10 of households. Many of them are parents. Many of 

11 them are what they used to call disconnected young 

12 people, meaning that they're out of school and out 

13 of work. And so they have a unique set of 

14 challenges.

15 They have a unique set of challenges in 

16 identifying, you know, many of them, like we're 

17 hearing, are -- have difficulty really going into 

18 financial institutions and working with financial 

19 institutions. They have all kinds of 

20 misconceptions about what's available.

21 And so, the way we approach this work 

22 is to go to a place where we know these young people 

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1 are. Many of them are trying to find employment.

2 And the workforce programs provide a 

3 really unique opportunity to engage with these 

4 young folks. And figure out ways to empower the 

5 workforce programs to provide these financial 

6 capability services to these young people.

7 So, in 2015 we collaborated with the 

8 Department of Labor. We partnered with the 

9 Department of Labor.

10 We worked with Prosperity Now, America 

11 Saves, and several other organizations outside of 

12 government to launch this initiative that we 

13 called, cleverly called, YES, Youth Employment

14 Success Initiative.

15 And the idea was to do a couple of 

16 things. One to learn from workforce programs 

17 about what are the challenges that they are 

18 encountering as they try to prepare their young 

19 people to go out into the workforce?

20 If you can imagine a 16 year old young 

21 person who is getting a job for the first time, but 

22 that person doesn't understand banking. They 

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1 don't understand credit. They don't understand 

2 taxes. They don't understand what to do with their 

3 paycheck.

4 You know, how are you really preparing 

5 this person for success if you're training them for 

6 an employment situation, putting them in a job. 

7 It's almost like giving someone a car without, you 

8 know, a driver's license, or the ability to drive. 

9 And so that's the kind of theory behind 

10 what we were trying to do. So, we wanted to learn 

11 from these communities. Share some best practices 

12 with them.

13 Build up their capacity so they could 

14 do this work better. And then take that learning 

15 back to the Bureau and then share it with a broader 

16 segment of the population.

17 So, we worked with 23 communities. 

18 What we quickly learned is that 23 was a large 

19 number.

20 (Laughter.)

21 MR. BROWN: I'm sorry, 24. But we 

22 quickly learned that that was too many. So we 

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1 drilled down and really focused on five of the 

2 communities with the contracting work that we were 

3 doing with Prosperity Now.

4 And really work with those communities 

5 really closely to find out, what exactly are the 

6 things they need to integrate these services? 

7 What are the challenges that they're facing with 

8 banking access?

9 You know, this is a great collaboration 

10 that you guys are doing in Lowell. But, it doesn't 

11 always work that way in some communities around the 

12 country. Some communities, there are differences 

13 in access to financial services.

14 So, one of the things that I heard today 

15 was that there's financial literacy. But there's 

16 also, how can a young person become more confident, 

17 more capable, and feeling more empowered to utilize 

18 the available resources and services that are out 

19 there?

20 Our frame of reference is really to look 

21 at building knowledge, providing an opportunity 

22 for someone to develop their skills, and really 

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1 working on access to financial services.

2 And that's the way we've structured our 

3 program from the beginning. That we wanted to hit 

4 each of these buckets.

5 So they needed to be products that meet 

6 the unique needs of this diverse population of 

7 people. It couldn't be a cookie cutter product.

8 But we also wanted to create a space 

9 where the workforce programs can actually help the 

10 young people practice these new skills that they're 

11 learning around money management.

12 So, that all being said, you know, we 

13 sit here in D.C., and we launch this program in 

14 these communities around the country. And what we 

15 quickly realized is that we needed to go out and 

16 talk to them.

17 We need to go out and talk to not only 

18 the young people who are going through these 

19 programs, but also the operators. Because without 

20 the operators buying into the program and buying 

21 into this idea of the value of financial 

22 capability, meaning that if they prepare their 

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1 young workers, they're much more likely to be 

2 successful.

3 We also needed to understand what the 

4 operators cared about. And for the WIOA funded 

5 programs, one of the things they cared about was 

6 job retention, income gains, and so on.

7 And so, they were naturally interested 

8 in learning about ways that they can continue the 

9 success of the training that they've provided.

10 A couple of things that we've learned 

11 from talking to these young people and the people 

12 that work with them, is that they were looking for 

13 an unbiased, free financial education resources 

14 that were specifically designed for young people 

15 in that age range, 16 to 24.

16 The materials had to be designed in a 

17 way that -- the way that these young folks learn. 

18 It has to be written in ways that they speak.

19 And it has to be fresh and kind of 

20 engaging. Which is a challenge sometimes for us 

21 regulators as we put information out there that is, 

22 you know, by the book.

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1 But, it's not meant for a 16 or 17 year 

2 old person. So, how do you -- how do you be correct 

3 and meet all your regulatory requirements, but at 

4 the same time put it in a way that they can 

5 understand it?

6 So those are some of the challenges and 

7 things that we've learned. We've also learned 

8 that the information has to be age appropriate. 

9 So, it might not be the best thing to start talking 

10 about retirement to a 16 year old.

11 (Laughter.)

12 MR. BROWN: You know, that being said, 

13 one of the topics that came up from these 

14 interactions was that, you know, they really want 

15 to talk about credit, savings, you know, debt, all 

16 of these things. These things are real to a lot 

17 of these young people.

18 You know, they have identity issues 

19 where their identity has been used by others. 

20 They're saving for helping around their families.

21 But they also want to -- they also have 

22 aspirations. You know, many of them want to rent 

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1 an apartment. Many of them want to purchase a car. 

2 And so what we've learned is to figure 

3 out ways to back into the financial capability 

4 learning without being overly prescriptive in 

5 terms of the way we give that information out.

6 And one of the things that we heard a 

7 lot about was, how do you help someone prepare for 

8 their first apartment? How do you help someone 

9 prepare for the transportation to get to work?

10 And so, one of the things that we are 

11 planning to do was we go forward, is to structure 

12 our future in this area in ways that are linked to 

13 these young people's aspirations.

14 And at the same time support the 

15 workforce system. And at the same time drive the 

16 financial capability scales that we are trying to 

17 insert into these programs.

18 A couple of areas that we're going to 

19 be focusing on, transportation seems to be a good 

20 one. Because in many parts of the country, people 

21 are having a hard time getting to work.

22 And that caused them to peel off and 

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1 lose their jobs. Other parts, people are paying, 

2 you know, even within the population that we looked 

3 at, some of these young people are paying large 

4 amounts of money paying for a car share to get to 

5 work.

6 Or, you know, some people are 

7 purchasing cars that are not really affordable in 

8 terms of how much they're making. Even in the 

9 cities, you know, you live in New York City, but 

10 you work in Westchester County, how do you get 

11 there, because the public transportation systems 

12 aren't.

13 Basically the transportation to work 

14 and where you live don't always align very easily. 

15 So how do you help someone to plan, budget and save 

16 for those occurrences?

17 So, going forward there are a couple of 

18 things we're going to be focusing on. Obviously 

19 transaction accounts will continue to be a big part 

20 of our work.

21 Helping these young people to, you 

22 know, and the folks that they work with, to figure 

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1 out ways to get access to accounts that are friendly 

2 to use in the FDIC's model.

3 To continue to promote that. And 

4 create linkages and partnerships like this great 

5 one in Lowell.

6 We're also focused on credit. That 

7 continues to be a big issue for young people in this 

8 population range. As they try to get an apartment, 

9 purchase an automobile, or whatever they're going 

10 to do in their lives, credit is a big part.

11 So, we want to make sure that they 

12 understand credit. Figure out ways to build up 

13 their credit. And continue to have strong credit 

14 ratings going into their young adulthood.

15 Savings is another area that we will 

16 continue to stress. Because that's kind of the 

17 engine that protects people from, you know, 

18 borrowing at a higher rate if they come into an 

19 emergency.

20 And it's just a good habit to start at 

21 a young age to start thinking about. Maybe when 

22 they get into their 30s they could start talking 

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1 about and thinking about retirement. But the 

2 habit of savings at a young age, will continue 

3 throughout their lives.

4 And then finally, helping them to 

5 manage their debt as they get into debt. Because 

6 that's part of, you know, making mistakes and 

7 correcting it in a young person's life.

8 This work, we've learned a great deal 

9 from this work over the last several years. Both 

10 working in collaboration with our partners at FDIC 

11 and others in the nonprofit sector.

12 And I think we will continue to learn. 

13 We will continue to work with the Department of 

14 Labor to share all of the great resources that we 

15 are collecting.

16 Part of what we are doing is assembling 

17 all of these great -- this great information from 

18 this project. And pushing it out to the systems 

19 at the Department of Labor so we can empower 

20 workforce systems to really embrace financial 

21 capability as part of the way they do their work.

22 If we can get more of them to start 

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1 thinking about this not as a side thing, but as this 

2 is what's going to drive success for your program, 

3 helping your people succeed in the financial 

4 marketplace will help you get better outcomes for 

5 your programs.

6 I think then we can see a win/win. 

7 Because many of them, you know, they want to do it, 

8 they just don't know how. 

9 And I think that's what's great about 

10 the collaboration that we've had here. Is that we 

11 are teaching them how to do it.

12 And hopefully our research will show 

13 that, you know, it's actually having positive 

14 outcomes in terms of job retention.

15 Thank you for the opportunity.

16 MR. REYNOLDS: Thank you. Can we go to 

17 the next slide? So we invite your questions for 

18 us.

19 We have a few questions up on the screen 

20 that we'd certainly welcome your input on. How 

21 best we can continue?

22 But let's start with Robert, would you 

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1 like to ask the first question?

2 MEMBER ANNIBALE: Just a -- and thank 

3 you. This is really interesting.

4 And you're touching on an age group, I 

5 mean, we've worked a lot more with some of our 

6 colleagues here they -- and others on youth, on a 

7 much younger group. And on-boarding, you know, 

8 thousands of kindergartners and others.

9 But, we've done that in a way because 

10 of the -- and with San Francisco, their decision 

11 to have a universal program, it meant taking every 

12 child at five years old. So documentation and 

13 parents were challenges obviously. Right?

14 So, instead it's actually a large 

15 escrow structure basically. Think of it as a trust 

16 fund for everybody. Sub accounts.

17 How do you, when you get to teens -- and 

18 we have a different regulator day to day, as well 

19 as the FDIC. So, I'm most thinking of KYC and AML. 

20 How do you open the accounts for 

21 somebody who's say 15, and would the CFPBs be on 

22 that too? Because they will be signing account 

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1 opening documentation, right?

2 I mean, to the extent that you can 

3 enforce or not, it will be a youth without a parent 

4 signing it. For which the kids you're targeting 

5 may -- the parent maybe part of the challenge, not 

6 only the absence of a parent.

7 How did you approach that in terms of 

8 the getting past the documentation to open?

9 MR. DAUGHERTY: A lot of conversations 

10 behind closed doors that was above my pay grade, 

11 to be honest.

12 (Laughter.)

13 MR. DAUGHERTY: No, completely fair. 

14 But no, we -- our -- the amount of accounts that 

15 we opened were smaller. And so we weren't overly 

16 concerned about losing too much money on if these 

17 accounts go bad.

18 And so it was a signed off by the 

19 President of the bank. And we were just able to 

20 draw up the accounts and make the proper 

21 documentation.

22 MEMBER ANNIBALE: No. I mean, not 

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1 commercially I didn't mean to lose money on it or 

2 not.

3 MR. DAUGHERTY: Yeah.

4 MEMBER ANNIBALE: But, I meant from a 

5 legal perspective. If you want to scale this and 

6 you open accounts for young people who can open 

7 them, using, as you're saying, without consent, 

8 without parental consent or any guardian consent.

9 And without full documentation, right, 

10 of some kind. Many of them don't have a driver's 

11 license or a passport or -- how did you manage that? 

12 Or did you just sort of stay below the 

13 radar while you're doing the pilot?

14 MR. DAUGHERTY: That would -- that's a 

15 good question for our legal team.

16 (Laughter.)

17 MR. REYNOLDS: I just also point out 

18 the interagency youth saving --

19 MS. DONOVAN: Getting in trouble, 

20 right? Yeah. I see what you're doing. Okay.

21 MR. REYNOLDS: I'll also just point out 

22 the interagency youth savings guidance. It has a 

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1 question specifically relating to -- a couple of 

2 questions relating to customer identification.

3 And there's one specifically relating 

4 to the escrow type model account. And it's about 

5 half a page, or a quarter of a page. It really gets 

6 at who is the customer? Is it the young person the 

7 customer? Or is it organization?

8 So, and when these questions come up, 

9 our community affairs' staff can connect parties 

10 that have questions to experts who can work through 

11 them.

12 MEMBER ANNIBALE: That example draws 

13 very much from Jose and our program. Which was all 

14 the -- which was really drawn on the escrow account 

15 in many ways.

16 The other one is really -- and I'll 

17 leave it here with any of the lawyers and I'll just 

18 hear clients.

19 It becomes -- so we have to be 

20 thoughtful how to do that so we can do it and scale 

21 this. Commercially, risk is up to the bank, and 

22 minimal hopefully.

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1 But that the youth, you know, the 

2 enforceability and the ability of the youth to go 

3 and contract on their own is something that we'd 

4 have to figure out.

5 MS. DONOVAN: May I just make a quick 

6 comment? All of our programs are workforce 

7 development programs, and you do have to complete 

8 an application.

9 So, if the young person is under 18, it 

10 does require parental signature. So, from that 

11 standpoint, we include everything about our 

12 program, and they sign off that that young person 

13 is able to participate in all aspects of the 

14 program. Including enrolling in a financial 

15 institution.

16 MEMBER ANNIBALE: Oh. Okay, that 

17 helps.

18 MEMBER LEVERE: So thank you. That 

19 was fabulous. I just want to give a shout out to 

20 Eastern Bank.

21 The other award they just won is the 

22 ABA's Financial Inclusion Award. For an 

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1 extraordinary program they have on diversity, 

2 equity, and inclusion around building business of 

3 color.

4 So, I want to follow on Bob's point. 

5 Because one of the biggest policy issues that has 

6 come out of our work on YES, as well as another youth 

7 financial capability fund that we're doing with 

8 Citi right now, is the issue of noncustodial youth 

9 accounts.

10 And the issues that you just described, 

11 Tom, in terms of looking up on check systems and 

12 seeing that they've taken out an account in this 

13 child's name, and all that -- those issues are ripe 

14 all throughout the systems.

15 And I think this is one of the big policy 

16 issues that together if we could, you know, I've 

17 been going bank by bank, talking to banks about how 

18 to do this. Because, it really is critical to 

19 making this whole initiative, which makes enormous 

20 sense.

21 And it's an incredible platform to 

22 build financial capability, savings, and all the 

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1 things we want. But we have to solve exactly the 

2 problem you said, Bob, so the banks feel safe with 

3 that.

4 The other point I just want to raise 

5 more broadly, which we've seen is, how do we, and 

6 Heather your point would be really interesting, the 

7 culture of workforce organizations and workforce 

8 development, is, in many cases, completely absent 

9 any of this work.

10 And that's an incredible opportunity 

11 for all of us working together. And that's been 

12 a huge part of YES, as well as other work.

13 And how do we think about this, starting 

14 with the Department of Labor, right? Who is in 

15 many cases never thought about where do they go to 

16 cash that first paycheck? You know, the whole 

17 story we think about.

18 So, I just love any more reflections on 

19 that in your peers, as we think about how do we 

20 broaden this?

21 MS. DONOVAN: Sure. So, to be honest, 

22 the WIOA has made financial education mandatory. 

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1 MEMBER LEVERE: Right.

2 MS. DONOVAN: So, the Department of 

3 Labor has to recognize that it's mandatory. But 

4 how you deliver financial education is of course 

5 subject.

6 MEMBER LEVERE: Exactly.

7 MS. DONOVAN: So, I think in our area 

8 we've made a really large stand as to -- and I've 

9 spoken about this at the New York Fed as well in 

10 regards to like CRA and EON, how they connect to 

11 each other.

12 And we've made a big stand on how 

13 important it is. And we've also adapted it to 

14 adult population in our career center as well.

15 And we've certified five people as 

16 educators in personal finance to really take it to 

17 the next level. So, we've made it a mission of 

18 ours.

19 How we make that a mission of the 

20 Department of Labor in general, is not up to me. 

21 But, they -- they're aware that I'm here today 

22 speaking about this.

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1 (Laughter.)

2 MEMBER LEVERE: Well, that will change 

3 everything.

4 (Laughter.)

5 MS. DONOVAN: But, we were talking 

6 about this at lunch as well, it's really about the 

7 directors and the state workforce boards coming 

8 together and recognizing a standard for financial 

9 education across the state.

10 Which I think is doable. We all just 

11 rebranded ourselves under one name. So, anywhere 

12 you go in Massachusetts you're going to go to a Mass 

13 Hire either workforce board or career center.

14 So, everyone has the same name. It's 

15 just your area is different. So, we are working 

16 towards that similarities across our state.

17 How you move that outside of our state, 

18 I think is -- I don't know the answer to that.

19 We did just have Pennsylvania Rapid 

20 Response Team in to learn about how we do our 

21 wraparound services. Because that's a big part of 

22 what we do.

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1 Is we provide supplemental services. 

2 We have a social worker and things like that. So, 

3 we're able to really fully encompass.

4 And we're hoping that if we're 

5 successful, and we've just started this, that we'll 

6 be able to do what we did here. Where we can share 

7 our success.

8 And that will start the conversation as 

9 to how we make that bigger.

10 MR. REYNOLDS: Ted?

11 MEMBER BECK: Obviously, I like what 

12 you're doing. And I appreciate you using 

13 financial capability as a description.

14 Because financial literacy is a term 

15 that I've been trying to get rid of for ten years. 

16 Financial capability is a much better label.

17 But, I wanted -- you started to talk 

18 about what I think is a really key thing. And a 

19 really key thing I think for the committee that 

20 maybe we could be of assistance. And that's tone 

21 at the top.

22 Because Doc, you convinced your bank to 

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1 do this.

2 MR. DAUGHERTY: Um-hum.

3 MEMBER BECK: Heather, you talked 

4 about how do you get more people saying this is a 

5 priority. Tell me about the tone at the top? And 

6 the support that you got to make this happen in 

7 Lowell, and hopefully across the entire network for 

8 the bank.

9 But the, how critical is that support 

10 to have this just not be a flavor of the month?

11 MR. DAUGHERTY: I think it's overly 

12 critical. We did it as just a small test pilot. 

13 We did it for two years.

14 We did not do it this year just from a 

15 staffing perspective. We are analyzing all the 

16 accounts to make sure that they are going to be 

17 profitable and a concept we do want to alter in the 

18 future.

19 So at the moment for Eastern Bank 

20 itself, it's a very, very small test pilot. But 

21 to be able to roll it out, you would need to have 

22 everyone's buy in from -- throughout the entire 

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1 bank and all the banks.

2 MS. DONOVAN: Right. We also did have 

3 nine separate institutions agree to the same exact 

4 thing.

5 So, while Doc is here with me, he's 

6 fantastic, we also had eight other institutions who 

7 were onboard the same exact way that Doc and his 

8 bank were. And who continue to be on our financial 

9 capability council that we conduct at the workforce 

10 office.

11 MEMBER BECK: Thanks.

12 MR. REYNOLDS: I guess we'll go back 

13 around.

14 MEMBER BARRERA: So, well 

15 congratulations because the work you're doing 

16 makes you a light blue.

17 (Laughter.)

18 MEMBER BARRERA: And then my question 

19 is, how about, you know, they've got their paycheck 

20 and -- you know, their job and their paycheck, but 

21 who's -- where's the training coming along about 

22 taxes? Reporting their annual taxes?

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1 MS. DONOVAN: I cannot figure this 

2 thing out. Sorry. So, we do -- along with the 

3 financial education training, we do an extensive 

4 soft skills work readiness training for all of our 

5 programs.

6 It ranges in hours from 15 to 100 

7 depending on who we're working with. So, our young 

8 people who have disabilities get an amended 

9 curriculum for the entire school year.

10 And that includes more work then we're 

11 able to do in just a day, on taxes, when you need 

12 to report, how you read, where your money is going, 

13 what you want to put in, what you want to put out. 

14 We encourage savings, checking.

15 And then we do a lot of the goal setting 

16 work that we can't do in that one day, along the 

17 course of the work readiness. So that we're really 

18 combining the skills that you need for work.

19 But also the skills that you need for 

20 life. Which includes being capable and 

21 understanding what you do with your paycheck and 

22 how to read it, and when you need to advocate for 

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1 yourself.

2 MEMBER CISNEROS: Hi. 

3 Congratulations everyone. Great work. In our --

4 at the city's financial empowerment coalition and 

5 the fund nonprofit organization we work through, 

6 we've administered summer jobs for youth and 

7 accounts for summer job for youth in nearly a dozen 

8 cities across the country.

9 In San Francisco, which is one of those 

10 cities, we connect seven thousand youth each year 

11 to summer jobs. And in early survey work, we found 

12 that fully half of the folks across all the cities 

13 we looked at -- started -- got their first paycheck 

14 without having a bank account, which is horrible.

15 So, we needed to do something about 

16 that. What I'm fascinated about is, and I 

17 understand Lowell's not the biggest city in the 

18 world, but I'm impressed by the number of financial 

19 institutions, and I'd love to learn more about 

20 them.

21 One of the things we struggle with is 

22 we found that to, Bob, your point, none of the major 

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1 banks, and though there is a recent exciting 

2 development in that area, would open accounts for 

3 anyone under age 18.

4 Can you tell me about the list of folks 

5 that joined in Lowell? Were any of them the large 

6 banks?

7 MR. MANNING: No. They were all 

8 community banks of four billion. Well, actually 

9 at the time they were about eight billion.

10 So, eight billion to about four hundred 

11 million.

12 MEMBER CISNEROS: Okay. And credit --

13 MR. MANNING: They were invited.

14 MEMBER CISNEROS: No, of course.

15 MR. MANNING: Yeah.

16 MEMBER CISNEROS: Right. We -- and 

17 our great partners at the FDIC, we've convened the 

18 largest banks and all the others many times to try 

19 to get them to do this, with pretty much no success. 

20 With the one exception that Bank of 

21 America has recently announced that their safe 

22 account is available to 16 and 17 year olds. Which 

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1 is great.

2 MEMBER ANNIBALE: Without parents? 

3 Without a guardian or a parent?

4 MEMBER CISNEROS: Yeah. Yeah. 

5 Noncustodial. Yes. And believe me, I'm going to 

6 be bringing that to all my other large banks --

7 (Laughter.)

8 MEMBER CISNEROS: Very soon.

9 MEMBER ANNIBALE: Doc's 30 thousand is 

10 working.

11 MEMBER CISNEROS: Exactly. So, 

12 congratulations. That's great. It sounds to me 

13 though like even though these eight banks are 

14 working with you in your program, it's not clear 

15 these banks are making these accounts just 

16 generally publically available to under age 18 

17 kids. Is that correct?

18 MR. MANNING: Some of the institutions 

19 that participated were credit unions. And they 

20 do.

21 MEMBER CISNEROS: Yes.

22 MR. MANNING: That's part of their --

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1 MEMBER CISNEROS: Our heroes in this 

2 work have been credit unions too. So, we hear you. 

3 MR. MANNING: And some of the other 

4 banks made exceptions. And are continuing to 

5 assess it, to give it further consideration going 

6 forward, that they may open it up to any and all. 

7 MEMBER CISNEROS: That's great.

8 MR. MANNING: But I know there's a 

9 couple that still are having conversations.

10 MEMBER CISNEROS: Well, I just want to 

11 echo, I think we've heard over and over, which is, 

12 we just need to get all the banks there. Because 

13 we're not going to make enough progress until we 

14 do. Thank you.

15 MEMBER HENDERSON: It's a great 

16 program guys. Congratulations. And thanks for 

17 the very clear explanation about what you're doing. 

18 It sounded very exciting.

19 I'm curious about whether there is any 

20 interaction between the banks and your program and 

21 the school systems that are involved that are 

22 producing the students that you're drawing from?

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1 But, I'm not suggesting that they need 

2 to be involved directly in the work. Because the 

3 truth is, the schools are already overburdened with 

4 programs that they can't effectively implement.

5 This is certainly not a program that 

6 should be incorporated in the schools. It's 

7 terrific that you all are taking it on. 

8 But, I'm wondering whether the schools 

9 get any feedback from your experience with the 

10 students. And sort of helping the schools shape 

11 skills for the new economy going forward.

12 Are they advised about how the students 

13 are doing? Are there adjustments in the 

14 curriculum that schools are offering that could be 

15 complementary to the work that you're doing?

16 And have you had any recommendations in 

17 that regard?

18 MS. DONOVAN: Sure. So again, I think 

19 that we're lucky in Lowell. We are a city of about 

20 110 thousand people.

21 We have a vocational school and a high 

22 school, and an alternative high school, and that 

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1 is -- and then some Catholic schools. But that's 

2 pretty much, that's it. That's the only options 

3 you have.

4 And we are lucky to be located in the 

5 vocational school during the day. With the 

6 disability employment initiative program that we 

7 have, we work with their top young people.

8 And that's a program that is for after 

9 you have gotten your certificate of completion. 

10 You can stay into this school until you're 22.

11 So, we're in their day to day school 

12 there. We also have an after school program 

13 located at the same vocational school in which we 

14 teach these skills.

15 And we are in the alternative high 

16 school every week teaching life skills, financial 

17 skills, career skills. So, we're lucky to be 

18 incorporated on that level.

19 We have a memorandum of understanding 

20 with them. So, they can't kick us out even if they 

21 wanted to.

22 (Laughter.)

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1 MS. DONOVAN: And then the high school, 

2 the public high school is, I think, the hardest to 

3 broach. They are so jammed packed with their 

4 schedules and things that they need to do.

5 But, we work really well with their 

6 guidance counselors and their administration 

7 staff. So, if they have somebody who comes into 

8 their college and career center that is in need of 

9 our services, we're a block way. And they just 

10 send them down.

11 So, I think we're lucky in that aspect. 

12 But, as to being able to get into the public school 

13 and really feet on the ground, we're always 

14 actively working on that on committees and things 

15 like that. But, we're not there yet.

16 MEMBER HENDERSON: Okay. Thank you.

17 MR. REYNOLDS: And there's one stream 

18 of federal funding for youth employment programs 

19 that go for out of school youth interestingly.

20 MEMBER HENDERSON: Is that right?

21 MR. REYNOLDS: Yes.

22 MEMBER HENDERSON: And you incorporate 

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1 that through the community college? Or do you do 

2 it somehow differently?

3 MR. REYNOLDS: The WIOA funding goes to 

4 the workforce development boards. But that's part 

5 of the formula. That the formula looks at how many 

6 youths are out of school.

7 MEMBER HENDERSON: I see. Okay. 

8 Thanks.

9 MEMBER MCCOY: Yes, thank you. I love 

10 the name YES. And I think the back story that you 

11 presented today was getting to YES. And it's 

12 really impressive.

13 I had two questions. And for Doc and 

14 Heather and Jeffrey, I'd be curious about maybe the 

15 top one or two challenges you had as you were 

16 getting to YES.

17 And then for Desmond, I was really 

18 intrigued with your talking about the issue of 

19 trying to take this to scale. And even to take it 

20 back from five up to the original 24.

21 And so, I'd love your thoughts on both. 

22 MS. DONOVAN: Do you want to do that 

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1 first? Okay. And Jeff, would you like to talk 

2 about a challenge?

3 MR. MANNING: Sure. One of the 

4 challenges was trying to make it a true safe 

5 account. Not allowing overdrafts.

6 MEMBER MCCOY: Um-hum.

7 MR. MANNING: That took several hours 

8 of discussion. And I wouldn't say pleading, but 

9 it was trying to make it perfectly clear, these 

10 kids, you know, they're low income.

11 Some of them are already struggling. 

12 We didn't want to make it any harder for them, you 

13 know.

14 MEMBER MCCOY: Yeah.

15 MR. MANNING: It's tough to get through 

16 high school or through a day at school itself. But 

17 then to have an overdraft over your head at 17 or 

18 18 years old, we just didn't want that to happen. 

19 So again, between again, hours of 

20 discussion, the agreement was to not allow it. And

21 to deal through the check system.

22 Those were probably the two largest 

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1 challenges that we had with the entire program.

2 MEMBER MCCOY: Okay.

3 MR. MANNING: To get everyone to buy in 

4 if you will.

5 MS. DONOVAN: And I think just it's 

6 funny to note that our first roundtable, we did 

7 bring credit unions and banks together in the same 

8 spot. 

9 MEMBER MCCOY: Brave soul.

10 MS. DONOVAN: And the credit unions 

11 were like yes right away. And so then the bankers 

12 were like, yeah, we can do that.

13 (Laughter.)

14 MR. MANNING: And actually one of the 

15 nice features of the entire bank fair is when the 

16 banks and credit unions worked side by side trying 

17 to compete for accounts, was they all had the 

18 ability. And some said they couldn't do it. But 

19 I know they could, to open an account on their 

20 system with a zero balance.

21 It's a target. You can turn it on to 

22 make the account go live. Even though you can 

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1 basically upload it with a zero balance, and it's 

2 a live account until that first check hits or the 

3 first deposit.

4 So, some said they couldn't do it. I 

5 asked them to go back and talk with their internal 

6 folks.

7 And they called me back and said, you 

8 know, you can. And I said yeah. I knew the answer 

9 when I asked the question.

10 (Laughter.)

11 MR. MANNING: It was one of those. So 

12 that was kind of -- that helped things along too. 

13 MR. BROWN: So for us, I think, there 

14 -- I'll also answer your first question. There 

15 were a lot of challenges that we saw as we were 

16 working with these communities.

17 As I mentioned, starting with 20 we 

18 realized that the diversity in a workforce program 

19 is so complicated at the ground level. Funds are 

20 coming from the state.

21 Funds are coming from nonprofits. 

22 Funds are coming from local areas. Funds are 

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1 coming from the federal government. Trying to 

2 figure out all of that.

3 And trying to build in the financial 

4 capability work on top of that, for many of these 

5 workforce programs required a lot of extra help. 

6 So that was one of the challenges that we recognized 

7 in scaling this.

8 The other challenge that we saw was just 

9 a difficulty and a level of lack of understanding 

10 about opening up accounts for both young people 

11 under 18, but also having accounts available for 

12 those who are over 18, but might not have a lot of 

13 funds coming into the account. That's also a 

14 challenge for many of these programs.

15 So, the workforce people, even though 

16 they want to do these things, sometimes it's hard 

17 for them to find partnerships. Lowell is a unique 

18 situation.

19 As we go forward, we want to make sure 

20 that that financial capability side of things can 

21 be structured in a way where it's a lot easier for 

22 the workforce programs not to have to think about 

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1 how to create it. Because this is not their core 

2 work.

3 We want to make it a turnkey process. 

4 Where we meet the financial education and skill 

5 building needs of the young people. And at the 

6 same time make it easier for the administrators to 

7 implement the program.

8 We will continue to work with the FDIC 

9 and others to make, you know, more of these 

10 accounts, these safe accounts available. Because 

11 in a lot of cases, the programs are turning to 

12 payroll cards and prepaid cards. There's a level 

13 of complexity and fee structures around those 

14 programs that, you know, cause concern to some of 

15 the program providers.

16 So, at the end of the day, we really 

17 think that access to safe banking accounts and safe 

18 credit union accounts, you know, that's the way 

19 that we want to encourage these young people to move 

20 forward on. Because there are always going to be 

21 other products available.

22 We think that this is the best long term 

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1 way to get them in the financial system that will 

2 work over time.

3 MR. DAUGHERTY: Yeah. And for me, 

4 just because I wanted to chime in real fast. For 

5 me it was the pull through. That was my biggest 

6 concern. I'm going to open up a whole bunch of 

7 accounts. Three months later we're going to just 

8 close them out.

9 And I don't have any statistics on this, 

10 but just knowing the City of Lowell and the 

11 Merrimack Valley as well as I do, I honestly believe 

12 that the majority of these kids, if they did not 

13 go through this program, would go into the nonbank 

14 section.

15 The reason is, because they are being 

16 taught by their parents on how they bank. And 

17 their parents don't know how to bank.

18 And so they're just teaching generation 

19 after generation after generation. So, having 

20 this program, you get the ah-ha moment.

21 Oh, now I understand. I don't have to 

22 be afraid of the bank. And they are able to ask 

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1 all those tough questions that they were afraid to 

2 ask.

3 So, I don't think it's that they 

4 mistrust banks. Some of them they do. But I think 

5 a lot of it is just lack of knowledge.

6 They just don't understand because 

7 they're being taught that by their parents or 

8 they're being taught by the TV, of saying hey, put 

9 your check on this payday card. You don't have to 

10 stand in the bank line for three days.

11 And all of a sudden they're being 

12 learned by a commercial. So, I think this is a 

13 fantastic program.

14 MR. REYNOLDS: Alden?

15 MEMBER MCDONALD: Yes. I agree that 

16 your program is a very, very important program for 

17 all of us to move forward with. Not only the end 

18 bank, but the financial literacy part in our 

19 community.

20 You basically mentioned three partners 

21 that you need. And that was the Department of 

22 Labor, the workforce agencies, and banks.

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1 Have you guys had any type of 

2 conversation, any type of strategic planning on how 

3 do you put the two, the Department of Labor and the 

4 workforce agencies together?

5 And if you had that, can the FDIC, who 

6 played a very important part of bringing the banks 

7 to the table, look like we can make that 

8 three-legged stool into four legs.

9 MR. REYNOLDS: I'll just start with the 

10 Department of Labor. The Department of Labor has 

11 really been a great collaborator with us in making 

12 their -- so for example, they facilitated us 

13 conducting webinars a number of times for their 

14 grantees.

15 Where we were able to on the Department 

16 of Labor facilitated webinar, explain Money Smart 

17 opportunity to connect. I think part of the 

18 challenge is the regulation requires financial 

19 education to be offered.

20 But how that is offered can range from 

21 a simple brochure to something more robust like we 

22 talked about here.

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1 MEMBER MCDONALD: I guess I was 

2 thinking a little bit more aggressively. And that 

3 was the Department of Labor making it a policy for 

4 the funding.

5 MR. REYNOLDS: I see. Right.

6 MEMBER MCDONALD: To have the 

7 financial literacy up front. Because that's at 

8 the beginning of the issue.

9 So, if the Department of Labor and the 

10 Workforce Commission can somehow or another, make 

11 it part of the training. This is what you guys have 

12 done. You made it part of the training in order 

13 to enter the program.

14 So to me that appears to be a very easy 

15 lift in having that discussion and basically 

16 develop a strategy on how do we have that 

17 discussion.

18 As I said here, I just saw your solution 

19 for a number of items that we experience in the low 

20 income community, in the African American and even 

21 the Latino community. That's a big lift.

22 And if we can incorporate that into the 

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1 policy piece, that makes it. Because, on the 

2 banking side, I'm sure we could encourage the banks 

3 and school the banks that they can open an account 

4 for someone under 18.

5 Because most bankers will tell you, 

6 well the law won't permit us to open it. And they 

7 won't go further and say, without a guardian and 

8 things of that nature.

9 But, I think if we could begin educating 

10 the banks, that can happen. And I think it's a good 

11 entry point. And I see a lot of banks perhaps 

12 signing up on that.

13 MR. REYNOLDS: Thank you.

14 MR. MILLER: So we've reached the end 

15 of the program. Jelena McWilliams, I don't know 

16 if you have any final thoughts you want to share. 

17 CHAIRMAN McWILLIAMS: I do. I do. I 

18 would be amiss if I didn't thank the panel and 

19 everybody on the Committee for a truly engaging and 

20 educational discussion today.

21 And I've learned so much from you that 

22 I'm grateful for today. And I'm proud of our staff 

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1 for the work they've done in this area.

2 As I mentioned this morning, I don't 

3 take these issues lightly. And I think we can 

4 generally in society do better and do good.

5 And I tell my daughter all the time, 

6 when in doubt, do good. So, I will leave with that. 

7 I know this issue is near and dear to 

8 Marty's heart as well. So, Marty if you would like 

9 to close, I would be honored to have you.

10 DIRECTOR GRUENBERG: Thank you Jelena. 

11 I want to thank the panel. This has really been 

12 a terrific discussion. And the whole program 

13 today has really been outstanding.

14 This Committee has been a huge asset for 

15 the FDIC. We've really benefitted greatly. And 

16 I think you've had an impact on this agency.

17 And more broadly, quite frankly, we've 

18 had a number -- any number of points today, people 

19 have talked about safe accounts as something that 

20 is now sort of part of the discussion around 

21 economic inclusion. 

22 And the idea for safe accounts 

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1 originated with this Committee. So, the 

2 contribution has really been outstanding, and 

3 today's meeting has been a reflection of that.

4 And I want to conclude by saying that 

5 this Committee was actually started by my 

6 predecessor as Chairman Sheila Bair. And I had the 

7 privilege of continuing it when I was Chairman.

8 And I just want to say a word of thanks 

9 to our new Chairman, Jelena McWilliams for 

10 continuing this Committee and it's important work. 

11 It's part of the institution of the FDIC today, an 

12 important part of our mission.

13 And I think the meeting today just 

14 illustrates the value that it brings. So, thank 

15 you all. And we'll see you next time.

16 (Applause.)

17 (Whereupon, the above-entitled matter 

18 went off the record at 3:35 p.m.)

19

20

21

22

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