1

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

FEDERAL DEPOSIT INSURANCE CORPORATION

+ + + + +

ADVISORY COMMITTEE ON ECONOMIC INCLUSION

+ + + + +

MEETING

+ + + + +

THURSDAY

OCTOBER 20, 2016

+ + + + +

The Advisory Committee met in the Board 

Room of the FDIC Headquarters, 550 17th Street, 

N.W., Washington, D.C., at 9:05 a.m., Martin J. 

Gruenberg, Chairman, presiding.

MEMBERS PRESENT:

MARTIN J. GRUENBERG, Chairman, FDIC

ROBERT A. ANNIBALE, Global Director, Citi 

Microfinance and Community Development,

Citi

MICHAEL BARR, Professor of Law, University of

Michigan Law School

TED BECK, President and CEO, National Endowment 

for Financial Education 

KELVIN BOSTON, President, Boston Media, Inc.

JOSE CISNEROS, Treasurer, City and County of San 

Francisco

MARTIN EAKES, CEO, Self-Help Credit Union

ANDREA LEVERE, President, Corporation for 

Enterprise Development

PATRICIA A. MCCOY, Liberty Mutual Professor of 

Law, Boston College Law School

ALDEN J. MCDONALD, JR., President and CEO, 

Liberty Bank and Trust 
2

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

MEMBERS PRESENT: (CONT)

BRUCE D. MURPHY, Executive Vice President and 

President, Community 

Development Banking, KeyBank

MARK W. OLSON, Chairman, Treliant Risk Advisors

JOHN W. RYAN, President and CEO, Conference of 

State Bank Supervisors

PHILLIP L. SWAGEL, Professor, University of 

Maryland, School of Public Policy

JOHN C. WEICHER, Senior Fellow and Director, 

Center for Housing and Financial Markets, 

Hudson Institute
3

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

CONTENTS

Opening Remarks

Martin J. Gruenberg.................. 4

Expanding Access to Safe Transaction 

Accounts

Jonathan Miller, Moderator........... 6

Lynn Heitman......................... 9

Jonathan Mintz....................... 19

Liz Ortiz............................ 28

Results of the FDIC National Survey of 

Unbanked and Underbanked Households

Karyen Chu, Moderator................ 75

Ryan Goodstein....................... 76

Jeffrey Weinstein.................... 88

Alicia Lloro......................... 103

Discussion of Survey Results

Keith Ernst, Moderator............... 149

Karyen Chu........................... 150

Initial Lessons from FDIC Youth

Savings Pilot

Luke W. Reynolds, Moderator.......... 210

Ron Jauregui......................... 213

Julie M. Thurlow..................... 222

Michelle Huddleston.................. 231

Susan Bistransin..................... 240

Closing Remarks

Martin J. Gruenberg.................. 277

Adjourn ..................................... 277
4

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

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

2 9:06 a.m.

3 CHAIR GRUENBERG: If I can ask for 

4 everyone's attention. We have a full agenda today 

5 and I think a pretty interesting one. So, I want 

6 to try to get going and stay on schedule if we can. 

7 Let me just give you a brief overview 

8 of our program. The first issue this morning will 

9 catch us up on continuing efforts to expand access 

10 to safe transaction accounts. A representative 

11 from U.S. Bank will discuss their new product that 

12 aligns with their Model Safe Account Standards. 

13 Cities for Financial Empowerment will provide an 

14 update on their work with the Bank On movement. 

15 And the FDIC will discuss our continued efforts to 

16 expand efforts to safe low-cost transactions.

17 Next, we will spend the bulk of today 

18 devoted to review of the results of the 2015 

19 National Survey of Unbanked and Underbanked 

20 Households. We first introduced the Household 

21 Survey in 2009 and it continues to be an invaluable 

22 resource for the FDIC, as well as for researchers, 
5

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 community organizations and industry to better 

2 understand the needs of underserved households.

3 The presentation this morning will 

4 provide will provide the framework of findings for 

5 a follow-up discussion after lunch on the 

6 implications of the results.

7 And I want to frankly say that the 

8 discussion that we have with this committee every 

9 two years on the findings of the survey is the 

10 highlight of the work we do here.

11 Finally, over two years ago the FDIC 

12 began the Youth Savings Pilot as a way to promote 

13 financial inclusion among young people. Today, we 

14 will get an update and outline of lessons learned 

15 from the pilot. And I should mention that we will 

16 have a full program tomorrow at our Virginia Square 

17 facility to discuss the work of the pilot in more 

18 detail.

19 So, we have a lot to cover. Before we 

20 begin, let me remind people that this meeting is 

21 being webcast live and recorded for future viewing.

22 I also want to let the committee know 
6

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 that I am going to have to step out after the first 

2 panel for that session providing the overview of 

3 the Household Survey, have the opportunity to get 

4 briefed in some detail and I have got to go to a 

5 meeting outside of the Agency but I will be back 

6 after lunch for the discussion this afternoon on 

7 the implications of the survey, as well as the 

8 discussion of the Youth Savings Pilot.

9 So, to get started, I would like to 

10 introduce the moderator of our first panel, 

11 Jonathan Miller. He is the Deputy Director for 

12 Policy and Research in our Division of Depositor 

13 and Consumer Protection.

14 MR. MILLER: Thank you, Mr. Chairman. 

15 Good morning members of the committee. As the 

16 chairman described, our first panel this morning 

17 will continue the discussion that we have had over 

18 the course of a number of years now regarding the 

19 expansion of access to safe low-cost transaction 

20 accounts.

21 Right after this panel, as the chairman 

22 mentioned, you are going to hear in our discussion 
7

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 of the Household Survey how high and unexpected 

2 fees can be a barrier to joining or remaining in 

3 the banking system, especially for low and moderate 

4 income families.

5 Over the course of the past several 

6 years, we have adopted a template developed with

7 the active assistance of this committee that we 

8 call the Safe Accounts Template. These accounts 

9 are low-cost as defined by having no or low monthly 

10 fees, no or low monthly balances, and importantly, 

11 no overdraft fees. We focused on Safe Accounts as 

12 a way of helping these families surmount the 

13 barriers to account ownership that we have 

14 identified in the Household Survey.

15 Our first panelist, Lynn Heitman, will 

16 discuss how another significant financial 

17 institution is offering a product designed to 

18 provide safe affordable access to financial 

19 services.

20 Lynn is the Executive Vice President at 

21 U.S. Bank in consumer banking sales and support and 

22 she is responsible for the product strategy and 
8

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 support management of retail consumer deposits and 

2 loans. She is going to give us an overview of the 

3 safe debit account product that U.S. Bank is 

4 offering.

5 And I will note that with the addition 

6 of U.S. Bank's new product, 87 percent of all 

7 Americans now live in a county with a full service 

8 branch of an institution offering Safe Account.

9 The panel after Lynn, we will hear from 

10 Jonathan Mintz, an old friend to this committee. 

11 He is the President and CEO of the Cities for 

12 Financial Empowerment Fund, as you know, inspired 

13 in part by the Model Safe Accounts Template. CFE 

14 developed Bank On National Account Standards. 

15 These standards provide local Bank On programs with 

16 a framework for creating access to mainstream 

17 banking to the unbanked and underbanked community.

18 Jonathan's comments will provide the 

19 committee with updates on the Bank On efforts that 

20 CFE is helping to lead. 

21 And finally, the FDIC's own Liz Ortiz, 

22 our Deputy Director for Consumer and Community 
9

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 Affairs will round out the panel's discussion 

2 providing an update on what the FDIC is doing out 

3 in the field in partnership with CFE and others to 

4 promote these Safe Accounts.

5 So, Lynn, let me hand it over to you.

6 MS. HEITMAN: All right. Wonderful. 

7 Good morning, everybody and thanks so much for 

8 having me. I think what I will start with first 

9 is who we are. For those of you on the East Coast 

10 of the country, we may not be a familiar name or 

11 the southern part of the country as well. We are 

12 the fifth largest bank in the country. We have 

13 more than 3,100 branches and 5,000 ATMS in 25 states 

14 in the Midwest and West. And we serve more than 

15 18 million consumers. So, certainly, a broad 

16 range of impact that we have across the country.

17 Our goal is to be a trusted choice for 

18 our customers and we are fortunate to have been 

19 recognized as one of the most admired, most 

20 trusted, and most ethical companies in the world. 

21 And personally, I am very proud to work for this 

22 organization.
10

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 So, we believe that we have an 

2 opportunity but also a responsibility to reach and 

3 serve all consumers, including the unbanked and 

4 underbanked. We believe that sincerely and have 

5 been working, actually on a Safe Account for 

6 several years, which many people look at me when 

7 I say that and say why does it take several years 

8 to work on a product. It is because it had starts 

9 and stops. And I think as the industry has 

10 evolved, we have learned and we have adjusted and 

11 certainly had an opportunity to move things much 

12 quicker last year, really driven a lot by our 

13 positive and very collaborative relationships with 

14 our regulators, as well as organizations like the 

15 CFE fund that really provided an opportunity for 

16 us to learn a lot more about the consumer and 

17 exactly what their needs were as we were working 

18 through that product design.

19 The Bank On Standards introduced last 

20 year provided us an opportunity to benchmark the 

21 design that we had out there and ensure that it was 

22 something that was going to meet the needs of the 
11

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 consumers. And our account has all of the features 

2 that are required to meet the Bank On standards, 

3 as well as many of the additional features that were 

4 recommended for the product. So, we were very 

5 pleased to see that when that benchmark was 

6 released last year.

7 So, two months ago in August we launched 

8 the U.S. Bank Safe Debit Account. Our goal, to 

9 provide a safe affordable deposit account that had 

10 the benefits of the traditional checking account 

11 for our customers, obviously. So, I believe that 

12 this simple snapshot is a document that is 

13 available --

14 MR. MILLER: It's in your package, yes.

15 MS. HEITMAN: -- to you in your 

16 packets. That does lay out all of the details but 

17 I will walk through some of the key benefits here 

18 to save everybody from having to read the front and 

19 back of that.

20 It is a checkless account. It does 

21 offer a debit card. It has a $4.95 monthly 

22 maintenance fee. Free withdrawals at any U.S. 
12

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 Bank ATM. We do not carry those into overdraft and 

2 there are no overdraft or NSF fees on this product.

3 The funds availability policies are 

4 standard policy for any product that we offer and 

5 that was something that was very important for us 

6 as we looked at this product as well. It does 

7 provide full access via online and mobile banking, 

8 including some key account management features 

9 like text banking and account alerts, which I know 

10 this committee has talked about in the past.

11 We do offer full online bill pay with 

12 this product as well, which is critical, with a 

13 couple of restrictions. And those restrictions 

14 are around recurring payments and future-dated 

15 payments. And the reason for that is because those 

16 types of payments, as they are scheduled or 

17 scheduled out later are something that becomes 

18 difficult for this consumer set to manage, when 

19 they are trying to manage their account balance. 

20 So, we felt that it was important to hold back on 

21 those, something that we are obviously going to 

22 watch and look for whether it is something we can 
13

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 offer in the future.

2 We do offer mobile deposits, remote 

3 deposit captures. We refer to it as a standard fee 

4 that we charge for this service for all of our 

5 products. So, there is not anything that is 

6 different than what any other checking account 

7 customer gets.

8 We also offer discounted money orders 

9 at $1.65 versus our standard rate of $5. We have 

10 available no-fee savings account for these 

11 customers as well and they can choose paper or 

12 electronic statements, at their choice. Whatever 

13 is most convenient for them.

14 Account screening for this product is 

15 the same as all other accounts that we open in the 

16 branches. We screen for past incidents of fraud 

17 or an unresolved U.S. Bank charge off. Those are 

18 the only two screens that we do. We do not screen 

19 for credit when we open the checking account in our 

20 branches.

21 Today, we offer this product in the 

22 branches only but in November we will be offering 
14

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 an online and a phone apply option for the account 

2 as well.

3 Additionally and equally important, I 

4 think, to all the features, which I don't want to 

5 diminish of course, but what was very critical is 

6 that the account is offered with equal visibility 

7 to any other checking account that we offer. So, 

8 all of our branch materials, anything on 

9 usbank.com, this product is laid out equally to 

10 that and is an option. As the banker goes through 

11 the onboarding process with the customer, there are 

12 a series of questions and interactions that they 

13 go through and this product is built right into that 

14 part of the discussion as well.

15 I will also point out, and Jonathan and 

16 I have talked about this a couple of times, 

17 something that was very critical when we put the 

18 launch plan together, is the employee training 

19 element of our launch. Confidence to discuss a 

20 product comes from full understanding of the 

21 product, something, certainly, we have learned as 

22 an organization.
15

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 So, all of our branch employees across 

2 the country were required to go through a training 

3 course on this product to understand its features 

4 and benefits before we launch the product in August 

5 and we will have continuous training that we do with 

6 that. So, that was something that was very 

7 critical as well.

8 So, our results have been very 

9 positive. They have exceeded our expectations. 

10 We are certainly very pleased. One interesting 

11 note that I will point out is two of the three 

12 accounts that we have opened since we launched are 

13 for new customers to the bank. So, we are bringing 

14 consumers into the banking system and I think that 

15 is important.

16 But I also think it is important to talk 

17 about the other, the one out of three as well, the 

18 other group, because we all know that many 

19 underbanked and unbanked consumers have had a bank 

20 account in the past. So, I think we, as an 

21 industry, have as much responsibility to try to 

22 keep consumers into the system as we do to try to 
16

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 draw them back into the system. And I believe by 

2 offering this option this does allow our bankers 

3 to have a conversation with a customer and say maybe 

4 this account hasn't worked out for you, but rather 

5 than leave, how about this account. Would this be 

6 something that would give you more control that you 

7 are looking for? So, I think that was very 

8 important.

9 Our community partners have been 

10 instrumental in spreading the word about the 

11 account. We have met with more than a hundred 

12 community organizations across the country since 

13 we launched the product to share with them the 

14 details so that they can discuss this option with 

15 their clients and the feedback has been 

16 overwhelmingly positive, as you would expect.

17 Likewise, though, our employees have 

18 been very enthusiastic and supportive of the 

19 product. I have heard many great stories of 

20 conversations that they have had. They are very 

21 pleased to be able to have this option to be able 

22 to discuss with their customers and I think that 
17

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 that speaks for itself there as well. They are our 

2 ambassadors in their own communities. We have 

3 branches in metropolitan areas and in many rural 

4 areas across the country. Our employees as our 

5 ambassadors do have the ability, then, and have 

6 been having conversations with local organizations 

7 that they work with, which is also important as 

8 well.

9 Our commitment to this segment is not 

10 just tied to the Safe Account. It goes beyond that 

11 and we feel it is important it is not about an 

12 account. It is about a focus in general. We are 

13 committed to financial education through a very 

14 robust Financial Genius Program, as we call it, 

15 that we have in the bank.

16 We also have worked hard to make 

17 learning about credit engaging. So, we do offer 

18 -- which I heard a chuckle. That is actually very 

19 true. How do we do that? We do offer access for 

20 all of our customers, all of our online banking 

21 customers, to a free credit score and a credit score 

22 dashboard, which I think is probably the most 
18

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 important part of what we offer, where they are able 

2 to go ahead and actually simulate what would happen 

3 to their credit score if they were to pay off a loan, 

4 for example, or open up a new line of credit. So, 

5 that is something that is available to all of these 

6 consumers as well. So, just a couple of examples 

7 of how this account is really part of a bigger 

8 picture of how we look at -- how we service these 

9 customers.

10 So, just in closing, we really 

11 appreciate the support of our regulators. It has 

12 been key. Our community partners and CFE 

13 organizations are certainly very important. 

14 Thank you for the opportunity.

15 MR. MILLER: Thank you. Perfect 

16 transition to Jonathan.

17 MS. HEITMAN: Yes, absolutely.

18 MR. MINTZ: Liz and I find ourselves 

19 in-between a perfect presentation from a great 

20 banking partner and the Consumer Research Team. 

21 So, we are in tough shape.

22 MS. ORTIZ: Speak for yourself.
19

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 MR. MINTZ: I apparently will.

2 I am delighted to be back. I really 

3 appreciate the opportunity and just a couple of 

4 quick reminders and then some updates on how things 

5 are going, other than the obvious update of such 

6 great news from U.S. Bank.

7 So, you all will recall we put out these 

8 National Account Standards. Obviously, these 

9 build on the strong foundation, as the other 

10 Jonathan mentioned, of the Safe Account Standards 

11 that came out of the FDIC. So, this is a real --

12 this has been very helpful and I think the FDIC's 

13 lessons learned and advice about how to think this 

14 through and how to structure it and making it a 

15 two-year standard, and making sure that it is up 

16 to date and continuing to draw feedback in the 

17 marketplace and from our banking partners about the 

18 standard has been very instructive and we are 

19 pleased about that.

20 We put together a Bank On National 

21 Advisory Board. Many of you were in the room. Any 

22 mistakes or inappropriate things I say today are 
20

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 their responsibility. So, just look at those as 

2 well.

3 So, I want to go through and give a quick 

4 update. We talked about the standards and the 

5 Advisory Board. The Advisory Board has also 

6 created two working groups and those working groups 

7 have been focusing in on some real important issues 

8 that have always faced banking access efforts like 

9 Bank On. One of them is data and the kind of sets 

10 of data that are useful for each of the different 

11 partners in the banking access Bank On world; the 

12 kind of data that are useful for banks to be looking 

13 at in the way that you heard Lynn talking about, 

14 for example, the percentage of customers who are 

15 new to the bank and those who are switching 

16 accounts; data for Bank On Coalitions to be 

17 thinking about the ways that they can measure their 

18 own efforts; and data for national efforts like the 

19 CFE funds that we can really be tracking. Not what 

20 others are doing and taking credit for that but 

21 really thinking through what our own goals are.

22 The second working group, which has 
21

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 been super important is thinking about how to help 

2 Bank On Coalitions structure their relationships 

3 with financial institutions. We are humbled and 

4 clear that all of this is a set of voluntary 

5 partnerships and we want to make sure that those 

6 voluntary partnerships are both effective and 

7 win-win.

8 One of the really big issues that I am 

9 going to focus in on much more in a moment is this 

10 question of data. And we have got some exciting 

11 developments on the ways that we think we can help, 

12 particularly, financial institutions be able to 

13 crow about their good work. So, I am going to come 

14 back to that fourth bullet in a moment.

15 Building local coalition capacity, we 

16 have been issuing capacity grants to local 

17 coalitions across the country and providing other 

18 resources and more to come and really helping 

19 coalitions to think through not just best practices 

20 on how to be a vibrant coalition with multiple 

21 sector partners but also to be thinking about the 

22 most effective ways that they can be using those 
22

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 coalitions to not just raise awareness about issue 

2 but actually accomplish measurable impact. And so 

3 a real focus on capacity building I think is proving 

4 important. 

5 It is also a way for us to try to align 

6 best practices a little bit. Again, these are 

7 local coalitions with local power bases who are 

8 volunteering to work together as part of a national 

9 community. And I think that one of the things that 

10 we have been most excited and surprised by in terms 

11 of its strength is how hungry coalitions are to 

12 share best practices, how hungry coalitions are to 

13 rely upon each other's experiences and to be able 

14 to use national resources, particularly like the 

15 National Account Standard, as a way of fast 

16 forwarding constructive conversations and impact 

17 at a local level.

18 One of our real focus points at the CFE 

19 Fund in terms of best practices for local 

20 coalitions is thinking about not just how to raise 

21 awareness about good accounts but how to actually 

22 connect people to good accounts and how to do so 
23

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 at a large scale. Our bias, if you will, is about 

2 looking for municipal integration opportunities, 

3 places where local government is already touching 

4 your target population and touching them with 

5 money. One of our most exciting examples that we 

6 have been working now with eight cities, thanks to 

7 the support of Citi is a program called Summer Jobs 

8 Connect, where we are helping cities and learning 

9 from cities as they restructure their registration 

10 and payment systems of summer youth employment 

11 programs and turning them into banking access 

12 moments. It is a real shining example, I think, 

13 of where one can harness infrastructure and control 

14 over program flow and it is also for those who 

15 really focus in on the financial education 

16 component of banking access. There is no better 

17 time, particularly for young people, to be teaching 

18 them about how to use a bank account than when you

19 are, in fact, signing them up for direct deposit 

20 and having them get their statements and think 

21 about splitting some of their salary into savings 

22 and very literally real-world opportunities. And 
24

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 so those experiences have been going really well. 

2 Since the launch three summers ago of Summer Jobs 

3 Connect, dozens of cities have been using this 

4 approach. We are very excited about that.

5 And this is only one of several examples 

6 of where municipalities are touching target 

7 populations with payment streams and have the 

8 ability to strongly encourage direct deposit as the 

9 means of getting that money and then being able to 

10 confidently say to those who need an account, in 

11 order to get direct deposit, we have a set of 

12 standards and a set of partners who meet those 

13 standards. And we are comfortable playing middle 

14 man in connecting you to those accounts. So, we 

15 are really excited about that approach and it is 

16 working well.

17 We also you know you can't have a 

18 conversation without using the term learning 

19 community. We manage a learning community and we 

20 are looking forward to our next conference. Rumor 

21 has it the chairman has agreed to come speak at that 

22 conference and if not, this is a pretty awkward 
25

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 moment. So, we are looking forward to that.

2 CHAIR GRUENBERG: I think we are good, 

3 Jon.

4 MR. MINTZ: That will get him to the 

5 table. So, I think we are in good shape.

6 So, let me zero back to what I really 

7 want to focus my few remaining minutes on, which 

8 is the central data reporting infrastructure. And 

9 I want to talk about the infrastructure that we are 

10 currently building.

11 So, the basic idea here is that we have 

12 got two incredible partners that are going to help 

13 us think through and institutionalize how one 

14 validates whether or not an account that purports 

15 to meet the national standards in fact meets those 

16 national standards and then how to give them credit 

17 and help them take credit for the great work that 

18 they are doing in connecting people into these 

19 terrific products.

20 And so we will be managing a portal by 

21 which financial institutions, either through their 

22 Bank On partners or on their own, will submit a 
26

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 request for validation or accreditation of this 

2 account and the National Consumer Law Center has 

3 agreed to be our validator partner. They will 

4 conduct an independent review of the account, take 

5 a look, and match it to National Account Standards 

6 and come up with an objective answer to the question 

7 of does this account meet the standards or not.

8 We are not doing that out of a lack of 

9 trust. We are doing that because I think that it 

10 is one thing for us to be doing this on a national 

11 and even a regional level but our ambitions are 

12 broader than national and regional. Eighty-seven 

13 or eighty-eight percent is a great statistic but 

14 a hundred is always better. And so we really want 

15 to help facilitate local coalitions' ability to say 

16 to all of their financial institution partners, 

17 banks and credit unions, not just national and 

18 regional but also local, this is what we are looking 

19 for, this is what we are excited about conveying 

20 to our residents and we want to make sure that you 

21 have got that validation.

22 So, with the National Consumer Law 
27

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 Center blessing on the product, we are then 

2 thrilled to also be partnering with the Federal 

3 Reserve Bank of Saint Louis, who is in the process, 

4 as we speak, of building a data portal by which they 

5 will be able to communicate with financial 

6 institutions who have validated products meeting 

7 the standards to be able to accept data, said data 

8 being co-created with our Advisory Board and other 

9 partners and to be able to then turn around on an 

10 aggregate and appropriate basis and to be able to 

11 report on the good news on a regular basis about 

12 what is happening across the country in a very 

13 tangible way on how people are entering and how they 

14 are doing at some level on these Bank On accounts.

15 So, we are really thrilled to have this 

16 partnership and look forward to being able to open 

17 our portal soon so that we can start to really help 

18 validate all the financial institutions that have 

19 been coming forward and talking excitedly about 

20 meeting the standards.

21 That's it.

22 MR. MILLER: Thank you. Liz.
28

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 MS. ORTIZ: Thank you. So, I think I 

2 would like to pick up where Jonathan Mintz left off 

3 and talk about the efforts of the FDIC's Community 

4 Affairs staff members to work on the ground with 

5 local Bank On coalitions, financial institutions, 

6 and in collaboration with CFE to connect 

7 individuals and families to bank accounts and a 

8 banking relationship.

9 As an aside, I will point out that both 

10 Jonathan and Lynn are pretty tough acts to follow. 

11 So, I will attempt to delight the committee members 

12 and my moderator by keeping my remarks short and 

13 on point so that we can get to questions because 

14 I can tell folks have a lot of things they are dying 

15 to ask.

16 So, I am going to touch on three areas: 

17 progress that we have made over the past year; how 

18 and where the FDIC has been working on the ground 

19 during 2016 and what we have learned from those 

20 efforts; and where we would like to go from here.

21 So, let me just quickly describe or 

22 recap some of the progress over the last year or 
29

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 18 months. More banks have added accounts to their 

2 product offering that are consistent with the FDIC 

3 template and the CFE Bank On standards. Lynn 

4 described the U.S. Bank product, now one of ten 

5 large national and regional bank product offerings 

6 that are available to consumers. This is, of 

7 course, in addition to the original group of banks 

8 that participated in the FDIC's Safe Account pilot, 

9 many of whom still offer that product.

10 CFE announced its national standard 

11 with the San Francisco Mayor's Office and Jose 

12 Cisneros' Office of Financial Empowerment last 

13 year, almost exactly at this time. And since then, 

14 more Bank Ons have followed San Francisco's example 

15 and embraced these standards as part of their local 

16 programs and are benefiting from their connection 

17 to CFE and its capacity building programs. And the 

18 FDIC has utilized its resources, mainly, its human 

19 capital, our community affairs specialists and 

20 managers to work closely with Bank On coalitions 

21 in seven locations, as well as in dozens of other 

22 communities, where we have been asked for technical
30

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 assistance by the Bank On Coalition.

2 As most of you know, the FDIC has a long 

3 history with Bank On, since it earliest days, with 

4 one of our Community Affairs managers, Eloy 

5 Villafranca, spending close to a year or more 

6 working with the State of California to support its 

7 efforts to roll Bank On out state-wide. This was 

8 nearly 15 years ago.

9 So, our institutional connection and 

10 support for this effort is deep and long-standing.

11 So, what are we doing differently in 

12 2016? Think first, we have identified a handful 

13 of cities, seven in total, where we would have a 

14 staff member focus his or her efforts to support 

15 the advancement of the local Bank On Coalition. 

16 These cities, and I am sort of working my way from 

17 the West Coast eastward, are Seattle, San 

18 Francisco, Denver, Houston, Louisville, Miami, and 

19 Washington, D.C. In these cities, our Community 

20 Affairs specialists are working with the Bank On 

21 leadership, municipal agencies, and nonprofit 

22 community organizations to first coordinate bank
31

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 information sessions, to share the features and 

2 benefits of the accounts that meet the CFE 

3 standards and inspire others to follow suit.

4 Second, we are organizing community 

5 group roundtables that introduce the groups 

6 sometimes to each other, to the Bank On, to the 

7 municipal agencies that are participating and to 

8 start to develop targeted but integrated 

9 strategies for neighborhood outreach.

10 Third, we convene economic inclusion 

11 summits that start with a focus on a banking 

12 relationship but then have a broader focus on 

13 financial well-being.

14 So, what does this look like in 

15 practice? In Denver, the Bank On Denver program 

16 focuses on important outcomes such as opening a 

17 safe and affordable bank account but also looks at 

18 establishing or improving credit scores, 

19 decreasing debt, increasing savings, and 

20 establishing regular savings habits. In addition 

21 to financial counseling, Bank On Denver has a model 

22 that focuses on integration with other services 
32

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 driving towards self-sufficiency, including 

2 benefits enrollment, family stabilization 

3 services, workforce training, job placement, 

4 housing, and other supports.

5 And it does not stop with a single 

6 meeting we are convening. For example, in 

7 Washington, D.C. this summer there was an initial 

8 bank information session, where we had a dozen 

9 banks participating, and is now being followed up 

10 with individual outreach meetings with those 

11 banks, as well as major employers, D.C. government 

12 agencies, schools, and large universities. It is 

13 going back to the point that we want to connect the 

14 banks, the government agencies to where the clients 

15 are.

16 We are also working to strengthen local 

17 connections to the Bank On by leveraging some of 

18 the FDIC's existing network of local 

19 relationships. So, for example, in Houston, where 

20 we have an AEI, Alliance for Economic Inclusion, 

21 the Bank On is able to leverage those established 

22 connections and the trust that already exists 
33

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 between the banks and the community groups who have 

2 been working together for years. This is 

3 especially important because in Bank On Houston 

4 there is now a brand new leader. So, rather than 

5 a new person having to introduce herself to the 

6 community leaders one by one, she comes to our 

7 quarterly AEI meeting and meets everyone all at the 

8 same time. So, in Houston, the Volunteers of 

9 America, who has been a Bank On Houston partner and 

10 a member of our AEI, has opened 231 bank accounts 

11 through its Banking Bootcamp.

12 And I think it is also important to say 

13 that we are not just working in seven places. We 

14 have continued to engage in other places and 

15 support groups like Bank On South Alabama, Bank On 

16 Indiana, Bank On The Heartland, Bank On Savannah.

17 So, what have we learned? I think 

18 first, as Jonathan pointed out, banking programs 

19 really need to be integrated into programs that 

20 support workforce development, credit repair, 

21 financial education and you do have to meet the 

22 clients where they are. So, D.C. is a good 
34

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 example. The Bank On has connected with the Summer 

2 Youth Employment Program, as well as its TANF 

3 Training Program, Temporary Assistance for Needy 

4 Families, to connect youth and TANF recipients to 

5 bank accounts at the point they are either getting 

6 a job or receiving their benefits.

7 I think it is also noteworthy that 

8 consistent leadership over time is always going to 

9 increase impact. And so strategies that minimize 

10 disruption when that occurs, whether it is at the 

11 program level or the municipal level, are 

12 important. We have elections. We have staff 

13 turnover. Changes are constant. And if you lose 

14 somebody who has been in the seat for a long time, 

15 you want to be able to have continuous progress and 

16 implementation of a program that you have been 

17 investing in for many years.

18 Lynn talked about local bank training 

19 and I think that is also very important. Local 

20 bank branch training on products, especially new 

21 ones, is not always consistent. I think that is 

22 no surprise to anybody who has worked in a large 
35

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 or even not so large organization. Messages and 

2 priorities don't always flow from the center in a 

3 straight line. I can tell you from my own 

4 experience, managing a branch, I didn't always 

5 promote the products or services that headquarters 

6 was championing.

7 Okay, I have confessed. That's why 

8 U.S. Bank efforts to support bank staff training 

9 are really important. There is nothing worse than 

10 sending somebody to a bank to open an account and 

11 they talk to a staff member who has no idea what 

12 they are talking about or wants to talk to them 

13 about something else.

14 And I think the other takeaway we have 

15 so far is that Bank On coalitions are at different 

16 stages of development. There is a saying in the 

17 nonprofit biz that if you have met one funder, you 

18 have met one funder. Fund raising doesn't scale. 

19 Every foundation has its own theory of change, 

20 strategic plan and you, as the nonprofit, have to 

21 figure out how to align your goals with theirs.

22 And similarly with Bank Ons. Every 
36

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 community is different. It is the economy. It is 

2 civic infrastructure or lack thereof, the 

3 functionality of the local municipality, history 

4 of collaboration among the community groups 

5 themselves. And at the FDIC we decided that we are 

6 going to embrace these differences and learn from 

7 them.

8 So, what we have learned so far. You 

9 can start from scratch. So, we have Bank On Miami, 

10 pretty much starting from the ground up, had its 

11 soft launch in February 2016. It is working with 

12 existing Bank On coalitions like Bank On Savannah, 

13 Bank On South Alabama, to learn from them. Bank 

14 On Miami has worked with Bank On Savannah to get 

15 guidance and feedback regarding outreach, 

16 marketing, evaluation, tracking, and reporting and 

17 it is also developing an effective campaign for 

18 promoting the program, as well as garnering the 

19 resources it needs to implement full out marketing 

20 strategy.

21 And the FDIC in Atlanta provides 

22 technical support to all three of these coalitions.
37

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 You can also build on a track record of 

2 strong performance. So, as the first Bank On 

3 Coalition in the nation, Bank On San Francisco 

4 enjoys strong support, CFE, San Francisco Office 

5 of Financial Empowerment, and other city and county 

6 of San Francisco agencies. It is integrating Bank 

7 On into the city and city-wide financial capability 

8 programs and integrating Bank On into their 

9 workforce development and gaining prevention 

10 strategies.

11 Bank On Louisville is another strong 

12 program in its sixth year of existence with a high 

13 degree of local support and participation. 

14 Louisville Metro United Way, Metro Government's 

15 Office of Community Services and Revitalization, 

16 Department of Financial Empowerment, Department of

17 Economic Development, they all are providing 

18 strong support to Bank On Louisville. And its 

19 great partnership, then, allows it to successfully 

20 engage in other programs, including the Children's 

21 Savings Pilot, Utility Empowerment Program, its 

22 partnership with Louisville Water Company, as well 
38

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 as the Louisville Alliance for Development through 

2 Diversity, which is a Workforce Development and 

3 Financial Empowerment Integration Collaborate.

4 So, Louisville, having embraced the 

5 standards, can take its strong track record of 

6 partnership and account opening to another level.

7 You can also merge two or more programs 

8 for broader impact and efficiency. So, FDIC is 

9 planning outreach activities with the Bank On 

10 Coalitions like Bank On Seattle in King County who 

11 is also providing technical assistance to Bank On 

12 Washington, which intends to support smaller Bank 

13 Ons throughout the entire state.

14 So, looking head, I think we see benefit 

15 from our on-ground efforts and plan to expand and 

16 continue them. And of course, we really do welcome 

17 your input on where you see high need and 

18 opportunity for this work.

19 We can see a range of strategies for 

20 success and, as these crystalize, we can spotlight 

21 and share them. And again, we welcome ideas on how 

22 to do that most effectively.
39

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 And finally, I think we look forward to 

2 continuing our partnership with CFE and financial 

3 institutions to promote access and to expand 

4 economic inclusion.

5 And with that, I turn this back to our 

6 moderator, Jonathan Miller.

7 MR. MILLER: Thank you all very much. 

8 Three terrific presentations and the floor is 

9 yours, Bruce.

10 MEMBER MURPHY: First, let me commend 

11 this bank for both its courage and choice. What 

12 you are providing is not only needed for low- to 

13 moderate- income people but if people really 

14 understand what that product is, it is a mass market 

15 product as well.

16 And where we have a similar product, we 

17 were surprised at the breadth of interest in this 

18 kind of a product because it gives clients choice 

19 and control. And when you give clients a choice 

20 and control, then the fear of losing fee income 

21 starts dissipating. So, that is one of the reasons 

22 why lots of folks choose not to go down this path 
40

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 is the fear of fee income.

2 So, again, I just want to commend the 

3 U.S. Bank and work that you are doing because in 

4 fact, it is truly going to make a difference.

5 MR. MILLER: Thank you. Why don't we 

6 just -- can we just do this? Bob.

7 MEMBER ANNIBALE: Thanks. Again, I 

8 congratulate you. And I think it is really 

9 important for U.S. Bank because as a whole 

10 geography, also I think the needed coverage of an 

11 account throughout, I guess you are from the west, 

12 the whole West Coast into the Middle West, and it 

13 will make a big difference, especially in 

14 California and some other states where it is 

15 patchy. And we have learned a lot and we are happy 

16 to share whatever we can with you.

17 And to Jonathan and others, I think the 

18 idea, Jonathan, now that we have Law Center to be 

19 able to provide a sort of certification or due 

20 diligence, which is probably a useful tool as well.

21 My only other thought was for some of 

22 the other national banks, at least in my 
41

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 conversation with them, in terms of reporting, as 

2 we have talked about, many of them, because this 

3 is national platforms, local reporting is not 

4 always as easy as it may appear. And then you may 

5 be hesitant to try to build that out. So, we need 

6 to be able to think about what level they report 

7 and to whom they report.

8 Obviously, there has always been an 

9 issue of how many questions there are to report at 

10 municipal levels, kinds of cuts of data, and some 

11 municipalities have asked for many forms of data 

12 at that level, as you know in New York, and that 

13 has not always responded well.

14 So, try to think with you about how to 

15 make it a positive thing for people to report to. 

16 And of course, any carrot that can be there for them 

17 to do so, in terms of recognition or otherwise.

18 MR. MINTZ: I certainly agree with you. 

19 I think that one of the benefits of a central 

20 reporting infrastructure is, in part, a way to 

21 help, particularly the larger financial 

22 institutions, not have to keep reinventing or 
42

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 re-cutting the wheel every time they are trying to 

2 show their stakeholders how they are doing. So, 

3 I definitely agree.

4 MR. MILLER: Michael.

5 MEMBER BARR: I may have broken your 

6 mike. There we go, I think.

7 MR. MILLER: Yes, that should work.

8 MEMBER BARR: So, first of all, let me 

9 just join the other panelists in saying thank you 

10 for both the thoughtful presentations but, much 

11 more importantly, the thoughtful work that 

12 actually is going on in the ground that underlies 

13 the presentations, which is really terrific. 

14 There has been a lot of progress.

15 And I am very excited, Jonathan, to hear 

16 about the idea of the data collection being 

17 somewhat of an empirical nerd and would love to see 

18 a lot more research done not only on what the 

19 measures of output are, in terms of products, but 

20 also outcomes in terms of behaviors and savings and 

21 changes in peoples' lives. So, I think that is an 

22 important measure.
43

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 I want to say one maybe impolitic word 

2 about the context that this is going on in, which 

3 is we obviously had a major financial institution 

4 rightfully lose the trust of many of its customers 

5 recently. And I think that is an important context 

6 for thinking about here we are as a committee 

7 working on trying to develop safe accounts and 

8 there is a lot of unsafe activity going on that is 

9 reducing trust in the financial system, reducing 

10 people's willingness to come into the financial 

11 system when they see that kind of conduct taking 

12 place. And I think we need to work together to 

13 think about the appropriate way of sort of working 

14 in that context, knowing that it is there.

15 I think it also goes to Bruce's point 

16 about the need for enhancing choice for consumers. 

17 And one of the things that I think the committee 

18 ought to think about in terms of policy issues is 

19 how to give people better ownership of their own 

20 financial lives that lets them switch institutions 

21 from institutions that they don't trust to 

22 institutions that they can and should trust. And 
44

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 that involves some technology changes in the 

2 banking sector and it involves some policy changes 

3 in the federal government I think we ought to think 

4 about as a committee.

5 MR. MILLER: Thank you. Interesting. 

6 Ted?

7 MEMBER BECK: Just following on, very 

8 encouraging presentations. Thank you. It is 

9 very good work. And I want to stay on the data 

10 piece for a second.

11 Jonathan, you mentioned the support of 

12 the Youth Employment Programs, both in education 

13 and using that as a vehicle for industry. Are you 

14 aware of anywhere where they are tracking what they 

15 are doing and not only as far as what education is 

16 being provided but also are accounts being retained 

17 after the program finishes?

18 Our data tells us the three most 

19 positive things, points of influence for young 

20 adults where we see good behavior are one, parents; 

21 two, education; and three, having had a part-time 

22 job. If you are tracking the data, I think that 
45

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 would be incredibly valuable and if not, I am 

2 wondering if that could be done.

3 MR. MINTZ: Yes, that is a great 

4 question and I would love to talk to you more about 

5 this. There is no question that from the beginning 

6 the standards that we used, our city partners used 

7 in partner with banks, had to first take on this 

8 question of dormancy because, particularly for 

9 this population, it was often a job experience and 

10 a direct deposit flow that was going to stop at the 

11 end of the summer. So, that was really important.

12 We do have some aggregate data from some 

13 of our banking partners across Summer Jobs Connect 

14 about activity in those accounts and how they are 

15 doing. Some folks come back in the next summer and 

16 so that was another way of sort of reenergizing 

17 their use of the account.

18 In some ways, Summer Jobs Connect is a 

19 perfect example of what we mean by banking 

20 integration. In other ways, it is one of the most 

21 difficult approaches because you are dealing with 

22 youth accounts and 60 percent of summer youth 
46

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 employment folks are under 18. So, you are dealing 

2 with even extra difficult issues regarding youth 

3 accounts and you are dealing with this variable of 

4 flows of money.

5 That having been said, I think those 

6 lessons are important and I think that the success 

7 in uptake, and then in use of those accounts is 

8 helpful. We are now about a year and a half in to 

9 when people started direct depositing through our 

10 city partners. So, that data is just beginning to 

11 come in. But let's stay in touch.

12 MR. MILLER: Kelvin?

13 MEMBER BOSTON: Two quick questions. 

14 One, Elizabeth, you mentioned Volunteers of 

15 America, I think, in your report, and opening up 

16 200 accounts. I think they have an older 

17 population that they work with. Could you give us 

18 a little bit idea of the type of accounts they open 

19 and for whom?

20 And then Jonathan, you mentioned you 

21 had some capacity grants that you are giving out 

22 to nonprofits or partners. If you can talk about 
47

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 that.

2 MS. ORTIZ: Yes, so on Volunteers of 

3 America, I don't have the information regarding who 

4 the accounts were opened by, whether they were 

5 older people or younger. I don't have that 

6 information. I can certainly follow-up and get 

7 that for you. I think the point of that example 

8 is to just say that you can, by working with FDIC 

9 and through the AEI, we gave the new leader of the 

10 Bank On Houston fast access to a whole network of 

11 community partners that were poised and ready to 

12 be working with the populations that we were trying 

13 to reach and connect them to the bank accounts. We 

14 can certainly follow-up and get you the 

15 information.

16 MEMBER BOSTON: Do you know why they 

17 were participating? You don't think about 

18 Volunteers for America with Bank On, per se. I was 

19 just trying to see if there was a --

20 MS. ORTIZ: Well you know it is 

21 interesting. I mean they might not have been who 

22 you would typically think of as being part of a 
48

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 Bank On but they are who typically participates in 

2 our Alliances for Economic Inclusion, which casts 

3 a wide net of community stakeholders and don't just 

4 work on things like opening bank accounts but 

5 really have an agenda that is based on the members 

6 themselves that is a function of the needs of the 

7 local community.

8 So, and I think that is just another 

9 example of how working together we are able to 

10 leverage each other's experience and networks and 

11 expertise to continue to advance this effort 

12 forward.

13 MR. MINTZ: And to your other question 

14 real quickly, we have a Bank On Capacity Grant Fund. 

15 We are issuing grants of up to $10,000 to Bank On 

16 Coalitions across the country. So are, we have 

17 issued just over two dozen of them and are hoping 

18 to issue dozens more.

19 And this is a way of not only supporting 

20 efforts but really helping to build in interwoven 

21 community and those are going well.

22 In addition, we have really taken notes 
49

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 from the FDIC's approach to zeroing in on cities 

2 where you really think you can develop strong 

3 models for others to learn from. And so if I can 

4 charm my way into coming back sometime I want to 

5 talk to you about a fellowship program that we are 

6 putting together. We are going to invest even more 

7 in a certain number of cities to really build out 

8 A plus examples of what Bank On Coalition 

9 leadership can accomplish.

10 MEMBER BOSTON: Then what do you use 

11 the funds for or are there criteria?

12 MR. MINTZ: We are pretty open to the 

13 approach. As Liz says, I agree again, Bank Ons

14 have different priorities and different 

15 approaches. Some are spending it on 

16 communication. Some are spending it on convening 

17 opportunities. Some are spending it on different 

18 ways of trying to facilitate account opening 

19 opportunities. And we are really writing a check 

20 based upon them being in the right ballpark in 

21 thinking through how to connect people to 

22 appropriate accounts and looking to learn from how 
50

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 they can spend the money and how it will be useful.

2 I think for some Bank On Coalitions, 

3 $10,000 is a surprisingly large amount of money and 

4 we are really happy to be able to be helpful there. 

5 With others, it is really more about the connection 

6 and not so much about what that cash can help them 

7 do that they might not have otherwise been able to 

8 do.

9 MEMBER CISNEROS: Hi. Well, as I 

10 think most people here know, ten years ago we 

11 launched the first Bank On program in San 

12 Francisco. And thank you, Liz, for commenting on 

13 many of the accomplishments we have made during 

14 that time and remember the modifications and new 

15 approaches we are taking towards the system in that 

16 time. 

17 You rightly commented on a number of the 

18 issues around sustainability, keeping the energy 

19 and the participants engaged is always an item that 

20 we need to be vigilant about.

21 But I do want to also echo the comment 

22 that you made that we have gotten a lot of support 
51

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 both from the FDIC locally in San Francisco, as well 

2 as the local Federal Reserve Bank office as well. 

3 So, I encourage every city and group working on 

4 programs like these to reach out to great local 

5 partners like that.

6 I also want to mention that in respect 

7 to U.S. Bank, the U.S. Bank was one of our founding 

8 partners in the Bank On San Francisco program. And 

9 for ten years, you have been a strong partner in 

10 that program. Thank you very much. I can't be 

11 more excited than the fact that now we will be 

12 repositioning our program, focusing of course on 

13 Safe Accounts, and to be able to have U.S. Bank in 

14 that set of offerings as well is going to be a huge 

15 success for us going forward. So, thank you.

16 But the thing I was really struck by and 

17 this hearkens back to what we saw as much as ten 

18 years ago was the role of, as you call them, bank 

19 ambassadors. I really do think that that speaks 

20 volumes to how important all the various 

21 partnerships and players in these Bank On programs 

22 really make a difference.
52

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 In San Francisco and in almost all the 

2 Bank On cities, we use the city's voice to tell 

3 people the value of having a bank account and 

4 putting their money in a safe place and avoid 

5 getting ripped off by check cashers or worse. But 

6 while we send them in the door, it is important that 

7 someone is there to greet them when they walk in 

8 and greet them with the right message, the right 

9 account, the right kind of support and education 

10 and information. And it is those ambassadors that 

11 they run into in each of our partner banks and 

12 credit unions that really end up making this 

13 program a success. So, thank you for highlighting 

14 them and building, hopefully, a huge team of 

15 ambassadors all across all your markets because we 

16 will take advantage of them everywhere we can and 

17 see if we can benefit more folks.

18 And then lastly, to Michael, a point you 

19 brought up about the news we have been hearing of 

20 late about bad practices and actions by a major bank 

21 in this country. It really hearkens me to think 

22 about we have spent an incredible amount of time 
53

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 and had huge success in creating standards for Safe 

2 Accounts. I wonder if we don't need to put our 

3 heads together and think about safe banking 

4 practices. And maybe we need to have some 

5 standards or a threshold there that says we need 

6 to see appropriate practices and ethical practices 

7 occurring in the places we are going to send our 

8 neediest members of our community to make sure that 

9 they are not going to be preyed upon in a different 

10 way.

11 So, I will put that out there to 

12 everybody in this conversation and hope we can 

13 focus on that in the future.

14 MR. MILLER: Thank you. Martin?

15 MEMBER EAKES: So, I wanted to make a 

16 comment and then ask Lynn a couple of questions.

17 The comment is to look at what the 

18 changes have been in the industry over the last ten 

19 years. In 2005, virtually no community banks and 

20 credit unions did overdraft fees but the large 

21 banks almost to a bank did and promoted them. And 

22 they did practices such as ordering checks, things 
54

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 that would maximize the fee income on customers. 

2 So, I feel like particularly with U.S. 

3 Bank and Citi, Bank of America, some of the large 

4 banks, we have made a lot of progress in the last 

5 ten years. On the other hand, our smaller 

6 institutions are now more reliant on overdraft fees 

7 than they were in 2005. So, it is a real seesaw 

8 event that is just confusing, in some ways.

9 U.S. Bank I wanted to say, we know you 

10 in the Southeast. You are one of the largest 

11 investors in New Markets Tax Credit projects that 

12 sort of low-income census tracks. Even though you 

13 don't have a branch network, we know you and 

14 appreciate you. And I think this product is really 

15 quite terrific.

16 My two little questions are to ask you 

17 to explain a little bit more of what the standard 

18 deposit and the deposit plus is because I don't 

19 quite understand it.

20 And then secondly, when you have bill 

21 pay, is your bill pay, which is free, which is not 

22 easy to pull off, is it integrated real-time into 
55

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 the account so that it is not possible for someone 

2 to issue a check or a bill pay if the funds are not 

3 in the account?

4 MS. HEITMAN: So, good questions. The 

5 deposit point and deposit, they are product names 

6 for mobile deposits. That is, in essence, what 

7 they are.

8 MEMBER EAKES: Only mobile.

9 MS. HEITMAN: Only mobile deposits, 

10 correct.

11 The question on online bill pay, it is 

12 same day not real-time. So, that is important to 

13 understand. There is that slight chance that 

14 something happens throughout the day where things 

15 get out of sync. But I think same day is the best 

16 that the system can do at this point time and that 

17 is something that we are watching. It is the 

18 reason, exactly, though, why we are restricting 

19 recurring and future-dated payments for that exact 

20 reason.

21 I think we have seen a lot of 

22 advancements in the payment system, which, as my 
56

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 comment about why does it take several years to 

2 design a product like this, I think the advancement 

3 of the payment system, I think the move to more 

4 real-time payments across the entire ecosystem is 

5 going to also help exactly what we are talking about 

6 here as well.

7 MEMBER EAKES: If you have a lag of a 

8 day, does that mean that someone could have a bill 

9 pay and then funds go out of their account so you 

10 could be in an overdraft position? What is the 

11 downside that you see?

12 MS. HEITMAN: The chances are very slim 

13 just because of the way that the process works and 

14 the connection between the systems and the check 

15 going out. But there is the potential and it has 

16 more to do with -- less about that particular 

17 transaction than all of the other transactions that 

18 are occurring in account throughout a day that may 

19 post that weren't visible in the account, if that 

20 makes sense.

21 So, I think that is why it is important 

22 that we continue to push for that same day and that 
57

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 real-time process.

2 MR. MINTZ: I just want to jump in super 

3 quick. I wholeheartedly agree moving to same time 

4 processing obviously will be hugely helpful. But 

5 I also have to give U.S. Bank a lot of credit because 

6 even the identification of a possible window where 

7 an account can be overdrawn doesn't bring the 

8 policy choice of the bank to say and we will punish 

9 you if that happens.

10 And I think that that is huge. And so 

11 when we have these conversations with financial 

12 institutions around the country who are looking to 

13 move to the standard and they identify this 

14 potential gap in timing, the answer doesn't have 

15 to be well, we will have to charge them, which 

16 raises all of the trust issues and the cost issues 

17 that it kept people out of the banking system for 

18 so long.

19 MEMBER EAKES: U.S. Bank has made 

20 policy choice to say this is the risk that we are 

21 bearing, not the consumer, and we don't think the 

22 risk is all that great.
58

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 MS. HEITMAN: Exactly right. Exactly 

2 right. And I think there is an awful of learning 

3 to come from it and I think that is where we go from 

4 here. And that is one thing that we are certainly 

5 watching on the accounts that we have booked and 

6 the accounts that are going negative in their 

7 balances and it is at a much smaller rate than our 

8 traditional accounts, which is exactly what you 

9 would expect and it is at very, very small dollar 

10 amounts.

11 MEMBER EAKES: It's really terrific. 

12 Thank you.

13 MR. MILLER: Andrea.

14 MEMBER LEVERE: I will be quick. I 

15 know we are at time so thank you all for a great 

16 panel. 

17 Lynn, I have two questions for you, 

18 which is I know it is very early in looking at the 

19 data you have collected. But one of the things 

20 that we have been able to do is take the unbanked 

21 and underbanked data of the FDIC and take it down 

22 to very local levels, at the city level, at the 
59

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 metro level, and then at the state level. And this 

2 extraordinary range of who is unbanked and who is 

3 underbanked, have you noticed any geographic 

4 patterns in the uptake in the accounts or the lack 

5 thereof? Because you have very different 

6 footprint from a lot of the other banks that we have 

7 worked with.

8 MS. HEITMAN: Right.

9 MEMBER LEVERE: And then the second 

10 question, very quickly, is we are also very 

11 interested in the connection to statements and how 

12 you incent people to make that connection in a very 

13 institutional way.

14 MS. HEITMAN: Right.

15 MEMBER LEVERE: So, any thoughts or 

16 anything you’ve learned?

17 MS. HEITMAN: So to your first 

18 question, we have not looked at geographic 

19 differences yet. We are, in essence, past our 

20 first month-end. So, as much as I keep asking for 

21 more reports, and more reports, and more reports, 

22 and everybody keeps rolling their eyes at me. We 
60

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 will have certainly more access to that information 

2 over the coming months. And the geographic look 

3 is something that is very critical.

4 The savings connection, I completely 

5 agree. I think that is critical. As we talk about 

6 what's next, and again, I talked about the big 

7 picture and that this is one piece of how want to 

8 serve this segment, I think the financial 

9 education, the savings connection, and there are 

10 different things that we can do there, are all 

11 things that we have on our roadmap that that we are 

12 having a discussion about. So, very good point. 

13 Very valid point.

14 MEMBER MCCOY: Jon, are we out of time?

15 MR. MILLER: No.

16 MEMBER SWAGEL: These questions over 

17 here are not -- no speeches but --

18 MR. MILLER: No, no, no. I 

19 understand. We are going to --

20 MEMBER MCCOY: Very briefly, I am 

21 thrilled with this product and especially pleased 

22 about the free credit score and the simulator. I 
61

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 think that really help people get in control of 

2 their financial future.

3 I was curious and then I am sure one of 

4 the challenges is locating unbanked people to sell 

5 them this product. I was curious what thoughts 

6 U.S. Bank has for trying to connect with these 

7 people.

8 MS. HEITMAN: Yes, that is a very good 

9 question and I think it is very much one-on-one. 

10 It is all about the local connections that Liz 

11 talked about, which is why the biggest part of our 

12 launch plan, besides employees, educating 

13 employees, was reaching out to over 100 community 

14 organizations in the markets that we serve.

15 For a consumer to have confidence and 

16 comfort to be able to walk into a branch and inquire 

17 about a product like this, I think that connection 

18 and that relationship that they may have with those 

19 local organizations is going to be critical. I 

20 think that is really where we are going to be most 

21 successful and that is really where we focused our 

22 energy.
62

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 MEMBER MCDONALD: I think the report 

2 that you have given is quite interesting in a number 

3 of different ways. And my observation and 

4 question to Jonathan and Elizabeth is that the FDIC 

5 has done a lot of work with bringing with these new 

6 accounts over the years.

7 Do you keep a running total of the 

8 number of cities of communities that the Bank On 

9 program is operating, number one and number two, 

10 an estimated number of accounts?

11 It would be interesting to track and to 

12 publicize because I think those numbers are huge 

13 and it is a program that the FDIC got onboard with 

14 early on in the process, recognizing the need for 

15 the unbanked and underbanked. And I think it is 

16 a number that we need to publish, keep track, and 

17 it would encourage more banks to begin looking at 

18 quote the Safe Account and things of that nature 

19 because it is a building block for other things to 

20 come with the whole electronic banking world. And 

21 it is just something I have thought of as I sat here 

22 listening to the report.
63

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 MS. ORTIZ: That's a great question and 

2 since Jonathan manages research and they are 

3 responsible for data, I will let him respond.

4 MR. MILLER: Nice to have a colleague 

5 like Liz.

6 So, this is something we have struggled 

7 with all along. We have not asked banks to report 

8 the numbers of accounts. We will, from time to 

9 time, get voluntary reports. I mean Bob has been 

10 pretty forthcoming on the activity at Citi on their 

11 access account. It is just hard, as you know, in 

12 a broader context of concerns about regulatory 

13 burden, asking banks to report just becomes very 

14 difficult to do.

15 I think we probably have a better sense 

16 of the numbers of Bank Ons that are going on around 

17 the country and where we have activity and so forth. 

18 And that is probably the kind of thing we could get 

19 you but we have not been able to count the accounts, 

20 although, again, I think that is part of the portal 

21 of the Saint Louis Fed that Jonathan is talking 

22 about.
64

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 MEMBER MCDONALD: Yes, I'm not trying 

2 to put anymore regulatory burden on the banks. But 

3 I just thought it would be an interesting piece for 

4 us from the FDIC personnel who is out in the field 

5 pushing Bank On, they can perhaps give you a pretty 

6 good number to the number of banks participating 

7 in the program.

8 MS. ORTIZ: Absolutely.

9 MEMBER MCDONALD: And you could 

10 extract, perhaps, some numbers just to have an idea 

11 as to how successful the program is.

12 MS. ORTIZ: In the spirit to say that 

13 Jonathan Mintz and I are sort of collaborating in 

14 that effort, not only just counting the number of 

15 Bank Ons as well as the number of Bank Ons who are 

16 affirmatively embracing the standard as part of 

17 their efforts, I think that is number one.

18 I think number two it is not just 

19 counting accounts because ultimately, what we are 

20 interested in is a sustainable relationship with 

21 a financial institution that goes beyond a safe 

22 affordable transaction account but encompasses 
65

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 savings and access to credit and so forth.

2 And finally, I am going to turn it over 

3 to Jonathan Mintz because I do think the effort that 

4 they have undertaken to kind of have a foundational 

5 relationship with the Saint Louis Fed and start to 

6 have standards for data collection and then the 

7 opportunity to start to report that information out 

8 has the opportunity, I think to both share 

9 information and support good research in this area 

10 about what works, what doesn't work, where it is 

11 happening, where it is not happening. But also 

12 once you have that out there, I do think you start 

13 to get some momentum around having other people 

14 want to participate in that. And hopefully, it 

15 builds up its own momentum and will continue on from 

16 there.

17 MR. MINTZ: Yes, I would just add super 

18 quickly. I mean you have asked the question --

19 exactly the right question that I need to be able 

20 to answer as well. And you know right now I would 

21 say that there are probably 50 active Bank On 

22 coalitions in the country and another 50 to 75 
66

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 coalitions at some level of activity. We are 

2 hoping to bump those numbers up but that gives you 

3 some sense of the array of existing coalitions 

4 right now. Each have a number of partners and each 

5 are in a point of transition, even among the narrow 

6 two dozen plus coalitions that have embraced the 

7 national standard, each of them is in a process of 

8 working with their financial institutions to move 

9 them into offering these accounts.

10 So, this is a very much a process but 

11 our eye is exactly on being able to answer that 

12 question.

13 MR. MILLER: Great. Other questions? 

14 Phil.

15 MEMBER SWAGEL: Okay, sure. Thank 

16 you. I had two questions and I think the second 

17 might be safer later in the afternoon.

18 The first was just a follow-up. I had 

19 the same question as Martin the deposit point. And 

20 it just seems striking that if I understand the 

21 sheet right, if you walk into a branch, it is free 

22 to deposit your money but if you use your phone that 
67

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 it costs -- it is not free.

2 So, am I misunderstanding and what is 

3 the thinking behind that? We had really nice 

4 presentations here on mobile banking. So anyway, 

5 it is just a question.

6 The second -- maybe I should just ask 

7 the second question. The second question is 

8 almost to say this is really great. And so I echo 

9 everyone else's thoughts. I almost feel like once 

10 the customers are in or once the underbanked get 

11 connected, the almost harder job is to make the 

12 system continue to work for them. And here I am 

13 thinking when really bad situations happen like 

14 fraud and if someone's paycheck doesn't show up in 

15 their account say like what is going on, is it my 

16 employer, is it the bank, at what point is the 

17 fraud?

18 And so I guess my question is maybe for 

19 Jonathan, for everyone, is who then helps the 

20 person who, the customer who probably doesn't have 

21 a lot of knowledge, might not even know to go to 

22 the CFPB but, of course, for many institutions CFPB 
68

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 by statute can't do anything for the smaller 

2 institutions. So who then helps sort of the next 

3 step of making a system work and dealing with fraud?

4 MS. HEITMAN: So your question on 

5 deposit point, so the fee that we charge for mobile 

6 deposits is a charge that we have on all of our 

7 checking accounts. And I definitely hear what you 

8 are saying. It is a product and a process that we 

9 are looking at and evaluating on a regular basis. 

10 Any change we make to that fee will be made across 

11 the board to all accounts at the same level.

12 I know you didn't pose the second 

13 question to me but I am going to just throw a couple 

14 of comments in there on that as well.

15 MR. MINTZ: It saves me the trouble of 

16 throwing it.

17 MS. HEITMAN: There you go.

18 I think a lot of what we have talked 

19 about here and I have heard it in some of the 

20 comments is it is about that relationship and it 

21 is about that consumer getting comfortable with the 

22 banking system in general and the banking system 
69

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 can't just be their mobile phone or that online 

2 website. We feel very strongly, as an 

3 organization, that it is the relationship that we 

4 have with the customer on a personal level.

5 We provide all of that electronic 

6 access for convenience but we want the consumer to 

7 establish a relationship with their local office 

8 and with their local bank. And if that payroll 

9 check doesn't come through or they see fraud on 

10 their account, they have a comfort level with the 

11 first person they can call is that person in the 

12 branch.

13 So, that is how I would look at that as 

14 well.

15 MR. MINTZ: And I would underscore 

16 that. I mean I think of this in concentric 

17 circles. The goal of Bank On is to forge those 

18 connections and that is where you want the 

19 relationship to be and you want it to be a standard 

20 primary relationship.

21 But in addition, as Jose mentioned 

22 earlier, part of the beauty of Bank On Coalition's 
70

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 playing a facilitator role in these connections is 

2 also the ability to help troubleshoot. And one of 

3 the big lessons that we learned from San 

4 Francisco's experience was how critical it was for 

5 them to have the kind of ambassadorial 

6 relationships with their branches so that if that 

7 primary relationship wasn't perfect, there was a 

8 place for people to go, a second place for people 

9 to go to be able to raise a flag and ask for help.

10 MEMBER SWAGEL: Yes, thanks. That 

11 seems really, really important.

12 CHAIR GRUENBERG: Just if I can make 

13 one observation, this is a perfect lead-in to our 

14 next panel and presentation of the Household Survey 

15 results, which I think have a number of genuinely 

16 interesting and enlightening findings that will 

17 generate a lot of discussion. I'm pretty 

18 confident about it and almost all of it in a 

19 positive direction.

20 Second, I am really struck at the value 

21 we are beginning to see from sustaining this effort 

22 over a period of time. And it is really nice to 
71

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 see from our standpoint, starting with the survey 

2 in getting to develop information about the issue, 

3 working with this committee developing a concept 

4 around a low-cost safe transaction account, seeing 

5 that worked through, and then picked up by a number 

6 of major financial institutions to expand access 

7 and now, in effect, with the Bank On having a 

8 mechanism to push that even more broadly into 

9 communities around the country and then having 

10 continuing efforts both on the research side and 

11 on the implementation side. 

12 If I may say, Lynn, I think what you laid 

13 out in terms of U.S. Bank's implementation here in 

14 which you are integrating your low-cost debit 

15 accounts into your menu of products, training your 

16 staff so that they actually understand the product 

17 and are able to explain it to customers, collecting 

18 the data from the outset on your experience as you 

19 develop it, and then making it available both 

20 through the branch and then in the near future 

21 online is really a model of both how to present and 

22 market the product that I think has a lot of value, 
72

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 in essence, for other institutions.

2 So, the ability here to stay with it in 

3 the longer run, I really feel as if we are beginning 

4 to make an impact here in a meaningful way and that 

5 is just terrific.

6 So, I want to thank you all and I will 

7 let you proceed.

8 MR. MILLER: I thank you very much. 

9 Let me thank the panelists for terrific 

10 presentations and a great discussion and we will 

11 get ready for the second panel. 

12 (Whereupon, the above-entitled matter 

13 went off the record at 10:17 a.m. and resumed at 

14 10:19 a.m.)

15 MR. MILLER: All right. So, as the 

16 Chairman mentioned, he's going to be absent for 

17 this panel. So, we are going to launch into the 

18 next one.

19 And I going to turn it over to Karyen 

20 Chu to start the next presentation.

21 MS. CHU: Members of the committee, we 

22 are delighted to be here today to present results 
73

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 from the 2015 FDIC National Survey of Unbanked and 

2 Underbanked Households.

3 As most of you know, the survey is 

4 conducted as a supplement to the Census Bureau's 

5 current population survey and it has been conducted 

6 every two years since 2009. We used the survey to 

7 measure household participation in the banking 

8 system and household use of nonbank financial 

9 services. With each administration of the survey, 

10 we make revisions that try to balance maintaining 

11 measurements that are comparable over time with 

12 adding new measurements that broaden and deepen 

13 what we know about unbanked and underbanked 

14 household's use of a wide range of bank and non-bank 

15 financial services.

16 In the 2015 survey, we added many new 

17 questions that we believe allow us to paint the most 

18 comprehensive picture yet. This survey is an 

19 undertaking that could not have been accomplished 

20 without the hard work and dedication of an entire 

21 team of researchers, whose names we have listed 

22 here.
74

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 I have with me today on this panel the 

2 three lead authors of the report, Ryan Goodstein, 

3 Alicia Lloro, and Jeffrey Weinstein, who will 

4 present to you our key findings from this report. 

5 It is my pleasure now to turn the 

6 microphone over to Ryan to begin the presentation.

7 MR. GOODSTEIN: Thanks, Karyen and 

8 thanks to the committee. We are really grateful 

9 for the opportunity to present the results of our 

10 work.

11 Before we dive in, let me just sketch 

12 out the plan for the talk. I'm going to spend some 

13 time talking about banking status for U.S. 

14 households, really focusing on unbanked and 

15 underbanked rates across the U.S. population and 

16 differences across the population and some of the 

17 factors that are associated with that. I will then 

18 turn it over to Jeffrey Weinstein, who is going to 

19 talk about first banked households and the methods 

20 that they are using to access accounts, use of 

21 prepaid cards, as well as saving for unexpected 

22 expenses or emergencies. And then Alicia will 
75

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 finish up by talking about -- I'm sorry, Jeffrey 

2 will also cover use of alternative financial 

3 services and then Alicia will finish up by talking 

4 about use of bank and nonbank credit and how 

5 households conduct financial transactions in a 

6 typical month.

7 Okay, so diving right in, this chart on 

8 slide 14 -- I will try to read the slide numbers 

9 out so those of you with your --

10 MR. MILLER: The slides are in your 

11 packet, too, if you want them. Save your necks.

12 MR. GOODSTEIN: I'm sorry, slide 4 or 

13 14, depending on which -- 4.

14 Okay, so this chart illustrates the 

15 trend in unbanked rates over time for the U.S. 

16 population. So, in 2015, seven percent of 

17 households in the U.S. were unbanked. This works 

18 out to about 9 million households. This is good 

19 news in the sense that it is a lower unbanked rate 

20 than any that we have found in the four years of 

21 our survey. Relative to 2013, it was a decline of 

22 0.7 percentage points. And of course, some this 
76

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 decline, as expected, can be attributed to changes 

2 in the socioeconomic conditions facing households. 

3 About half of the decline can be attributed to this 

4 but the remaining decline is still statistically 

5 significant. So, it suggests that there is 

6 something else sort of above and beyond just 

7 general economic conditions that are driving this.

8 In terms of underbanked, just a quick 

9 refresher. In this report when we are talking 

10 about underbanked households, what we mean by that 

11 is that the household has a bank account but that 

12 it has used one of these alternative financial 

13 services in the last 12 months.

14 So, in 2015 and 2013, the definition was 

15 the same but in 2011, slightly different because 

16 we didn't ask about auto title loans in that survey.

17 So, this table summarizes overall 

18 banking status by year for the population. So, in 

19 2015, as I said, 7 percent of households in the U.S. 

20 were unbanked, 19.9 percent were underbanked, 68 

21 percent of households are fully banked, which means 

22 that they have a bank account and they did not use 
77

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 any of the AFS products in the last 12 months. And 

2 then the remaining 5 percent are banked but we 

3 didn't have enough information to be able to 

4 categorize the household as being underbanked or 

5 fully banked.

6 And as you can see, just by looking up 

7 the second column, the underbanked rate in 2015 was 

8 actually quite similar to 2013.

9 So, there is a lot of detail in the 

10 report, looking at differences across the 

11 population. Generally, the patterns are similar 

12 to what we see in the past in the sense that certain 

13 segments of the population, lower income, 

14 households with lower educational attainment, 

15 younger households, households with disabilities, 

16 certain racial and ethnic minorities have higher 

17 unbanked and underbanked rates and that holds true 

18 in this year's set of results.

19 We do see that reflecting in the 

20 national trend we see declines in the unbanked 

21 rate, across all these segments or almost all of 

22 these segments, I should say, and the underbanked 
78

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 rates, changes in underbanked rates were actually 

2 somewhat mixed. So, as I said, there is a lot in 

3 the report but just to sort of highlight this, we 

4 will focus on just looking at differences by race 

5 and ethnicity.

6 So, this is slide 8. So, just to help 

7 you digest this chart, on the farthest to the left, 

8 this is the unbanked rates for black households. 

9 The light blue bar indicates that 20.6 percent of 

10 black households in 2013 were unbanked and that 

11 number fell to 18.2 in 2015, too. So, you had a 

12 fairly substantial decline there. Similarly for 

13 Hispanic households you see a decline.

14 As I said, it is not universally true. 

15 So, in particular, it is somewhat puzzling to see 

16 that among Asian households we actually see an 

17 increase from 2.2 to 4.0. Of course, the overall 

18 unbanked rate is quite low among this group but the 

19 fact that there is an increase is interesting and 

20 worth looking at it in more detail.

21 Underbanked rates, as I said, they are 

22 mixed. So, again, focusing first on looking at the 
79

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 black households, 33.2 percent in 2013 of black 

2 household are underbanked by our definition. This 

3 declined to 31.1 percent in 2015. So, actually 

4 quite striking. The fully banked rate for this 

5 group increased from 40 percent to about 45 

6 percent. So, that is a pretty substantial 

7 increase for that period.

8 Hispanic households are actually 

9 fairly similar across years, across the survey 

10 years and Asian households you see an increase in 

11 underbanked rates as well.

12 So, let's move on from there, looking 

13 now at geographic patterns. So, this is not a map 

14 of -- this is not the electoral map.

15 MR. MILLER: Actually it is.

16 (Laughter.)

17 MR. GOODSTEIN: I have no comment on 

18 that.

19 Okay, so the way to look at this map is 

20 that the darker the shade of blue, the more unbanked 

21 the rate is, relative to other states. So, similar 

22 to past years you see that states in the south have 
80

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 higher rates of being unbanked compared to others.

2 Patterns are fairly similar in 

3 underbanked rates in the sense that they are higher 

4 among the south but a little bit more disparate 

5 across the nation in terms of where we see higher 

6 rates of being underbanked.

7 Okay, so turning now to look at 

8 underbanked households -- I'm sorry, the 

9 population of households that are unbanked. Just 

10 as we have talked about in past reports and was 

11 mentioned in the previous panel, we know that bank 

12 account ownership is not static and certain 

13 households sort of come in and out of the banking 

14 system over time. And just as we have seen in past 

15 survey results, almost half or roughly half of 

16 unbanked households have had a bank account at some 

17 point in the past.

18 In the 2013 survey, we did a lot of work 

19 looking into transitions in and out of the banking 

20 system. And one of the key points that we found 

21 was that for exits out of the banking system, a big 

22 contributing factor to that was shocks to income. 
81

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 So, either job loss or other shocks to employment, 

2 that kind of thing.

3 So, motivated by this and also other 

4 research in this area, we added a new question to 

5 the 2015 study asking households to describe 

6 basically the way their income -- describe their 

7 income over the past 12 months.

8 So, of the households in the U.S. in 

9 2015, roughly 71 percent or 72 percent said that 

10 their income from month to month was about the same 

11 over the past 12 months; 16 percent said that income 

12 varied somewhat from month to month; and 4.5 

13 percent said their income varied a lot from month 

14 to month. So about 20 percent of households, a 

15 little more than 20 percent of households in the 

16 U.S. have some volatility in their income. And 

17 this distribution is actually fairly consistent 

18 when you look at income levels. So, even among 

19 higher income households you see some volatility 

20 as well.

21 And this is interesting because, as you 

22 may expect, you might have expected to see we find 
82

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 that income volatility is associated with 

2 increased rates of being unbanked and underbanked. 

3 So, looking at the top part of this chart, among 

4 U.S. households whose income varied a lot from 

5 month to month, that is the dark blue bar at the 

6 top, the unbanked rate was 12.9 percent. So, that 

7 is a little bit more than double the unbanked rate 

8 among households that had income that was about the 

9 same from month to month.

10 And similarly, when you look at the 

11 underbanked rate, you see a higher rate of being 

12 underbanked for those households with income that 

13 varied along or somewhat from month to month, 

14 compared to those who had income about the same.

15 And what is interesting about this is 

16 this is not just a story about lower income 

17 households. We actually see this at different 

18 ranges across the income spectrum. So, just to 

19 illustrate this, there is a lot on this chart. I 

20 will just try and walk through it briefly.

21 So, each group of three bars is a 

22 different population based on their annual income 
83

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 level. So for example, the third from the bottom 

2 where it says $30,000 to $50,000, what this says 

3 is among households in the U.S. that had income from 

4 $30,000 to $50,000 over the past year, those who 

5 had income that varied a lot from month to month, 

6 8.5 percent of those households were unbanked 

7 compared to households at the same income level, 

8 $30,000 to $50,000, whose income was about the same 

9 from month to month, their unbanked rate was about 

10 4 percent. So you can see sort of at that modern 

11 income level, we see an effect. And that same 

12 pattern you see across, again, across all levels 

13 of income.

14 I am not going to show you here, just 

15 in the interest of time, similar patterns for 

16 underbanked rates as well. So, across the income 

17 spectrum, you see an influence of volatility above 

18 and beyond income level and other factors.

19 Okay, so just as in the past studies, 

20 we have looked -- we have asked unbanked households 

21 for the reasons why they did not have an account. 

22 And the results from these questions are similar 
84

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 to what we found in past years. The most cited 

2 reason for not having an account in 2015 was that 

3 the household simply said they do not have enough 

4 money to keep in the account. And 37.8 percent 

5 cited that as the main reason of all these reasons 

6 for why they do not have an account.

7 So, other widely cited reasons you can 

8 see include avoiding a bank gives them more 

9 privacy, although somewhat interesting, 28.5 

10 percent cite that as one of the reasons but only 

11 3.4 present cite that as the main reason.

12 We have heard a little bit about trust 

13 in banks and trust certainly plays a role. 

14 Twenty-eight percent of households that don't have 

15 an account say that one of the reasons why is that 

16 they don't trust banks and almost 11 percent say 

17 that that is the main reason why they don't have 

18 an account.

19 Other factors, of course, are account 

20 fees, whether the fact that -- I should say that 

21 some unbanked households say that unpredictable or 

22 high fees are reasons why they don't have a bank 
85

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 account.

2 We have another new question in this 

3 year's survey and this is trying to get a sense of 

4 just household perceptions about banks. So, 

5 specifically, the questions asks households for 

6 their perception how interested are banks in 

7 serving households like yours. And so they can 

8 answer very or somewhat, not at all, or they could 

9 basically not answer it.

10 So, just looking first at the top bar 

11 shows that if you look at the dark blue segment of 

12 that top bar, 76 percent or 76.6 percent about three 

13 in four households thought that banks were very or 

14 somewhat interested. But strikingly, the 

15 proportion among the unbanked is really quite a bit 

16 lower. So, only 31 percent of unbanked households 

17 thought that banks were very or somewhat interested 

18 and 55.8 percent thought that banks were not at all 

19 interested in serving households like theirs.

20 Also of interest is actually the 

21 differences between underbanked and fully banked 

22 households are not that great. So, about 80 
86

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 percent of underbanked households thought that 

2 banks were very or somewhat interested, compared 

3 to 84 percent of among fully banked.

4 Okay, so with that, let me hand it over 

5 to Jeffrey.

6 MR. WEINSTEIN: All right, thank you 

7 Ryan.

8 So what I am going to discuss now are 

9 for bank households methods used to access bank 

10 accounts. And moving to slide 19 in the packet.

11 So as in 2013, we asked banked 

12 households the methods they use to access their 

13 accounts. Households could choose among bank 

14 tellers, ATM kiosks, telephone banking, online 

15 banking, mobile banking or other. And so what this 

16 graph shows is it shows the light blue bars are 

17 methods used to access an account in 2013. The 

18 dark blue bars are for 2015. 

19 So, for example, if you look at the 

20 first row for bank teller, about 79 percent of 

21 banked households that accessed their account in 

22 the past 12 months for 2013 accessed their account 
87

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 using a bank teller and for 2015 about 76 percent 

2 of banked households accessed their account 

3 through a bank teller.

4 If looking down towards the bottom for 

5 online and mobile banking, we see from 2013 to 2015 

6 there were substantial gains in online and mobile 

7 banking. So, online banking in 2013, 55 percent 

8 of banked households accessed their account 

9 through online banking in 2013 compared to 60.4 

10 percent in 2015. And for mobile banking, the 

11 increase was from 23 percent to about 32 percent.

12 And so we can also see looking at the 

13 first row for banked tellers, the slight decline, 

14 bank tellers were still widely used. So even in 

15 2015, about three out of four banked households 

16 accessed their account through a bank teller.

17 Okay so as in 2013, we also asked banked 

18 household which method is the primary method used 

19 to access their account. And so what we can see 

20 here, if we look at this graph, we see that well 

21 in 2013, approximately the same proportion of 

22 banked households used bank tellers and online 
88

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 banking as the primary method of account access, 

2 32 to 33 percent. Online banking now exceeds bank 

3 tellers. So, we can see that 37 percent of banked 

4 households use online banking as the primary method 

5 of account access, versus about 28 percent of 

6 banked households in 2015 use bank tellers as the 

7 primary method.

8 That is one observation. Another 

9 observation is that mobile banking also increased 

10 substantially. So, in 2013, about six percent of 

11 banked households used mobile banking as the 

12 primary method of account access compared to about 

13 ten percent in 2015.

14 So the next section I am going to talk 

15 about is use of prepaid cards. So as in past years, 

16 we have asked households about their use of prepaid 

17 cards. And so from 2013 to 2015, the proportion 

18 of households that used prepaid cards in the past 

19 12 months increased from 7.9 percent in 2013 to 9.8 

20 percent in 2015. Those are the national 

21 estimates. We see that the growth occurred 

22 broadly across socioeconomic and demographic 
89

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 groups. Almost all of the socioeconomic and 

2 demographic groups analyzed in the survey had 

3 growth in prepaid card use from 2013 to 2015.

4 As in 2013, looking at use of prepaid 

5 cards across the population, prepaid card use 

6 varied by household characteristics. For 

7 example, prepaid card use was higher among lower 

8 income households, less educated households, 

9 younger households, black households, and 

10 working-age disabled households.

11 As Ryan discussed, in 2015 we asked a 

12 new question about income volatility and we see 

13 that income volatility is associated with higher 

14 rates of prepaid card use. So, looking at the 

15 graph here, 15.5 percent of households with income 

16 that varied a lot from month to month used a prepaid 

17 card in the past 12 months in 2015. And if we look 

18 down at the bottom in the tan bar, among households 

19 whose income was about the same each month, 9.2 

20 percent used prepaid cards. 

21 And so this, for the overall sample, 

22 this pattern held at all income levels.
90

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 Okay so slide 24 presents prepaid card 

2 use by banking status and year. And so we see, 

3 looking at these bars, between 2013 and 2015, 

4 prepaid card use increased substantially among 

5 unbanked, underbanked, and fully banked 

6 households.

7 So, looking at the first two bars for 

8 unbanked households, about 22 percent of unbanked 

9 household used prepaid cards in the past 12 months 

10 in 2013 compared to prepaid card use among unbanked 

11 household of 27 percent in 2015.

12 So, there was an increase for unbanked 

13 households. There was also, as I mentioned, an 

14 increase for underbanked and fully banked 

15 households.

16 Again, if we just look at 2015 by 

17 itself, prepaid card use remained most prevalent 

18 among unbanked households.

19 So, the next section that I am going to 

20 talk about is saving for unexpected expenses or 

21 emergencies. And we are on slide 26. Okay, so 

22 this was a new set of questions for the 2015 survey.
91

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 So, the 2015 survey included new 

2 questions on whether households saved for 

3 unexpected expenses or emergencies in the past 12 

4 months, as well as the methods that they used to 

5 save for this purpose.

6 And so we see the overall national 

7 number is that 56.3 percent of households save for 

8 unexpected expenses or emergencies in the past 12 

9 months. 

10 So, what does this mean in terms of how 

11 we ask the survey question? These households set 

12 aside any money in the past 12 months that could 

13 be used for unexpected expenses or emergency, even 

14 if the funds were later spent. And as part of the 

15 question, households were prompted to considere

16 only funds that could be easily spent, if necessary 

17 and not retirement or other long-term savings. 

18 So, again, really, the focus here is saving for 

19 unexpected expenses or emergencies.

20 In terms of looking across the 

21 population, rates of saving for unexpected 

22 expenses or emergencies varied by household 
92

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 characteristics. For example, savings rates were 

2 lower among lower income households, less educated 

3 households, black and Hispanic households, and 

4 working-age disabled households.

5 And just to give you an example of some 

6 of the magnitudes by income, looking at the next 

7 slide, 27, the differences in savings rates by 

8 income were especially pronounced. So, we can see 

9 looking at the left-most bar, 30.8 percent of 

10 households with income of less than $15,000 saved 

11 for unexpected expenses or emergencies compared to 

12 looking at the right-most bar about 73 percent of 

13 households with income of at least $75,000 saved 

14 for unexpected expenses or emergencies. So, 

15 really wide variation in savings rates by income.

16 There were also large differences in 

17 savings rates by banking status. We can see here 

18 that unbanked households saved for unexpected 

19 expenses or emergencies at a much lower rate than 

20 unbanked and fully banked households.

21 So, looking at the first bar, about 20 

22 percent of unbanked households saved for 
93

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 unexpected expenses or emergencies, compared to 55 

2 percent of underbanked and 60 percent of fully 

3 banked households.

4 So you can see, obviously, here that 

5 unbanked households saved for this purpose at a 

6 much lower rate, whereas, for unbanked and fully 

7 banked households, savings rates were very similar 

8 to each other.

9 Okay, moving into savings methods. 

10 So, slide 29. Among the households that saved, the 

11 households that saved were then asked where they 

12 kept the funds. And they could choose one or more 

13 savings methods from the list that we have 

14 provided. So, these methods include savings 

15 accounts, checking accounts, saving in the home or 

16 with family and friends, saving in other accounts 

17 such as certificates of deposit or brokerage 

18 accounts, keeping savings on a prepaid card, 

19 purchasing something with the intent to pawn it or 

20 sell it later if necessary, or other methods.

21 And so we can see here from this graph 

22 that savings and checking accounts were the most 
94

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 used savings methods. So, we can see from the top 

2 most bar that 70 percent of households that save 

3 for unexpected expenses or emergencies kept 

4 savings in a savings account, followed by about 25 

5 percent kept savings in a checking account. So, 

6 looking at the two together, about 85 percent of 

7 all households that save for unexpected expenses 

8 or emergencies kept savings in at least one of those 

9 accounts.

10 And we can see from the third bar that 

11 about ten percent of households kept savings in the 

12 home or with family or friends.

13 Okay, so these are the overall numbers. 

14 We can then look by banking status. And with 

15 savings rates, there are large differences in 

16 savings methods by banking status.

17 So here we are just going to focus a few 

18 of the methods here. So we have for unbanked, 

19 underbanked, or fully banked households the dark 

20 blue bar is for keeping savings in a savings or 

21 checking account. The lighter blue bar is for 

22 saving in the home or with family or friends and 
95

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 the tan bar is for saving on a prepaid card.

2 So, we can see from the first three set 

3 of bars for unbanked households, unbanked 

4 households that saved primarily kept savings in the 

5 home or with family or friends or on prepaid cards.

6 So, about 68 percent of unbanked 

7 households that saved kept savings in the home or 

8 with family or friends and about 13 percent kept

9 savings on prepaid cards.

10 And we can see for unbanked and fully 

11 banked households, among these households that 

12 saved, they primarily used savings and checking 

13 accounts. So for underbanked households, 82 

14 percent kept saving -- 82 percent of underbanked 

15 households that saved kept savings in a savings or 

16 checking account. And among fully banked 

17 households that saved, 88 percent kept savings in 

18 a savings or a checking account. So, we see here 

19 that there are stark differences in savings methods 

20 by banking status.

21 Okay so the last section I am going to 

22 discuss before I turn it over to Alicia are use of 
96

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 alternative financial services, so if we turn to 

2 slide 32. 

3 So as in previous surveys and Ryan 

4 already discussed a little bit about this, we asked 

5 about household use of alternative financial 

6 services. So, households were asked if they went 

7 to a place other than a bank to purchase a money 

8 order, cash a check, or send an international 

9 remittance, which we characterize this transaction 

10 AFS, Alternative Financial Services, and 

11 households were also asked whether they used any 

12 of the following nonbank products or services that 

13 may be used in lieu of bank credit, payday loans, 

14 pawn shop loans, rent-to-own services, refund 

15 anticipation loans, and auto title loans, which we 

16 characterize as credit AFS.

17 And as Ryan also mentioned, these are 

18 the same set of alternative financial services that 

19 we asked about in the 2013 survey.

20 All right, so slide 33 shows use of 

21 alternative financial services by year, looking at 

22 any alternative financial service, transaction, 
97

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 alternative financial services and credit, 

2 alternative financial services.

3 So, we see that patterns of AFS use 

4 among households in 2015 were generally similar to 

5 those in 2015 -- 2013 was similar to those in 2015. 

6 So about one in four households used an AFS in 2015, 

7 24.0 percent. As in 2013, use of transaction AFS 

8 was more common than use of credit AFS. So, about 

9 20 percent of households in 2015 used a transaction 

10 AFS and 7.7 percent used credit AFS.

11 We also see, looking at changes over 

12 time, use of transaction AFS fell from 21.9 percent 

13 to 20.2 percent of the population, while use of 

14 credit AFS increased from 7.0 percent to 7.7 

15 percent.

16 On slide 24 we look at AFS use by bank 

17 account ownership in year. So, the left panel is 

18 for unbanked households. The right panel is for 

19 banked households. So, we can see, again for 2013 

20 and 2015, use of AFS continued to be much higher 

21 among unbanked households than banked households.

22 So 57.3 percent of unbanked households 
98

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 used in AFS in 2015 compared to 21.4 percent of 

2 banked households in the AFS. We do see, though 

3 for unbanked households, the proportion that used 

4 any AFS fell from 63.2 percent in 2013 to 57.3

5 percent in 2015.

6 Looking then to see where the 

7 transaction AFS or credit AFS fall, we see that for 

8 unbanked households pretty much the entire 

9 decrease in use of AFS was attributed to a decline 

10 in transaction AFS.

11 So, we can see here that transaction AFS 

12 fell from 60.5 percent of unbanked households to 

13 54.1 percent of unbanked households going from 2013 

14 to 2015, while use of credit AFS stayed 

15 approximately the same.

16 For banked households, similar 

17 proportions used AFS in 2013 and 2015. And again, 

18 we see that use of transaction AFS fell slightly 

19 among banked households from 18.6 to 17.6 percent. 

20 Credit AFS increased from 6.2 to 7.0 percent.

21 And so the last point I wanted to 

22 mention on AFS use is again looking at AFS use and 
99

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 income volatility. Income volatility was 

2 associated with higher rates of AFS use both for 

3 credit AFS in the top panel and transaction AFS in 

4 the bottom panel. So for example, for credit AFS, 

5 about 16 percent of households with income that 

6 varied a lot from month to month used credit AFS 

7 in the past 12 months, compared to 6.9 percent among 

8 households with income was about the same each 

9 month. 

10 And the similar patterns observed for 

11 transaction AFS; 34 percent of households with 

12 income that varied a lot from month to month used 

13 transaction AFS in the past 12 months, compared to 

14 about 19 percent among households with income that 

15 was about the same each month.

16 And just as with prepaid cards and 

17 unbanked and underbanked rates, we also observed 

18 that these patterns held at all income levels. And 

19 this is discussed more in the report.

20 All right, with that, I am going to turn 

21 it over to Alicia to discuss bank and nonbank 

22 credit.
100

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 MS. LLORO: Thanks, Jeffrey.

2 So, to gain a more complete picture of 

3 household credit behavior in addition to the 

4 questions on credit AFS, the 2015 survey added 

5 questions about whether in the past 12 months a 

6 household had a credit card or a personal loan or 

7 line of credit from a bank. So, we all these items 

8 bank credit for short.

9 So, most households had bank credit and 

10 about 64 percent only had bank credit. A 

11 significant share had nonbank credit. So nonbank 

12 credit refers to the credit AFS products that 

13 Jeffrey just mentioned in the previous slides. 

14 So, of those, about half had both bank and nonbank 

15 credit and the other half only had nonbank credit.

16 And then finally, 28 percent of 

17 households didn't have any of the credit products 

18 that we asked about in the survey.

19 So, just a note there at the bottom that

20 households may have had other credit products that 

21 we didn't ask about like mortgages or auto loans. 

22 So, just keep that in mind as I talk about the credit 
101

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 products.

2 So, this next figure on slide 38 shows 

3 how household credit behavior varied by certain 

4 demographic characteristics. The report has a 

5 full set of demographic characteristics but for the 

6 interest of time here, we will just go over a few.

7 So, the top bar shows the same 

8 distribution that was on the pie chart in the 

9 previous slide. This is for all households. So, 

10 as we can see from the dark blue bars, households 

11 with incomes of less than $15,000, black 

12 households, Hispanic households, and working-age 

13 disabled households were much more likely not to 

14 have any of the credit products that we asked about 

15 in the survey.

16 Also from the next bar over, kind of a 

17 mid-colored blue, black households, working-age 

18 disabled households, and lower income households 

19 were also much more likely to use nonbank credit 

20 only. In fact, they were more than twice as likely 

21 as households overall to use nonbank credit only.

22 So in addition to asking households 
102

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 about what credit products they had, the survey 

2 also added new questions to provide some insight 

3 into a household's potential ability to qualify for 

4 bank credit. Specifically, the survey asked 

5 households whether in the past 12 months they had 

6 applied for a new credit card or a personal loan 

7 or line of credit at a bank. And if they did so, 

8 households were asked whether they were denied the 

9 credit or whether they were not given as much credit 

10 as they applied for.

11 So the first bar there shows that about 

12 14 percent of households applied for bank credit 

13 in the past 12 months. And then also overall about 

14 three percent of households both applied for credit 

15 and were denied credit or were not given as much 

16 as requested.

17 The survey also included a question 

18 that asked households if they had thought about 

19 applying for credit but didn't do so because they 

20 thought they might be turned down. And we found 

21 that about six percent of households are what we 

22 call discouraged about applying for bank credit.
103

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 Finally, the survey asked households 

2 whether in the past 12 months they had fallen behind 

3 on bills. And about 17 percent of households 

4 reported that they fell behind on bills in the past 

5 12 months.

6 So, we find that these factors are 

7 associated with nonbank credit use. So, if we 

8 focus on the column on the right for nonbank credit 

9 only, in the middle we showed households that were 

10 discouraged about applying for bank credit. So we 

11 can see that about 17 percent of households that 

12 were discouraged about applying for bank credit 

13 used nonbank credit only, compared to only 3.3 

14 percent of households that were not discouraged.

15 Similarly for households that fell 

16 behind on bills, about 15 percent of those 

17 households use nonbank credit only and that is 

18 compared to only about two percent of households 

19 that did not fall behind on bills.

20 So, I would just like to point out that 

21 these are associations in the data, that we are not 

22 making causal statements with these numbers.
104

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 And then finally, we looked at what we 

2 call unmet demand for bank credit. So for the 

3 purposes of our analysis, we classify a household 

4 as having credit needs that were not fully met by 

5 banks, if the household applied for credit and was 

6 denied, if they felt discouraged about applying for 

7 bank credit, or if they used any nonbank credit 

8 product.

9 So, overall, 13.7 percent of households 

10 had credit needs that were not fully met by banks. 

11 We also note that about half of these households 

12 reported that they stay current on bills.

13 So, on the next panel, Karyen will speak 

14 to some implications related to these findings.

15 So on slide 43, we talked about how 

16 households conduct financial transactions in a 

17 typical month. So, the survey also added a series 

18 of new questions asking households how they 

19 typically pay bills for things like mortgage, rent, 

20 utilities, child care, and also how they receive 

21 income from things like work, government benefits, 

22 or other regular sources of income. And then this 
105

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 was asked in a typical month.

2 The goal of these questions was to learn 

3 the extent to which households use banks and other 

4 methods to handle these routine financial 

5 transactions.

6 So, this next figure shows how 

7 households paid bills in a typical month. The most 

8 common methods were electronic payment from a bank. 

9 So, this includes both bank bill pay and like direct 

10 withdrawal from your bank account but also we found 

11 that personal checks were a very common method of 

12 paying bills. So, about 60 percent of both of 

13 those. Those were followed by debit card and 

14 credit card.

15 Also, notably, 16.7 percent of 

16 households use cash to pay bills in a typical month.

17 So, this next slide is just to show you 

18 how we define what bank methods are. So anything 

19 above that dashed line is considered a bank method, 

20 electronic payment from a bank, a personal check, 

21 debit card, credit card, or a money order from a 

22 bank.
106

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 So, the bottom two bars show that about 

2 88 percent of households used at least one bank 

3 method to pay bills in a typical month and about 

4 three-quarters only used bank methods to pay bills 

5 in a typical month.

6 Oh, I think was reading from the wrong 

7 slide but close enough.

8 So, we can go back. Yes, sorry, 90 

9 percent and then it is still three-quarters.

10 So, this next slide shows how 

11 households receive income in a typical month. So 

12 by far, the most popular method was direct deposit 

13 into a bank account. About 80 percent of 

14 households typically receive their income in this 

15 way. The second most common was a paper check or 

16 money order.

17 So, the bank methods of receiving 

18 income in a typical month are direct deposit, and 

19 then paper check or money order only if the 

20 household has a bank account and also did not use 

21 a nonbank check casher. So, looking along the 

22 bottom there, 88.5 percent of households use any 
107

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 bank methods to receive income in a typical month 

2 and 79.2 percent only use bank methods to receive 

3 income in a typical month.

4 All right. So you might be wondering 

5 how this varies by banking status. So, perhaps 

6 unsurprisingly unbanked households mostly went 

7 outside the banking system to pay bills or receive 

8 income in a typical month and cash played an 

9 important role. About 60 percent of unbanked 

10 households used cash to pay their bills in a typical 

11 month.

12 In contrast, underbanked households 

13 used banks extensively, almost to the same extent 

14 as fully banked households. The one distinction 

15 is that they also widely used other methods, 

16 particularly for paying bills.

17 So the next slide here shows 

18 underbanked use for bill payments and income 

19 receipt in a typical month. So, on the bill 

20 payment side, 92.7 percent of underbanked 

21 households used a bank method to pay bills in a 

22 typical month. As I just mentioned, this is very 
108

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 similar, almost as high as for the fully banked. 

2 The one difference is that they use cash and nonbank 

3 money orders at substantially higher rates than the 

4 fully banked households. So by definition, the 

5 fully banked households don't use nonbank money 

6 orders. So that is a zero percent. And the fully 

7 banked use cash at about 9 percent.

8 So the underbanked are using banks 

9 extensively but they are also using cash and 

10 nonbank money orders and the prepaid card is a 

11 little bit smaller

12 On the bottom there, it shows that 

13 slightly over half of underbanked households only 

14 use bank methods to pay their bills in a typical 

15 month.

16 And then the right panel there shows how 

17 underbanked households typically receive income. 

18 Most receive income using any bank method, 92.4 

19 percent. On the bottom we can see that 76.2 

20 percent only use bank methods. The receiving 

21 income by underbanked households was very similar 

22 to that for the fully banked households.
109

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 Finally, last slide, I know this has 

2 been a lot of information, is a brief 

3 advertisement/reminder about our 

4 economicinclusion.gov website so you can find our 

5 full report, also a full set of appendix tables with 

6 probably more information than maybe you want to 

7 read in one sitting but it is all there if you need 

8 to look something up.

9 We also have the custom data table tool 

10 like we did for the 2013 surveys so you can run your 

11 own tables. And also if you are so inclined, you 

12 can download the full data set and your own 

13 analysis. We provide the data and documentation.

14 So with that, I will turn it back to 

15 Karyen Chu for questions.

16 MS. CHU: Great. Thank you, Alicia. 

17 So, we are open for questions. Mark.

18 MEMBER OLSON: As always, this is very 

19 interesting and very helpful. And it is always 

20 helpful to get the update.

21 Let me ask a question first just on what 

22 constitutes the universe that you are serving. I 
110

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 know it is households and it is adults but is there 

2 a presumption that anybody that is included in the 

3 survey is using a financial service of some sort? 

4 In other words, if somebody just becomes an adult 

5 or just become a resident of the United States but 

6 may not have any financial services, are they 

7 included in this survey or does it presume at least 

8 an existing single financial product?

9 MS. CHU: I will let Ryan answer that.

10 MR. GOODSTEIN: Sure. So this is a 

11 supplement to the current population survey. This 

12 is the same survey that provides, for example, 

13 employment estimates. And so the universe, so the 

14 populations we are talking about when we say U.S. 

15 households, it includes all U.S. households that 

16 are noninstitutionalized.

17 MEMBER OLSON: I see.

18 MR. GOODSTEIN: So basically 

19 nonmilitary and non-institution of some sort.

20 MEMBER OLSON: So it is very broadly 

21 based.

22 MR. GOODSTEIN: We do see some 
111

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 households, very few but some unbanked households 

2 that actually say no to everything or most 

3 everything. So, these are sort of the households 

4 we think are just operating totally in cash.

5 MEMBER OLSON: The second question, 

6 banks are financial intermediaries, which is to say 

7 being banked is not an end in itself. You want to 

8 be banked because it helps achieve something more 

9 broad, an education, a savings, retirement, and the 

10 like. And I think that as you identify the 

11 alternative financial services, there is sort of 

12 a pejorative connotation presuming that they are 

13 either more expensive or less sufficient. But do 

14 we, have we -- and is the data old enough so that 

15 you can correlate things like being a bank customer 

16 and achieving some of these greater financial 

17 goals? And maybe either Jeff or Alicia, that might 

18 be in your areas. So that we are not simply looking 

19 -- we are not doing it for the benefit of the banking 

20 industry, we are doing it for the benefit of the 

21 general public and making sure that the bank, 

22 itself, is serving a broader societal goal.
112

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 MS. CHU: I would say that so our survey 

2 has been conducted every two years since 2009. Our 

3 goal is to really provide information, objective 

4 information that allows us to talk about a measure 

5 usage of both bank and nonbank financial services. 

6 And this year we added a whole lot more questions 

7 that give us a lot more visibility into the 

8 transaction and financial services that people use 

9 to pay bills and receive income.

10 We haven't had, we don't really have 

11 very many outcome measures in the survey. And 

12 these are certainly, as I mentioned, every 

13 administration of the survey we look to try to see 

14 what we can add, at the same time trying to maintain 

15 comparability over time.

16 MEMBER OLSON: Well, I think that will 

17 be -- because the marketplace is pretty aggressive 

18 and the marketplace will continue to provide 

19 financial services and using all of the current 

20 methods of communication and distribution. And so 

21 I think that will be an increasingly important 

22 component of this survey, the extent to which the 
113

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 banking industry is providing the societal note.

2 MS. CHU: Andrea.

3 MEMBER LEVERE: So, I see that we have 

4 a second session about the implications. I am just 

5 going to ask about two data points. 

6 So on the emergency savings piece, did 

7 we ask any questions about how much they were saving 

8 at all? Do you have any data on that?

9 MR. WEINSTEIN: So we did not ask that 

10 question.

11 MEMBER LEVERE: You did not.

12 MR. WEINSTEIN: Right.

13 MEMBER LEVERE: Okay.

14 MR. WEINSTEIN: So we are just looking 

15 at sort of whether they save.

16 MEMBER LEVERE: Yes or no.

17 MR. WEINSTEIN: But it could, again, be 

18 in and out because they could have later spent the 

19 funds. It doesn't mean they necessarily have the 

20 funds currently. They could have had them, spent 

21 them on an emergency or unexpected expense. We 

22 don't know the amount of savings.
114

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 MEMBER LEVERE: You know there is a 

2 huge amount of data that looks at we don't have 

3 $400, we don't have $2,000. So, I just wondered 

4 if there was any addition to that thinking.

5 My other data question goes back to the 

6 data you reported on Asian communities and how it 

7 had a different trend line than others. I think 

8 that one thing we know that the disaggregation of 

9 data within the Asian communities is absolutely 

10 critical that the data remain deep.

11 So, I was wondering if there was 

12 disaggregation within that data, which would help 

13 us identify is this because of new immigrant 

14 populations or a change in the overall database.

15 MR. GOODSTEIN: That's a good point and 

16 in fact that came up in our presentation of this 

17 material internally last week. In fact, I think 

18 it is something we need to look into a big more. 

19 We can say so, I guess a few things on 

20 sort of the trend line in general about Asian 

21 households is yes, there is a jump up in unbanked 

22 rates and underbanked rates. But if you look over 
115

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 sort of the longer trend, it bounces around a little 

2 bit so it is, perhaps is a little more stark if you 

3 look at only 2013 to 2015. That is just one sort 

4 of point for context. 

5 But that said, I think when we look at 

6 sort of just the general other household 

7 characteristics and to what extent can we explain, 

8 use those to account for what we see in the changes 

9 from '13 to '15, they don't explain a whole lot but 

10 I think there is an opportunity to do exactly what 

11 you said, which is to dig deeper into sort of the 

12 composition of the households that are classified 

13 as Asian or as a country of origin and backgrounds, 

14 things like that. So, I think that is something 

15 we need to do more work on.

16 MS. CHU: Although, I will also caution 

17 that because the sample sizes are very small in that 

18 group --

19 MEMBER LEVERE: Which is always a 

20 challenge.

21 MS. CHU: -- right -- we may not be able

22 to decompose all that much and find much 
116

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 significance.

2 Pat.

3 MEMBER MCCOY: A couple of questions. 

4 I wasn't sure if your description of alternative 

5 financial services fully picked up nonbank intake 

6 services. So, that is one question.

7 And the other question is when I looked 

8 at the extent of reliance on cash in the unbanked 

9 sector, it occurred to me that some individuals may 

10 not go into the banking system because they are 

11 afraid of detection and legal enforcement. And 

12 this isn't a typical problem with welfare benefits, 

13 which may not really enough to live on. 

14 And I was wondering if you had any 

15 questions in the survey that tries to get at this 

16 concern about avoiding monitoring of their 

17 transactions.

18 MS. CHU: So maybe I will have Alicia 

19 answer the FinTech question.

20 MS. LLORO: Oh, sure. So currently 

21 with at least the credit questions and also the 

22 transaction, we are not picking up the FinTech. So, 
117

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 for example, marketplace lending, we would not 

2 include that.

3 MS. CHU: I'm sorry. For Pat's 

4 additional question --

5 MR. GOODSTEIN: Just on the second 

6 point about -- I'm not sure if I can speak directly 

7 to that, other to refer back to the households that 

8 don't have a bank account. The reasons that they 

9 cite for not having an account, one of which is 

10 something to do with privacy. So, I don't have a 

11 bank account because of privacy-related reasons. 

12 And so about a quarter of unbanked households cite 

13 that as a reason, although, as I pointed out, not 

14 a very high proportion of unbanked households cite 

15 that as the main reason. It is less than five 

16 percent, three or four percent, something like 

17 that.

18 MEMBER MCCOY: Yes, you know I have 

19 always had this question of is there an upper limit 

20 on the number of unbanked people we have been 

21 helping in the banking system that privacy question 

22 may become important.
118

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 MS. CHU: Ted.

2 MEMBER BECK: Just looking at the full 

3 report, you have got some really good data on age 

4 groups. And the presentation really didn't 

5 differentiation by age category. Are you seeing 

6 sort of any headline differences in behavior by the 

7 age category?

8 MR. GOODSTEIN: So, I think the 

9 patterns we see are sort of similar to what we have 

10 found in past reports, which you may be right it 

11 wasn't a point of emphasis in our presentation 

12 today. But generally speaking, in terms of 

13 unbanked and underbanked rates, we see that they 

14 are higher for younger households versus older 

15 households. Things like visiting for banked 

16 households, how they access for an account. As you 

17 might expect, in older households, they are more 

18 likely to say they use the bank teller, use that 

19 as the primary method and less likely to use online 

20 and mobile banking, things like that.

21 MEMBER BECK: And the second question 

22 is how are you treating gift cards or the prepaid 
119

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 card.

2 MR. GOODSTEIN: So, when we asked the 

3 question in the survey, we explicitly say we are 

4 not referring to gift cards. We sort of give a few 

5 sentence preamble about we mean and what we don't 

6 mean.

7 MS. CHU: Bob?

8 MEMBER ANNIBALE: Thanks. I was going 

9 to follow-up on a bit of that. But Mark's question 

10 was also there.

11 The whole concept of view of what is 

12 alternative and is it or is it complementary. So, 

13 remittances, for example, banks have not been the 

14 dominant form of provider's remittance services 

15 for a long time. And with KYC concerns and others, 

16 they are probably even less. So, you have to 

17 really think if that is a concern of ours or not. 

18 And if we say underserved, is that a problem that 

19 they are using remittance services? I was asking 

20 the same on the cards. 

21 Many benefits are also on cards now and 

22 there has been a growth in that. And just as gift 
120

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 cards in every shop you go to and every drug store. 

2 So, as long as you can exclude some of those, I think 

3 it is important.

4 And then there is things like PayPal and 

5 other P2P and Square. We just need to start to 

6 think as we go forward they may be complementary 

7 services for many people, not necessarily 

8 problematic in that sense of a goal. They are 

9 solving some needs.

10 It is the unbanked, having no bank 

11 account that starts to become curious as to that.

12 MS. CHU: Thank you. Alden.

13 MEMBER MCDONALD: Yes, going back to 

14 the survey and the sample that you had in the 

15 survey, did you keep your sample consistent through 

16 all of the questioning as well as the different 

17 years? For example, did you keep your sample of 

18 age demographics level or did you mix it up. How 

19 did you go about to select the survey folk to answer 

20 your questions?

21 Because by age, for example, you will 

22 have more individuals responding to the technology 
121

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 side versus the manual banking system for payments, 

2 as well as deposits. So, how did you do your 

3 sampling? What mix did you use?

4 MR. GOODSTEIN: Sure. So, as I 

5 mentioned before, the survey we actually just 

6 piggyback right on the CPS. So, we sort of use 

7 their sampling. When we use the survey weights, 

8 it is meant to represent the entire U.S. 

9 noninstitutionalized population. And so that is 

10 the mechanics of how it works.

11 MEMBER MCDONALD: Okay.

12 MR. GOODSTEIN: But it is true that so 

13 as the demographics of the country change and that 

14 is reflected to some degree in sort of the behaviors 

15 we see, so for example as the country ages, we know 

16 that being older is associated with higher rates 

17 of being banked. And so you see unbanked rates 

18 dropping for that reason. Other things equal but 

19 then of course, there are offsetting factors, 

20 things like increasing minority shares. So the 

21 actual outcomes that we see are reflective of 

22 demographic trends but the sample itself is meant 
122

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 to represent as of the survey date 2015, June 2015, 

2 what the country looks like.

3 MEMBER MCDONALD: And the same thing 

4 with 2013.

5 MR. GOODSTEIN: That's right. So, 

6 that has been true of all years of the survey.

7 One thing just on this point I should 

8 mention we use the householder to represent the 

9 household. So, there may be some variation in the 

10 sense when we refer to a household as a younger 

11 household or like a college educated household, we 

12 typically mean, or in this report we mean the 

13 householder. We looked at sensitivity to results 

14 to various other measures of incorporating other 

15 people in the household. And generally the 

16 patterns we see are similar. So, just to point out 

17 that technical point.

18 MS. CHU: Kelvin.

19 MEMBER BOSTON: Just a couple of 

20 points. And some of it we just head from Alden.

21 And this might be in the report. I 

22 think it would be interesting to find out are these 
123

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 people long-term unbanked or underbanked. Are 

2 they newly unbanked or underbanked? How long have 

3 they been in this situation? 

4 And the other question to me I think it 

5 would be helpful for the country is when we ask this 

6 question is are you not saving because of some asset 

7 test based on a government subsidy. I don't know 

8 if you can get at that but I think that would be 

9 an important question.

10 MEMBER MCCOY: The fear of one.

11 MEMBER BOSTON: That's my point. So 

12 people are not saving, may not be saving, may not 

13 be using these vehicles to save because they are 

14 afraid of losing their benefits.

15 The other thought I had was about page 

16 17 concerning how interested are banks in serving 

17 households like yours. I want to make sure I 

18 understand. Are we saying here that 55 percent of 

19 the unbanked are saying that banks are not 

20 interested? I just wanted to make sure, which is 

21 reasonable. But I think in this report it seems 

22 as though we have glossed over that.
124

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 MS. CHU: I'm sorry?

2 MEMBER BOSTON: It seems to me how we 

3 are presenting it right here that we are kind of 

4 glossing over that. That is very significant if 

5 you want people who may -- my position is people 

6 who are unbanked today may become banked tomorrow. 

7 It might just be a job or something temporarily that 

8 they are going through. But if they feel that 

9 banks are not interested in them period, are not 

10 serving them, then why should they come later when 

11 their situation changed?

12 So, I am just wondering if maybe we 

13 should at least underscore that there is a 

14 perception that banks are not interested in serving 

15 a certain population.

16 MS. CHU: Absolutely. So, let me 

17 actually address your last comment first and then 

18 turn it to my colleagues.

19 So, we actually have more in the report 

20 on this question about how interested are banks in 

21 serving households like yours. And just as 

22 importantly, we also actually have a major 
125

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 implication that we will discuss in the next panel 

2 on this.

3 MR. MILLER: This is a new question, 

4 right?

5 MS. CHU: This is a brand new question, 

6 yes. And then for your --

7 MR. MILLER: I am interested in digging 

8 in on this.

9 MS. CHU: Right. And so we will 

10 provide in that, when I discuss the implication, 

11 I will be providing a lot more detail into specific 

12 segments of this.

13 And then on your question about 

14 previous banking history, et cetera.

15 MR. GOODSTEIN: Yes, so we have a few 

16 data points on that. So we know that of unbanked 

17 households about half have been banked at some 

18 point in the past. And if I recall correctly, it 

19 is something like ten percent have been banked in 

20 the last year. So, of unbanked households, ten 

21 percent, thereabouts were unbanked -- were banked 

22 in the last year but are currently unbanked at the 
126

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 time of the survey.

2 MS. CHU: John.

3 MEMBER RYAN: Just a couple questions 

4 about the survey. Do you see differences in 

5 response rates based on income, age, ethnicity and 

6 is that a variable, if so that changes between the 

7 years?

8 And in the survey is there any 

9 opportunity, I imagine there would be the answer, 

10 but to provide narrative in responding to any of 

11 the questions?

12 MS. CHU: So, I will ask Alicia to 

13 respond.

14 MS. LLORO: Sure. Yes, so there is a 

15 difference in response rates by pretty much all of 

16 the demographic categories.

17 MEMBER RYAN: Are they significant?

18 MS. LLORO: Yes. So, the patterns are 

19 the same as far as so when people have to agree to 

20 take our supplement after they have done the base 

21 questions from the general population survey, so 

22 there is some drop off there. And it follows a sort 
127

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 of pattern by demographics.

2 And then as people proceed through our 

3 survey, there is also a drop off. So as you get 

4 further along, some people drop out as they go 

5 along. And certain questions may be hard to answer 

6 so they could have slightly higher nonresponse 

7 rates. 

8 And so it varies if we look at banked 

9 versus unbanked. The unbanked have a lower 

10 response rate. But the pattern of drop off is 

11 similar. 

12 So, if you think about like lower 

13 income, it sort of shifts the response rate down 

14 and then they sort of decrease as they go through 

15 the survey but that drop off isn't higher. So, it 

16 is sort of just kind of like a shift. The same 

17 thing with education, racte. So, it is kind of 

18 just a shift overall of a little bit lower response 

19 rate and then kind of the same drop off as you go 

20 through on the survey.

21 And most of the -- well, not most but 

22 sort of all of the information that we presented 
128

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 for you we did control for demographic 

2 characteristics. So, that should pick up a little 

3 bit with the response rate, if that is affecting 

4 sort of the distributions that we get. So, we make 

5 sure like accounting for other factors do these 

6 differences still hold up.

7 And so what we report they do hold up. 

8 So, that should help a little bit with the response 

9 rates.

10 But yes, so certainly, it is what you 

11 would expect. It is affecting.

12 MR. GOODSTEIN: Just one follow-up 

13 point on that. At least for the households that 

14 drop off before so they either don't complete the 

15 base CPS or they drop off when they get to our CPS, 

16 they are considered nonresponsive. And so the 

17 weighting we use reflects -- adjusts for that. Of 

18 course, that can't control for everything. So, to 

19 the extent that the drop off is differential by 

20 things that aren't observed or accounted for in the 

21 way, you know, that is, of course, not reflected. 

22 So, it gets to some of that. It corrects for some 
129

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 of that but not all of it.

2 MS. CHU: And to respond to your 

3 question about open-ended questions, so in many of 

4 these answers, when none of the choices apply to 

5 you, you can specify no, none of these but, instead, 

6 I use X.

7 Martin.

8 MEMBER EAKES: Yes, this is a little 

9 bit geeky. Is it possible to have -- we have got 

10 lots of correlations here. Would it be possible 

11 to have causation hypotheses of how do you get at 

12 that. So, it is part of Mark's question is you are 

13 fully banked, can you have hypotheses you can test 

14 about whether that leads to better outcomes or is 

15 this data set just not possible to get to causality.

16 MR. GOODSTEIN: So, I don't think any 

17 of us would be comfortable saying we could get to 

18 causality. I mean we can certainly, and we have 

19 done sort of behind the scenes.

20 MEMBER EAKES: Yes, you could never get 

21 to causality in any study.

22 MR. GOODSTEIN: But we can at least 
130

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 account for other things that we observe and do 

2 these differences. So, the difference in certain 

3 -- like for example, the difference in unbanked 

4 rates, by racial and ethnic minority groups, to 

5 what extent does that difference explain that 

6 difference. So, we can account for things we can 

7 observe, of course. 

8 So, things like income, education, and 

9 all these other characteristics. After doing so, 

10 there is, of course, still a difference. And so 

11 that is probably the more interesting question is 

12 what is the sort of residual distortion. That is, 

13 obviously, a much harder question to get to.

14 But in general so the differences that 

15 we have highlighted here. We have, at least behind 

16 the scenes, tried to account for other things. And 

17 at least qualitatively, we see these differences 

18 persist even for accounting -- when they account 

19 for other things. But I think we stopped short of 

20 saying there is still some causal effect of what 

21 is left.

22 MR. MILLER: It is an ongoing fight, 
131

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 Martin. I ask them all the time can I say this. 

2 And they say no. Then, I'm on my own as to whether 

3 I decide to or not.

4 MEMBER SWAGEL: It is remarkable data, 

5 though. It is really amazing.

6 MS. CHU: Thank you. John.

7 MEMBER WEICHER: I agree with what Phil 

8 was just saying, certainly. I have a couple of 

9 questions. One is, where does the money market 

10 mutual fund fit into your categories.

11 MR. GOODSTEIN: So, the actual 

12 question when we categorize the household as 

13 basically the question specifically is do you 

14 currently have a bank account. And so it doesn't 

15 refer specifically to types of accounts, whether 

16 savings or checking, although we have a follow-up 

17 on that.

18 If a respondent were to ask I have a 

19 money market account, they are instructed to say 

20 yes. And when we compare our data to other 

21 sources, for example the Fed Survey of Consumer 

22 Finances, they line up very closely as long as we 
132

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 include things like money market accounts and other 

2 sort of more -- accounts somewhere sort of 

3 wealthier the households the more higher you would 

4 use.

5 So, I think for the purposes of 

6 interpreting our results, it is safe to assume that 

7 when we say a bank account, it includes all of those 

8 types of products.

9 MR. MILLER: Even if it is not from a 

10 bank.

11 MR. GOODSTEIN: On that piece, I 

12 suppose that would be in there, too. I don't 

13 remember. That is probably something we should --

14 MEMBER WEICHER: It would be in the 

15 bank -- it would be counted as bank if it were with 

16 --

17 MR. GOODSTEIN: And of course, we 

18 should also remember that --

19 MEMBER WEICHER: Pardon me?

20 MR. GOODSTEIN: That's a good point. 

21 So to the extent that a household would have an 

22 account like that and not also a checking or a 
133

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 savings account or something from a bank as well, 

2 it is possible we might be sort of overshooting 

3 slightly. I would suspect that the number of 

4 households in the population that meet that 

5 criteria is probably not that big.

6 MEMBER WEICHER: That sort of feeds 

7 into my section question which is basically what 

8 is a bill as you are paying it?

9 I get monthly bills and I certainly 

10 never pay any of them in cash. And at the same time 

11 when I go out and do my shopping on the weekend, 

12 I am going to be using cash, depending on who it 

13 is and the size of the bill and I am going to be 

14 using a credit card, et cetera.

15 So, I am startled that only 16.7 percent 

16 of people use cash. Am I missing something there?

17 MR. GOODSTEIN: The preamble to this 

18 series of questions about how do you pay your bills 

19 in a typical month try and prompt the respondent 

20 to think about things like mortgage or rent, other 

21 sort of regular bills, utility bills, things like 

22 that.
134

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 And so I think for that reason maybe 

2 people aren't thinking, you know we didn't 

3 expressly call to their mind things like grocery 

4 and things like that.

5 That said, of fully banked households, 

6 something like ten percent or maybe a little bit 

7 less, seven or eight percent of fully banked 

8 households use cash. So, that is probably picking 

9 up things like that or child care or other things 

10 you could sort of imagine.

11 MEMBER WEICHER: That suggests that a 

12 great many people never use cash, if seven or eight 

13 percent say they do. That leaves a lot of people 

14 --

15 MEMBER LEVERE: None of our children.

16 MEMBER BARR: My children have never 

17 used --

18 MEMBER LEVERE: They don't know what it 

19 is.

20 MEMBER BARR: When they were little, 

21 they might have used pennies but not today.

22 MR. GOODSTEIN: I mean if you look at 
135

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 only the households that only use bank methods, 

2 that would mean that they do not use cash at least 

3 for these bills. Over 90 percent of fully banked 

4 households and something close to 90 percent for 

5 all households -- I'm sorry, for fully banked 

6 households. Something close to 90 percent were 

7 only bank.

8 MS. CHU: Jose?

9 MEMBER CISNEROS: Yes, great 

10 information. But if we are going to continue this, 

11 I am happy to go after lunch, if we are running --

12 MR. MILLER: We have got a few more 

13 minutes.

14 MEMBER CISNEROS: We do? Okay, great. 

15 I am intrigued about your information around direct 

16 deposits. We have looked at direct deposit in San 

17 Francisco in the past because, again, going on our 

18 own imaginings mostly, we were thinking and hoping 

19 that take-up rate of direct deposit might be 

20 correlated to a lot of better outcomes because if 

21 all or let's say most of an individual's or 

22 household's income is automatically landing 
136

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 rapidly and safely in their bank account, it 

2 hopefully encourages those individuals, those 

3 folks, to be doing a lot more living and transacting 

4 with main stream bank accounts and have less of a 

5 reason to even occasionally use nonbank offerings.

6 So, I am curious a little bit about two 

7 sets of questions. Both what information you 

8 might have now or we could look at getting in the 

9 future about what we know about the actions of 

10 people that are using direct deposit. Things that 

11 come to my mind are what percentage of your income 

12 do you receive through direct deposit.

13 So, I would imagine for many people, if 

14 not even most, it is probably 100 percent. Right? 

15 I mean if I have one employer and I get all my pay 

16 through direct deposit, then that would be 100 

17 percent. But I don't know, obviously at various 

18 income levels, there will be people that might have 

19 different varied sources or, as you say, income 

20 volatility and things like that.

21 So, I would be curious to see if 

22 correlations differ, depending upon the percentage 
137

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 of your income that comes through direct deposit.

2 I would also want to see if, again, some 

3 of these imagined benefits that could be determined 

4 are savings rates higher if I get all or a 

5 significant amount of my pay through direct deposit 

6 and, as I mentioned a minute go, do my use of nonbank 

7 things decrease?

8 And then looking at the folks -- and 

9 this is where I believe our most vulnerable 

10 communities are, the universe of folks that don't 

11 at all use direct deposit or use it very little -- I 

12 would say at all. That is a population I am 

13 particularly curious about because I think 

14 obviously those are where our unbanked folks live. 

15 Those are where our low-income families are.

16 And so some of the questions I have 

17 about that universe is, and I don't know that we 

18 would have asked this already, but is direct 

19 deposit even offered from the places that you 

20 receive your income from? Are your employers even 

21 offering you direct deposit?

22 So, in other words, was that even a 
138

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 choice that the household was or individual was 

2 making on their own or was it a choice that was kind 

3 of forced on them because it wasn't even offered? 

4 What is their income volatility looking like? I 

5 am imagining that if they have a lot of part-time 

6 jobs or short-term employment periods, even if it 

7 is offered it might be a pretty heavy lift to keep 

8 swapping in and out direct deposit connections 

9 every few months or something like that.

10 And so I am curious to see which of 

11 either of those two categories of information do 

12 you think might have now and then could we look at 

13 maybe adding some of those questions in the future.

14 MR. GOODSTEIN: So, I think those are 

15 all really good points. First, I will start with 

16 what we can't do. We don't have any questions now 

17 about what percent of income comes from direct 

18 deposit. That is something, at least at this 

19 point, we can't speak to at all. But I think there 

20 is a suggestion to look at sort of how, basically 

21 break up the population of bank people.

22 Also we already look at sort of the 
139

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 differences by unbanked or certainly for the large 

2 part they don't have direct deposit into a bank 

3 account. But it is a good idea to look within the 

4 community bank's households and how their other 

5 outcomes and other sort of behaviors differ by 

6 whether or not they have direct deposit.

7 Of course, again, returning to our 

8 earlier caveats we can look at differences. There 

9 is going to be other things going on that might be 

10 a shift in those differences. 

11 MEMBER CISNEROS: But I'm happy to draw 

12 conclusions like Jonathan that may or may not be 

13 actually valid.

14 MR. GOODSTEIN: We serve it up and you 

15 can run with it.

16 The other thing we should talk about and 

17 I think we should on this point now, and we 

18 mentioned it in the report but just to be clear, 

19 when we are talking about differences across 

20 households and what they are doing in terms of 

21 paying bills and receiving income, we haven't at 

22 all accounted for. And we have talked about in a 
140

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 future survey bringing questions like can you --

2 are you able to get direct deposit from your 

3 employer and on the pay side, are you using a money 

4 order because your landlord required it and things 

5 like that.

6 So, these differences that we show here 

7 and in the report, to some degree it is those 

8 factors, as well as sort of just individual 

9 household circumstances and preferences.

10 MEMBER BARR: Thank you. I will try 

11 not to break the mike this time.

12 Just a small point about Jose's 

13 question and then a question for you.

14 So, I asked a couple of those questions 

15 in my Detroit Study that I did several years ago 

16 and the findings are in the No Slack Book that I 

17 talked to this community about I think quite a long 

18 time ago. But as Ryan's questions would suggest, 

19 the sort of external factors is quite important for 

20 people. So, among the people in the study who 

21 didn't use direct deposit, a big driver for them 

22 was that their employer just didn't offer it. And 
141

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 a big driver for the use of money orders to pay 

2 landlords was because their landlord wouldn't take 

3 any other form of payment.

4 The same for cash. Use of cash was 

5 driven externally rather than motivated by the 

6 person's desire to go get a money order.

7 So, it just reinforces your point.

8 MEMBER CISNEROS: And I just want to 

9 say what that led us to believe was, in addition 

10 to focus on the poor person who didn't even have 

11 the option of receiving direct deposit, it was 

12 probably time for us to turn our sites on the 

13 employers and start talking to them about saying 

14 you all need to get to 100 percent offering of 

15 direct deposit. So, it just tells us where we need 

16 to direct our --

17 MEMBER BARR: I think that is right. I 

18 mean the challenge there for the direct deposit 

19 side, there shouldn't be large employers who don't 

20 do it but the challenge is really the smaller 

21 employers and the lots of people who have lots of 

22 part-time work. And that is a very big challenge.
142

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 So, my question was around the finding 

2 about the significant increase in bank status for 

3 African Americans, which I was really struck by. 

4 And I was particularly struck by it because African 

5 Americans have had a harder time than others coming 

6 out of the Great Recession reattaching to the labor 

7 force.

8 So you mentioned before that, at least 

9 in an aggregate level, I think, about half the 

10 increase in bank status can be attributed to job 

11 status. Is it different for African Americans? 

12 Can you tease out more the relationship between the 

13 increase for African Americans and other causal 

14 factors?

15 MR. GOODSTEIN: That's a good 

16 question, which I am sure we looked at at some point 

17 but the answer escapes me at the moment.

18 MEMBER BARR: Okay.

19 MR. GOODSTEIN: I mean I can say that 

20 for sure we can account for sort of the same story 

21 as I talk about for the overall trend when we 

22 account for things like economic conditions and 
143

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 other demographic changes on sort of the residual 

2 difference across time. In other words, the 

3 changeover times is still significant. Saying 

4 that that doesn't seem to be the whole story. And 

5 I don't remember off the top of my head sort of the 

6 magnitude of this.

7 MEMBER BARR: Maybe if it is in the 

8 180-page version, if we could chat about it in the 

9 afternoon or we could follow-up after, that would 

10 be great.

11 MS. CHU: Andrea.

12 MEMBER LEVERE: Very quick question. 

13 Is this data cut by gender?

14 MR. GOODSTEIN: We have not cut by 

15 gender. So, one of the reasons why is it is a 

16 household level survey. And so the gender cut 

17 doesn't necessarily work for all our households. 

18 What we have done, but we didn't focus at all today, 

19 but we showed how the results varied by households 

20 structure. So, married couple households, single 

21 female head of household, single male head of 

22 household, and individual households.
144

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 And so as you might expect, households, 

2 for example single female family households, these 

3 are households headed be a female with usually kids 

4 or other people in the household, they have higher 

5 rates of being unbanked, higher rates of being 

6 underbanked.

7 MEMBER LEVERE: And is that available 

8 on the website? You have that broken out?

9 MR. GOODSTEIN: Yes.

10 MR. WEINSTEIN: And also, the appendix 

11 table is also included.

12 MEMBER LEVERE: Okay, great.

13 MR. MILLER: Any other? And the real 

14 fun is after lunch, when we talk about the 

15 implications. I think we are ready to have lunch.

16 Thank you very much. Thank you to the 

17 panelists for really great presentations.

18 (Whereupon, the above-entitled matter 

19 went off the record at 11:35 a.m. and resumed at 

20 1:06 p.m.)

21 MR. ERNST: Thank you, Mr. Chairman. 

22 If we can begin, I will introduce our panel for the 
145

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 afternoon and purpose of it. The panelists will 

2 look familiar. And the purpose of the panel is to 

3 really delve in and explore the economic inclusion 

4 opportunities that are suggested by the data that 

5 we heard so much about this morning.

6 Karyen Chu will walk us through a brief 

7 set of slides to talk about the implications that 

8 our research team drew looking at the data. And 

9 as you listen to her presentation, I want to plant 

10 three questions for you to think about. First, do 

11 any of these implications stand out to you as 

12 particularly compelling now, based on the data you 

13 have seen and the experiences you bring to the 

14 table? Second, what are the key challenges to 

15 recognizing them? And third, what other 

16 opportunities do you see in the data or from your 

17 experiences that we should be thinking about?

18 After she finishes, we will open the 

19 discussion. We can touch on these questions and 

20 any topics that you bring to the table. 

21 With that, thank you, Karyen.

22 MS. CHU: All right. So, we have a 
146

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 total of six implications this year, given the 

2 large number of topics that we covered. Our first 

3 implication deals with households with volatile 

4 income. As we saw, more than one in five 

5 households have income that varies somewhat or a 

6 lot from month to month and these households are 

7 more likely to be unbanked or underbanked, even at 

8 among households with moderate levels of income. 

9 As you can see and as we discussed earlier, if you 

10 have income between $30,000 and $50,000 a year and 

11 your income is volatile, the unbanked rate is 7.4 

12 percent. And that compares with the same 

13 household income but your income is steady, the 

14 unbanked rate is 4 percent. And this difference 

15 of 3.5, 3.4 percentage points in unbanked rates is 

16 similar to the difference in magnitude of the 

17 unbanked rates between households that make 

18 between $30,000 and $50,000 and households that 

19 make between $50,000 and $75,000. 

20 So, bank products and services that 

21 enable households to better manage their account 

22 relationships and meet their financial needs when 
147

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 their income is volatile may help these consumers 

2 open and sustain bank accounts and conduct a 

3 greater share of their financial transactions 

4 within the banking system.

5 Below we give three examples of 

6 opportunities for banks to serve these households. 

7 Consumers with volatile incomes may find it 

8 difficult to consistently meet minimum balance 

9 requirements, even in cases when over time their 

10 deposits and balances could be substantial. 

11 Offering accounts with low or no minimum balance 

12 requirements and low fees that are consistent with 

13 the FDIC Safe Accounts Template can help these 

14 customers establish banking relationships and 

15 maintain those banking relationships during 

16 periods of lower income.

17 Second, consumers with volatile income 

18 may need to monitor their accounts closely. 

19 Almost all households with volatile income have a 

20 mobile phone and eight in ten have a smart phone. 

21 So, encouraging the use of mobile banking, 

22 including features such as account monitoring,
148

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 timely alerts may help these households better cope 

2 with their fluctuating income streams.

3 As you may recall, in focus groups that 

4 we conducted last year that we presented in May, 

5 some consumers reported that having mobile alerts 

6 and monitoring tools help them to reduce their 

7 fees, better track their finances and improved 

8 their on-the-spot decision making.

9 For our third example, we note that 

10 during periods when income is low, households with 

11 volatile income may feel more pressed to use 

12 incoming funds as soon as they are received. So, 

13 banking services that offer expedited access to 

14 these funds for a reasonable fee, while following 

15 sound risk management practices, may be attractive 

16 to these households.

17 Similarly, current efforts to offer 

18 quicker availability of funds through improvements 

19 in the payment system may also benefit these 

20 households.

21 Our second implication focuses on 

22 access to and use of smart phones to engage in 
149

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 banking activities which continues to grow at a 

2 rapid pace. As you see, for the unbanked 

3 households, there was a 30 percent increase in 

4 smart phone access between 2013 and 2015, resulting 

5 at the end in four in ten unbanked households having 

6 smart phone access in 2015. Similarly for 

7 underbanked households, we see a large increase 

8 resulting at the end in 2015 in three in four of 

9 those households having access to a smart phone. 

10 Along with increases in smart phone 

11 access, we also see a 37 percent increase in the 

12 use of mobile banking and a 66 percent increase in 

13 the use of mobile banking as the primary method for 

14 accessing a bank account.

15 In 2015, just like in previous years, 

16 underbanked households continue to be more likely 

17 than fully banked households to use the mobile 

18 channel as their primary means of accessing their 

19 account. And for the first time, we see that 

20 slightly less than half of all banked households 

21 use a physical banking channel, so using the bank 

22 branch or the ATM as their primary method of 
150

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 accessing accounts.

2 Consistent with implications from the 

3 2013 survey, this growth in use of smart phones to 

4 engage in banking activities presents promising 

5 opportunities to use the mobile platform to 

6 increase economic inclusion. At the same time, 

7 physical access to branches remains important. 

8 And our results suggest that modification of branch 

9 services may have economic inclusion implications.

10 For example, lower income households, 

11 less educated households, older households, and 

12 households located in rural areas continue to rely 

13 on bank tellers as their primary method for 

14 accessing their bank accounts.

15 Use of bank tellers also remains 

16 prevalent even among households that primarily use 

17 other methods for accessing their accounts. And 

18 finally, research from the Federal Reserve Bank of 

19 Governors indicates that 44 percent of households 

20 that responded to a 2013 survey chose their bank 

21 based on the location of its offices by far, the 

22 leading factor in the selection of their bank.
151

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 We heard from Jeffrey earlier today 

2 that one in five unbanked households save for 

3 unexpected expenses, although, for the most part, 

4 not in insured depositories. In fact, roughly 

5 two-thirds of unbanked households that save for 

6 unexpected expenses keep the savings in the home 

7 or with family or friends. An additional one in 

8 eight of these households keep these savings on a 

9 prepaid card.

10 Bringing these savings into the banking 

11 system could allow these households to build 

12 banking relationships and access to mainstream 

13 financial services at an insured depository will 

14 provide these consumers with a safe place to save, 

15 to conduct basic financial transactions, help them 

16 build a credit history, and help the access credit 

17 on favorable terms.

18 Low cost savings accounts with low 

19 minimum balance requirements are one option that 

20 unbanked households can use as a gateway to enter 

21 the banking system and build relationships with 

22 banks.
152

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 Our fourth implication focuses on 

2 households with unmet demand for bank credit. You 

3 heard from Alicia this morning that almost 14 

4 percent of households have unmet demand for bank 

5 credit, meaning that in the past 12 months they 

6 either used a nonbank credit product or were denied 

7 or felt discouraged about applying for bank credit, 

8 specifically for credit cards, personal loans, and 

9 lines of credit from a bank. Notably, so 8 percent 

10 of that 14 percent used a nonbank credit product 

11 in the last 12 months.

12 Banks may have the opportunity to help 

13 meet the credit needs of some of these households 

14 that have unmet demand for bank credit. For 

15 example, the vast majority of these households are 

16 banked, yet very few applied for bank credit in the 

17 past 12 months. Eighty-eight percent of these 

18 households, these fourteen percent of households 

19 with unmet demand for bank credit have a bank 

20 account. They are banked. They conduct their 

21 monthly financial transactions, meaning paying 

22 bills and receiving income using their bank 
153

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 accounts but despite active banking relationships, 

2 fewer than one in three of these households applied 

3 for a credit card or a personal loan or line of 

4 credit from a bank in the last 12 months.

5 Some of these households with unmet 

6 demand for bank credit may present opportunities 

7 for banks to extend credit in the form of credit 

8 cards or small dollar personal loans. For 

9 example, one in two households with unmet demand 

10 for bank credit indicated that they were current 

11 on their bills over the past 12 months.

12 Keeping up with bills is an incomplete 

13 measure of credit worthiness. But it, 

14 nonetheless, provides some insight into the 

15 financial situation of these households.

16 In addition, many of the households 

17 with unmet demand for bank credit are young and may 

18 have little or no credit history. Efforts to 

19 promote credit building or to incorporate 

20 nontraditional credit data into bank underwriting 

21 could expand access to bank credit for these 

22 households while also building and strengthening 
154

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 these consumers' relationships with banks.

2 For the vast majority of households 

3 with unmet demand for bank credit that are banked, 

4 banks could potentially use these households' 

5 account transaction and other banking relationship 

6 information to help underwrite and offer credit.

7 And finally, banks could also undertake 

8 communication strategies to increase households' 

9 awareness of short-term personal credit products.

10 Our fifth implication relates to 

11 financial transaction activity of underbanked 

12 households. In 2015, almost 20 percent of 

13 households were classified as underbanked. 

14 Substantial differences exist among these 

15 households in the ways that they conduct their 

16 financial transactions. The vast majority, as 

17 Ryan mentioned -- who mentioned? The vast 

18 majority used banks to pay bills in a typical month.

19 About one in six of them used cash or 

20 money orders as their primary method for paying 

21 bills in a typical month. An additional roughly 

22 one in four used bank methods to pay as their 
155

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 primary method but also used cash and nonbank money 

2 orders to pay some bills in a typical month.

3 And I wanted to remind you that bank 

4 methods means using a bank debit card, electronic 

5 payment from a bank account or a personal check 

6 drawn from a bank account.

7 Efforts to encourage and make it easier 

8 for a range of payees to accept electronic payments 

9 and outreach to raise awareness of bill pay and 

10 other electronic payments among lower income 

11 households may facilitate the movement of these 

12 transactions into the banking system.

13 So for example, for the roughly one in 

14 four underbanked households that primarily use 

15 bank methods to pay bills but also use cash and 

16 nonbank money orders, for these households it is 

17 possible that their use of cash and nonbank money 

18 orders is due to payee requirements, since they 

19 primarily use bank methods to pay bills. So, for 

20 these households, efforts to encourage and make it 

21 easier for the range of payees such as landlords 

22 to accept electronic payments may help these 
156

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 households reduce their use of cash and nonbank 

2 money orders.

3 For the one in six underbanked 

4 households that primarily use cash and nonbank 

5 money orders to pay bills in a typical month, we 

6 have conducted focus groups in 2015 with consumers 

7 and consumer financial counselors who noted that 

8 low-income and unbanked consumers may be 

9 unfamiliar with the full range of bank products and 

10 services that they can use to meet their financial 

11 transaction needs. And so banks may have the 

12 opportunity to encourage consumers to conduct 

13 these financial transactions within the banking 

14 system by, for example, raising awareness of 

15 alternatives, such as bill pay, bank bill pay, or 

16 person-to-person payments through bank accounts, 

17 including emerging options for faster payments.

18 So for example, in one of the banks that 

19 we talked to in our bank efforts, qualitative 

20 research last year, gave an example of they had a 

21 customer who would come in every month to buy bank 

22 money orders to pay a variety of bills. And 
157

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 finally the teller looked up the payees in their 

2 bill pay system and found that all of the payees 

3 were actually in their system. And so then the 

4 teller informed the customer that in fact the 

5 customer did not need to get nonbank money orders 

6 and run around and pay them but in fact could use 

7 bill pay and taught them how to use bill pay. And 

8 they noted that the customer did not know about this 

9 option.

10 And our final sixth implication goes to 

11 the question of perceptions of banks' interests in 

12 serving households like mine. More than half of 

13 unbanked -- so the majority of unbanked households 

14 think that banks have no interest in serving 

15 households like theirs. For example, as you can 

16 see, for unbanked households, more than half, 55.8 

17 percent perceive that banks are not at all 

18 interested in serving households like theirs. 

19 That is more than three times higher than the 16.6 

20 percent who feel the same way -- of underbanked 

21 households who feel the same way and more than four 

22 times higher than fully banked households that hold 
158

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 that same perception.

2 This perception is not limited just to 

3 lower income unbanked households. As you can see, 

4 even among unbanked households with annual incomes 

5 of at least $50,000, 46.7 percent perceived banks 

6 to be not at all interested in serving households 

7 like theirs.

8 Similarly, whether you were previously 

9 banked and, therefore, had experience with the 

10 banking system or you were never banked, for both 

11 sets of unbanked households you see that we have 

12 similarly high shares of unbanked households that 

13 say banks are not at all interested in serving 

14 households like mine.

15 The perception that banks are not at all 

16 interested in serving households like theirs is 

17 related to their interest in opening an account in 

18 the future. We see that unbanked households that 

19 perceive that banks are not at all interested in 

20 serving households like theirs are significantly 

21 less likely to be interested in opening an account 

22 in the future. As you can see from this table, only 
159

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 17.3 percent of unbanked households that perceive 

2 banks to be not at all interested in serving 

3 households like theirs say that they are very or 

4 somewhat likely to open an account in the next 12 

5 months. This compares with 50.4 percent of 

6 households who say that banks are very or somewhat 

7 interested in serving households like theirs.

8 So, we also see that unbanked 

9 households' perception that banks are not at all 

10 interested in serving households like theirs seems 

11 unrelated to the products and services actually 

12 offered by banks. Among these households that say 

13 banks are not at all interested in serving 

14 households like mine, only 18 percent told us that 

15 banks do not offer needed products or services as 

16 one reason that they are unbanked.

17 And only one percent of them cited that 

18 banks not offering needed products or services as 

19 the main reason that they are unbanked.

20 In addition, more than one in four 

21 unbanked households say that one reason that they 

22 are unbanked is because they do not trust banks. 
160

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 Roughly one in ten unbanked households are unbanked 

2 mainly because they do not trust banks. And lack 

3 of trust in banks was the second most frequently 

4 cited main reason for being unbanked.

5 These statistics about perceptions of 

6 banks' interest in serving households like theirs 

7 and lack of trust in banks are consistent with 

8 findings from qualitative research that we 

9 conducted last year that we reported in May with 

10 unbanked, underbanked, and low and moderate income 

11 consumers in which trust and familiarity emerged 

12 as important themes.

13 Taken together, the survey findings and 

14 the qualitative research findings suggest that 

15 developing longer term sustainable relationships 

16 with unbanked customers requires going beyond 

17 simply developing new products and services and 

18 that establishing trust and familiarity is equally 

19 important.

20 MR. ERNST: Thank you, Karyen, for 

21 walking us through those implications. And now I 

22 see that we are on slide 75 and I think probably 
161

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 well-prepared for the conversation period.

2 It has been pointed out to me in the past 

3 that I often will look close to me for questions. 

4 So, I am going to look down this end of the table 

5 first today and see if we have questions or initial 

6 comments and work my way around.

7 MEMBER WEICHER: Thank you very much.

8 I have been looking at the Survey of 

9 Consumer Finances and one of the things I have 

10 noticed, in particular, was that in the 2007 survey 

11 taken just at the peak of that business cycle, about 

12 15 percent of households did not have transaction 

13 accounts, 15 percent of the population. And 

14 something in that range had been typical back to 

15 1983, back to the first survey.

16 Between '07 and '10, the proportion 

17 went from about 85 to about 93. Or looked at the 

18 other way, the proportion of the population that 

19 did not have transaction accounts was cut in half 

20 during a period when nothing else was going right 

21 in the economy and nothing else, with one 

22 exception, was having an increase in asset 
162

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 ownership, that one being the second most common 

2 asset, which is automobiles.

3 Now, you only go back to 2009, which on 

4 the one hand is a pity, on the other hand would be 

5 true if you had gone back to 1909 and we wanted 

6 something from 1907. But the question becomes 

7 have you any sense from what you did of what the 

8 difference is in the use of transaction accounts, 

9 the ownership of transaction accounts, how that has 

10 changed even between '09, '11, '13, '15? You gave 

11 us the numbers. But do you have a sense of what 

12 is different about any of those people from one 

13 survey to the next? It might suggest something 

14 about what might have happened between '07 and '09.

15 MR. GOODSTEIN: I guess I am just 

16 trying to make sure I understand. So, is your 

17 question just what is driving the trend that we see 

18 in our data that is --

19 MEMBER WEICHER: Well, is there a trend 

20 in your data between '09 and now? You know '15 is 

21 the lowest percentage I think you had. But I am 

22 wondering if you are seeing any differences in who 
163

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 doesn't have a transaction account.

2 MR. GOODSTEIN: So, I can speak a 

3 little bit to the trends in our data and then as 

4 well as some of the results from the Survey of 

5 Consumer Finances.

6 And so as you heard earlier and before 

7 lunch, as we walked through the unbanked rates as 

8 we have measured them and how we see certainly from 

9 2011 to 2015 a decline from 8.2 to 7.7 to 7.0. And 

10 so roughly half of that, as we talked about, can 

11 be attributed to economic condition.

12 It is interesting, though, to take a 

13 longer perspective. Of course, we can't do that 

14 with our data but Surveys of Consumer Finance, back 

15 to 1983 there actually has been like a secular trend 

16 in terms of the unbanked rate has been decreasing. 

17 So, I don't remember the specific numbers offhand 

18 but there is a sort of longer trend towards more 

19 and more people being banked. And so it is 

20 important to think it is true that we see a downward 

21 trend in our data and some of that can be attributed 

22 to economic conditions but it is also a 
164

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 continuation of sort of a longer term trend. So, 

2 think about what is driving it. That might be a 

3 clue of where to start.

4 MEMBER WEICHER: You know it was 

5 changed from '07 to '09 is unprecedented cutting 

6 the unbanked rate in half, cutting the proportion 

7 without a transaction account by half in three 

8 years, nothing like that shows up from '83 on. It 

9 is trending down but not off a cliff.

10 MR. ERNST: The other thing we can say 

11 based on our data is that the gains from '13 to '15 

12 are broadly spread throughout different population 

13 segments. So, they are not isolated to one or two 

14 segments but, in fact, many of the population 

15 segments that had the highest unbanked rates had 

16 a reduction. And I think the other thing you 

17 comment calls to mind, which is not directly 

18 reflected in our survey results but reflects a 

19 longer term is if you think about the increasing 

20 relevance of financial services and access to the 

21 payment system to Americans' lives. The things 

22 that you can do with a transaction account and 
165

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 access to the payment system in 2015 are quite a 

2 bit different and quite a bit more varied, perhaps, 

3 than you could even do in 1996. So, I think that 

4 is something to think about, along with these 

5 economic factors. But thank you for the comment.

6 I want to give other opportunities.

7 MEMBER SWAGEL: Sure, I'll go next. 

8 And thanks, I will just say again what I said before 

9 about how remarkable these data are. Your 

10 analysis is really excellent. But the data, I know 

11 you are only beginning the mining process. So, it 

12 is truly remarkable. And I will be very interested 

13 in hearing everyone's comments. So, I will be 

14 brief.

15 So, I thought your analysis is really 

16 -- the way you laid out slides through 75 is very 

17 nice. The thing about the products, you know why 

18 are the unbanked not here on the product side. And 

19 then as you said, I can't remember who said it, on 

20 the trust side seems really right.

21 On the product side, I know it is the 

22 obvious point of payday lending rules. And 
166

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 obviously, I realize that it is a different agency 

2 that is doing those rules but they are just the 

3 natural one. 

4 And I actually submitted my first ever 

5 comment letter to the payday lending one -- I think 

6 it was my first ever comment letter, saying hey, 

7 think about banks and credit unions. So, anyway 

8 a small comment on the product side and hopefully, 

9 the FDIC will continue to push on that dimension.

10 On the trust side, I had one more 

11 thought, which, again, is a little bit of an echo 

12 of what I said earlier in the morning and then I 

13 will put a question mark at the end. So, 

14 hopefully, you will get it as a question mark.

15 And that is that trust is not just 

16 passive, it is not just creating an environment of 

17 trust but it can also be created proactively. And 

18 here as I mentioned fraud before in the morning and 

19 that is really what I have in mind. So, not just 

20 protecting consumers, making sure that the rules 

21 are followed but when things go wrong to 

22 proactively remediate and say hey, this went wrong. 
167

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 I mean obviously Michael referred to the recent 

2 case something went wrong in your accounts and we 

3 are proactively remediating it, which I realize is 

4 being done now. But five years ago when the first 

5 instance is discovered, it should be remediated at 

6 that moment. So, that is a more general point of 

7 something went wrong; we are proactively 

8 remediating it. We are not requiring you to go to 

9 our website. If you have to go to the FTC's website 

10 and fill out the identity theft form, we are 

11 proactively telling you to do that. We are not 

12 waiting for you to complain. We are proactively 

13 telling you to do that.

14 And that doesn't happen today. I mean 

15 we all understand it just doesn't happen. 

16 So here is my question. Is that 

17 culture? Is that regulation? Is it supervision? 

18 Is it for supervisors to say hey, you are no longer 

19 allowed to be passive? And whatever supervisory 

20 capacity if you don't proactively remediate, we are 

21 going to take the full range of actions against you 

22 for not proactively remediating.
168

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 It seems that is one way of building the 

2 culture of trust that would bring unbanked 

3 households into the system. So, I have to put a 

4 question mark at the end I think. 

5 Feel free to ignore the question. Is 

6 this just outside the bounds of supervision or 

7 regulation? Is it something that is legislation 

8 or is it something that the supervisory agencies 

9 can push on?

10 MR. ERNST: I don't know that I will 

11 ignore your question but I will hear it as a 

12 question for the table, rather than a question for 

13 us.

14 Martin.

15 MEMBER EAKES: So, I wanted to question 

16 whether your assessment is correct.

17 MEMBER SWAGEL: Absolutely.

18 MEMBER EAKES: So, the publishing of 

19 consumer complaints that the CFPB does now, they 

20 then also recommend to any financial institution 

21 those complaints, so in my case they come to the 

22 NCUA which refers it to the CEO of that institution. 
169

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 So, there is a mechanism now, if the complaint gets 

2 filed. You can't really ignore it very easily at 

3 your peril, if you are getting complaints at the 

4 CEO level that come directly to you.

5 MEMBER SWAGEL: So, I gather that there 

6 is not 100 percent linkage from someone going to 

7 CFPB and filing a complaint to its showing up. So, 

8 I gather that many of those complaints, instead, 

9 the CFPB basically farms them out to someone else. 

10 They say oh, you have to go talk to the Fed. You 

11 go talk to the Fed, we are done.

12 MEMBER EAKES: Well, I hope there is 

13 not any falling out because I have got a few of them.

14 MEMBER SWAGEL: So that actually is 

15 great. I am glad I'm wrong but I think I'm wrong 

16 only in part. I think there is a big missing gap.

17 MEMBER EAKES: I mean I think a bigger 

18 gap would be that lots of people don't know where 

19 to complain. They don't know that they can 

20 complain. And so if you have a hundred examples 

21 of abuse, only one complaint gets filed. So, I 

22 think that is --
170

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 MEMBER SWAGEL: And I guess that is 

2 what I meant by the proactive, that the supervisor 

3 should be the ones connecting these dots or seeing 

4 -- you know you shouldn't have to wait for the LA 

5 Times or whatever to connect the dots. They should 

6 be doing it on their own.

7 MEMBER EAKES: We get them.

8 MEMBER MCDONALD: Most of my customers 

9 are finding a way to get to me.

10 (Laughter.)

11 MEMBER SWAGEL: You know I will be very 

12 interested in the other side.

13 MR. MILLER: I have invited myself back 

14 to the table to address this specific point.

15 MEMBER SWAGEL: I have lured you in.

16 MR. MILLER: You did, indeed. So, all 

17 the prudential regulators and the CFPB have worked 

18 together to redo the Consumer Compliance Rating 

19 System. And the proposed system has gone out to 

20 the public for comment. We got a comment and I 

21 think it is safe to say that we will -- it is never 

22 safe to say on an interagency basis, but it is 
171

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 almost safe to say by the end of the year we will 

2 put out the new ratings.

3 And very explicitly in the new rating 

4 system to get the best rating of one, we encourage 

5 banks to identify problems themselves and to 

6 remediate those problems, provide restitution 

7 where restitution is appropriate and so that if an 

8 examiner comes into the bank and the bank says oh, 

9 look, we somehow gave people extra accounts but we 

10 found we had some rogue banker. We found it. We 

11 have a good compliance management system. We 

12 found it. We unwound it. We paid everybody back. 

13 Everybody has been made whole. We found it 

14 ourselves. We did it. We are going to applaud 

15 that with a higher rating.

16 MEMBER MURPHY: So, any financial 

17 institution who is concerned about their brand will 

18 have a complaint resolution process. We have a 

19 very aggressive -- and by the way, regulators come 

20 in and ask what is your complaint resolution 

21 process. It is one of those items that is 

22 examined. So we actually have a process that we 
172

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 speak to on a regular basis. And so not only what 

2 are the complaints; how did you resolve and then 

3 how are you systemically going to prevent them from 

4 happening going forward?

5 And so it is meant to have a sustainable 

6 response to those things that surface. We are not 

7 without, as my friend here says, without 

8 opportunities to hearing from clients about 

9 issues. And so we do have a fairly large 

10 infrastructure that is focused specifically on 

11 complaint resolution both people and systems. And 

12 it is tracked and measured and reported to our board 

13 on a regular basis.

14 And so it is not something that this 

15 happens, it is something that is aggressively 

16 managed.

17 MEMBER MCDONALD: I would like to also 

18 add that the follow-up from the regulatory agencies 

19 are very good. They specifically put 14 days in 

20 the letter to you to respond. And they have a great 

21 follow-up system.

22 I wanted to just point out that as most 
173

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 of you know, we have a lot of high volume, low 

2 balance customers, underbanked customers. And I 

3 can almost guarantee you that these individuals 

4 know how to find the agencies then they think that 

5 something is going wrong. 

6 And as much is that we probably receive 

7 more requests for issues than most financial 

8 institutions not because we are doing something 

9 wrong or our file is inaccurate but it is because 

10 of a lack of education about the system itself. 

11 And out of the volume that we receive and Martin 

12 could probably attest to this as well, I think maybe 

13 over the last three years we found maybe on one 

14 occasion we slipped up on something but, for the 

15 most part, the system works for individuals who 

16 feel that the bank is not treating them properly.

17 MR. ERNST: Great. I think I will let 

18 Karyen add one point.

19 MS. CHU: I wanted to just add one point 

20 on trust, which is that so certainly things like 

21 complaint resolution are important to consumers 

22 but, as we found from our focus groups last year, 
174

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 trust is actually much, much broader than that. It 

2 encompasses everything from how you treat it when 

3 you walk in the door, whether you feel that the bank 

4 actually has your interest at heart, language, and 

5 how welcoming the place feels. So, it is really 

6 very broad, much broader than certainly what I 

7 think we expected when we began those focus groups.

8 MEMBER MURPHY: If I might. The 

9 reality is unconscious bias that all of us have 

10 shown up, oftentimes, in places where -- and the 

11 whole notion of unconscious bias is we all grow up 

12 with biases. And from a diversity perspective, 

13 whether it is race and/or gender, sometimes those 

14 things show up in our language, in the way that we 

15 communicate, the way that we don't communicate. 

16 And oftentimes, that creates this issue of trust, 

17 that I am not valued for who I am, I am not often 

18 seen as somebody who you think I ought to be. And 

19 sometimes the complaints have an underlying theme 

20 around this notion of unconscious bias and how 

21 people feel about how they have been treated, which 

22 leads to this notion that when I look across the 
175

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 desk and I see no one like me, I see no one who even 

2 understands me. I oftentimes walk away saying 

3 this is not a place that I am welcome.

4 And so I just want to be very clear that 

5 that is a dynamic that in this context oftentimes 

6 happens.

7 MR. ERNST: Very powerful. Bob's 

8 jumping in and Angie and Pat are patiently in queue.

9 MEMBER ANNIBALE: Just to follow so 

10 much on what Bruce was saying is if we look at where 

11 to go to make the next deepest dives of progress 

12 on the area, you know I go back to page eight on 

13 the unbanked because that is the least blurry. 

14 People use many services so the underserved can be 

15 a part and you end up with almost six times the 

16 unbanked of the black community than you do the 

17 white.

18 And if it is 3.1, it is really 

19 interesting. And you can break that down further, 

20 I'm sure and understand where within the white 

21 community that comes from. But when you are 

22 already looking at the divide at six times the 
176

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 notional number for the black, almost that much for 

2 Hispanic, I think as we go forward, since we have 

3 this history, overlaying data more even from within 

4 the survey, and I know it is available so some of 

5 us probably should do that research based on the 

6 granular data you have. Where is that really 

7 showing up and coming out from? Where is the trust 

8 issue biggest in terms of showing itself? 

9 And I think it is a lot of what Bruce 

10 is saying. I think we have built platforms and a 

11 system that addresses many of the majority of the 

12 population well but not everyone. Many don't feel 

13 we meant it for them.

14 And so I think we need to be able to 

15 start to do the next level of granularity to 

16 interpret where do we target best? And when we 

17 target those communities that are most out, our own 

18 experience has been with intermediaries. It is 

19 meant you need it to find the trusted community 

20 organizations, municipalities or others who can 

21 help navigate that because all those marble palaces 

22 are all over the place. The branches are there. 
177

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 Very low on the numbers were branches and branch 

2 location as an impediment. People didn't perceive 

3 that as an impediment, interestingly. And I 

4 wouldn't have thought so, especially in urban 

5 areas.

6 But when we take on 10,000, 12,000 women 

7 from Green America in New York who never had a bank 

8 account before and they are in Queens, Brooklyn, 

9 the Bronx, it is not because there are no bank 

10 branches. They just never thought they could go 

11 into them, that it was for them.

12 Trusted intermediary also provides 

13 that level of appropriateness. I mean they, in 

14 some ways, provide a level of screening of the 

15 products that are going to be shown to someone.

16 So, as we start to think about deep 

17 dives going forward, we do all need to disaggregate 

18 the data more and then look at who are the partners 

19 to get deeper.

20 MR. ERNST: All right, thank you. So, 

21 just so everybody knows where I am, I have got 

22 Andrea, Pat and Michael. And if people want to 
178

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 give me a nod, I will put them on the list as well.

2 MEMBER BOSTON: Can I just mention 

3 something I think is important to what Bob just 

4 said? We definitely need the intermediaries but 

5 I also think we need to speak to the national 

6 marketing and advertising of the banks. They do 

7 not reach out to people of color. Most have the 

8 idea that we will use the general market ad agency 

9 that we will make some nice great ad that will

10 capture everybody and most of them only want the 

11 affluent.

12 So, even before you get to the 

13 intermediaries, you have sent out a message that 

14 well, you are not who we really want to speak to. 

15 And the reason why this stuck out to me because we 

16 have had this finding with wealth-building 

17 companies in America. It has been well-documented 

18 that people of color do not feel that they have 

19 engaged their community. So, to get this same 

20 finding at this number for banks is significant, 

21 is really an important thing that we should look 

22 into because we want to have -- so basically, you 
179

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 really need to have two or three different 

2 marketing programs to make different people feel 

3 welcome in the first place.

4 I just wanted to add that.

5 MR. ERNST: Thank you. Andrea.

6 MEMBER LEVERE: So, Bob,that was a 

7 fabulous introduction to what I wanted to talk 

8 about. I want to think about the implications in 

9 pre-context which is what is the power of data in 

10 giving people a different perspective on what the 

11 world is like. How do we then connect this? And 

12 this goes back to this question of trust into the 

13 exploding movement on the integration of financial 

14 capability, which is not just bringing in 

15 organizations that are focused on financial 

16 counseling or credit building or others but it is 

17 cutting across all the different sectors from 

18 healthcare to incarceration to others because they 

19 totally understand that if you don't deal with the 

20 financial insecurity of the person the outcomes are 

21 going to fail. And then third, bring back, maybe 

22 Pat raised this, some of the FinTech solutions that 
180

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 are actually working really well to address this 

2 issue of volatility, which really means that our 

3 whole vision that there was income on a monthly 

4 basis is now being exploded and you have the same 

5 kind of issues I used to do when I did small business 

6 lending, which is cash flow varies by the day, if 

7 not by the week. Households are having that same 

8 piece.

9 Number one is just, again, affirming 

10 this point that the data you have created also have 

11 been married with a range of other data. We have 

12 been working on a major new initiative with J.P. 

13 Morgan Chase on the racial wealth divide. As you 

14 know, we have taken your data, taken it down to the 

15 neighborhood level but added with that full set of 

16 other data points that are reflective of financial 

17 security or insecurity and also all sorts of other 

18 asset building to really reflect how does banking 

19 and banking status fit into these broader economic 

20 issues. So, the power of your data as a kind of 

21 place card within that and then thinking about how 

22 we all bring that to communities who never heard 
181

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 the word and who don't know the word.

2 I still get attacked all the time by 

3 people who say it is unfair to ask low-income people 

4 to save. I am so excited that I have the data point 

5 from that law professor at University of Virginia 

6 that tells me on average the financially 

7 underserved person is now spending $2,400 a year 

8 on fees and interest and that stops them, even when 

9 it is in front of the entire financial aid industry 

10 of America. And they said it was unfair to ask a 

11 low-income family to save.

12 So, I think thinking about how we use 

13 that data.

14 Number two, this issue of trust is we 

15 all have networks of institutions that are those 

16 trusted intermediaries. They are standing in line 

17 to figure out how do we integrate basic financial 

18 capability or access to financial counseling into 

19 the work we do.

20 So, again, we take this data and 

21 misunderstanding and the kind of sophisticated 

22 analysis you have done in terms of the segmentation 
182

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 of different populations I think is a real 

2 opportunity for us, as we think about integrating 

3 this in the curriculum.

4 And then last piece is that there is a 

5 set and they are mixed in their value because they 

6 are all targeted to lenders, Michael and my 

7 children who don't have any cash, but there is a 

8 FinTech application called Even, you may be 

9 familiar with this, that really helped you use an 

10 application to even out those income flows and to 

11 know how to save a little and use a little.

12 So, I think that that is CFSI's work and 

13 that is a way we can think about linking that 

14 because that is not a substitute for a bank account 

15 but that is a complement to how we think about it.

16 So, I think there is like three very 

17 concrete areas we can all work on together to expand 

18 the knowledge base, figure out how to integrate 

19 this and also link it to other tools that are easy 

20 as a complement.

21 MR. ERNST: Thank you. Pat.

22 MEMBER MCCOY: So, I would like to key 
183

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 off of what Andrea said. You know if you look at 

2 larger trends, we have seen the average family's 

3 inflation adjusted real wage flat, maybe slightly 

4 declining. We have seen increasing income 

5 volatility and we have seen increasing income 

6 inequality. So, your work fits, in a very 

7 important way, into these larger issues.

8 On the income volatility, one of the 

9 things I am intrigued with with your implications 

10 and your suggestions is normally when we talk about 

11 smoothing income volatility, at least in financial 

12 services, we are talking about credit products.

13 And so the whole debate about payday 

14 lending, in large part, is to what extent do we 

15 preserve it in its present format as an income 

16 smoothing mechanism. But your focus has been on 

17 techniques other than credit, which I think is 

18 extremely constructive. And I would like to just 

19 urge you to go farther down that path.

20 And so first of all, the issue you have 

21 raised, which is our really antiquated clearance 

22 system for payments, I think there has to be a 
184

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 regulatory determination that we are going to move 

2 to real-time and we are not going to wait six years 

3 or ten years to do it. That would make a big 

4 difference to people.

5 Another thing that I recently heard 

6 coming out of an MIT laboratory on FinTech is the 

7 idea of encouraging employers to deposit wages 

8 daily. And that could have pluses and minutes. 

9 I'm not sure it is panacea. But as you are thinking 

10 about reaching out to employers or other 

11 depositors, that might be something to explore the 

12 pluses and the minuses.

13 And then something -- I am not familiar 

14 with the application you discussed but that 

15 application and something I was talking about with 

16 Ted, programs to help people when they do have a 

17 more flush period, to encourage them to perhaps 

18 save the added increment into savings and help 

19 smooth that way.

20 The final thing I will say is that would 

21 it be worth conducting focus groups with unbanked 

22 consumers who are having income volatility issues 
185

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 and ask them what would really make a difference 

2 to you, apart from steady wages. Are there other 

3 things that would help you get from paycheck to 

4 paycheck? Because they may come up with 

5 innovations none of us has thought of.

6 MR. ERNST: Great. Thank you, very 

7 much. That brings us over to Michael and I have 

8 Martin and Ted on the list now, too.

9 MEMBER BARR: So, Keith, you must have 

10 planned this because what I would like to say really 

11 dovetails nicely with what Pat said. I think Pat 

12 was spot on about these set of issues.

13 And let me add, again, I don't think we 

14 can compliment you enough for this work and I am 

15 really excited about the introduction of the income 

16 volatility research into this mix. It is a key 

17 issue, not just for low and moderate income 

18 families but for middle income families as well.

19 So, I think Pat is right that we are 

20 looking for sort of a range of tools that will help 

21 individuals better manage their income volatility. 

22 And some of those tools are credit tools. Some of 
186

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 those tools might be insurance tools, which we 

2 haven't really talked about yet. And it relates 

3 to our social welfare system and unemployment 

4 insurance and how good we are at replacing income 

5 and a bunch of other factors.

6 A sort of third tool would be techniques 

7 to increase savings and that might involve some 

8 financial technology but could also be linked to 

9 a broader set of issues around earned income tax 

10 credit and deposits into these accounts, as well 

11 as Social Security issues for the older population.

12 And then as we were talking about 

13 earlier, the sort of transactional services and 

14 financial management tools that can help people 

15 better manage their flows even without giving them 

16 new sources of income or changing the volatility 

17 of income and expenses.

18 There are some, I think, policy things 

19 for the FDIC to think about in that broader space. 

20 It is obviously a big space and involves lot of 

21 moving pieces. But one is with the other bank 

22 regulators and with the CFPB, issues around the way 
187

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 in which financial technology intersects with the 

2 banking system. As most of you know, I think there 

3 is a huge fight now over how FinTech and banks share 

4 or don't share access to customer account 

5 information. And there are big values at stake 

6 that don't necessarily point all in one direction, 

7 privacy, security, data integrity, consumer 

8 autonomy, and consumer protection I think of as the 

9 four kind of key areas to worry about.

10 And our current system for worrying 

11 about those is not organized in any policy 

12 framework. It is just the FinTech guys and the 

13 bank guys are fighting with each other about 

14 whether scraping is good or bad. And there is not 

15 really a policy dialogue about what is the mix, what 

16 is the right policy, regulatory framework and what 

17 is the right technology to achieve those four, I 

18 think, fundamental values. So, I would urge 

19 spending some time thinking about, worrying about 

20 that.

21 The second big policy area I think that 

22 intersects on this that Pat already mentioned but 
188

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 I am going to mention it again because I think it 

2 is so important, and that is in your page four, 

3 which is getting money faster. So, if you have 

4 direct deposit, that problem has been mostly fixed 

5 but if you don't, and that is a big part of the group 

6 that you showed us, that is a real problem in not 

7 having good funds now. And I think the FDIC can 

8 play an important leadership role in pushing us 

9 towards immediate or close to immediate funds 

10 availability, with whatever exceptions are needed 

11 to deal with fraud and other problems.

12 The third big area the FDIC is hugely 

13 aware of, of course, is overdraft and Martin 

14 mentioned earlier this morning. So, if one of the 

15 things you are worried about is income and expense 

16 volatility, adding a new expense volatility to that 

17 problem is not likely to help. And so accounts 

18 that guard against that I think are wise.

19 Anyway, I have more but in the interest 

20 of letting my fellow Board members say a word or 

21 two, I am going to stop there.

22 MR. ERNST: Thank you very much. We 
189

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 have Martin. We have Ted, and then I have got Alden 

2 and Jose.

3 MEMBER EAKES: So my first comment is 

4 that I am sort of surprised about the consumer 

5 perceptions I think are pretty accurate. The 

6 unbanked group that thinks half of them that banks 

7 really don't want to serve them, I think that is 

8 roughly accurate. You know I think that it is 

9 probably true, that it is not just a perception. 

10 And then the half or the large percentage who say 

11 I don't trust banks, I think that we, as financial 

12 institutions have sort of earned some of that 

13 distrust. I am not trying to be too negative.

14 But I remember a story with a person who 

15 had been CEO of a very large regional bank and was 

16 the President of the North Carolina Bankers 

17 Association. He told me at the end of his career 

18 he said there are two things that I actually -- only 

19 two things in my whole career that I am not proud 

20 of in the banking world. The first is that we 

21 really did shut down branches in rural areas and 

22 low-income communities. So, Bob's point I think 
190

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 has not quite been my experience that people still 

2 want to have a branch to be able to open their 

3 account and to be able to go to when there is a time 

4 of a problem. And we really have not -- in my town, 

5 we have 30 or 50 branches on one side of town and 

6 we have not a single financial institution branch 

7 on the entire east side of Durham, which is a 

8 relatively prosperous town that happens to be 

9 largely African American. Not a single branch.

10 So, he was just saying that is one thing 

11 we really did shut down branches and it was all 

12 driven profitability and logical reasons. 

13 And the second thing he said I am really 

14 embarrassed by overdrafts, that that was the one 

15 place that we, as a banking sector, made the journey 

16 of low-income consumers worse. We added to their

17 volatility, rather than taking it away.

18 And so I am just sort of thinking that 

19 a lot of this is not increased marketing, per se. 

20 It is us taking a look inward and figuring out how 

21 can we make our costs, like we have over ten years, 

22 with the safe balance and Safe Accounts, make those 
191

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 fees less volatile or marginal financial families.

2 And I do think we have to figure out, 

3 even with funds, how to have not a blanket of 

4 branches in low-income or rural areas because it 

5 is not financial viable to do. But we need to have 

6 points of presence that can be what I call a safety 

7 blanket, where people can come to open an account 

8 or they can come when they need a face-to-face 

9 contact.

10 The other thing that struck me in the 

11 earlier mapping was what I think is an overlap. 

12 When we looked at the maps, the geographic maps, 

13 we saw in the southeast and the southwest a real 

14 preponderance of unbanked families. When we 

15 looked at the black, Hispanic, and elderly, we saw 

16 a higher disproportionate number of unbanked.

17 And when we looked at lower income and 

18 volatility, we didn't get the weightings. If we 

19 did, I missed the weightings for the different 

20 income classes for the proportion of people who are 

21 there. It is probably there but I missed it.

22 But I think all of those are somewhat 
192

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 overlapping. That if we really wanted to make an 

2 outreach, we are going to have to make a difference 

3 primarily with African American and Latino 

4 families that are almost 20 percent unbanked. 

5 That is the place where we have opportunity to 

6 really reach.

7 And then I started thinking, what are 

8 the implications for that? If we think about 

9 undocumented immigrant families, we have 11 

10 million people. I'm guessing that is probably 6 

11 or 7 million households. I don't know what the 

12 percent of your 7 percent is actually immigrant 

13 households. You feel like not only do financial 

14 institutions not want me, they have challenges in 

15 even being able to integrate us into their system. 

16 And so I would love to do some sort of deeper 

17 disaggregation of the 7 percent that are unbanked 

18 and figure out what the strategies are.

19 My final conclusion was that if we moved 

20 the minimum wage from $7 dollars plus to $12.25, 

21 we would make more difference on the unbanked for 

22 people who feel like they have enough money to put 
193

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 into an account that there are some things that are 

2 outside of banks' control or outside of this 

3 committee's control that would make a huge 

4 difference in making the whole financial system 

5 more accessible. My guess is that those factors 

6 really dwarf the other ones that I have talked 

7 about.

8 So, those are a jumble of miscellaneous 

9 thoughts but the fact that you are generating this 

10 kind of discussion in the data, it really is quite 

11 remarkable.

12 MEMBER ANNIBALE: And Martin, my 

13 mention of the branches wasn't about not having 

14 them because all of the ones, the accounts were 

15 opening and coming eventually through branches. 

16 Today it just was they weren't enough. Having 

17 branches in some of these communities by themselves 

18 still needs outreach.

19 MEMBER EAKES: It is a necessary but 

20 not sufficient --

21 MEMBER ANNIBALE: Yes, it is necessary 

22 but not sufficient and we absolutely need the hubs, 
194

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 the branches for whenever we -- we all need them 

2 but we have issues and we want introduction of the 

3 new accounts to meet our KYCs and to service people 

4 who want a certified check, if you want to make a 

5 transfer. But it wasn't enough, just using the 

6 example of a city where you have dense numbers of 

7 branches but still a high number of unbanked people 

8 because they didn't feel the branch was even 

9 accessible. And I think that is where we, when we 

10 look at the African American community, the 

11 Hispanic communities, immigrants for sure, we have 

12 a big focus on immigrant focus now, it really does 

13 take some intermediaries to help us with the trust 

14 and also the translation of the utility of a bank 

15 account for somebody. Because otherwise, you know 

16 Mark brought it up, is it a solution for what I need.

17 MEMBER EAKES: One of the things that 

18 is attention and confusing for me is I have these 

19 two things I was saying to advocate for. We need 

20 to have more bank presence. We need to get rid of 

21 overdraft fees. The two of those are actually 

22 related in a sense that people, banks can open 
195

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 branches that really are non-helpful because they 

2 have got all these overdraft fees. I once had 

3 bank who told me, he said my whole strategy is to 

4 open branches and get as many low-income checking 

5 accounts as I possibly can because that will pay 

6 for it.

7 He wasn't trying to be evil. He was 

8 just saying that is a strategy. And so I know I 

9 am arguing things that are -- but I do think that 

10 we have got to get rid of the overdraft fees as 

11 completely as we can in the system. We can figure 

12 out how to have low cost points of presence that 

13 aren't unrealistically unviable but we have got to 

14 do both of those.

15 MR. ERNST: Great. Thank you. So 

16 just, Mr. Chairman, we are at time. We have a few 

17 members of the committee in queue. I wonder if we 

18 might take those and then evaluate where we are. 

19 Thank you. Ted.

20 MEMBER BECK: This is quick. It is an 

21 offer. We are funding research right now. And I 

22 think under the income volatility thing you are on 
196

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 to something very important, so I will just focus 

2 on that.

3 We are funding research right now on the 

4 effect of income disruption, which means you have 

5 lost your job for six months. And I think making 

6 sure that the two are linked are very important. 

7 Here is a data point for you. In the lower half 

8 of the income distribution level during your 

9 working lives, you are probably going to experience 

10 four income disruptions. In other words, a 

11 significant drop because maybe if it is a couple, 

12 somebody lost a job. So, I think tying that kind 

13 of research, which I will give to, into this 

14 volatility thing, really starts to get at a broader 

15 picture about what it is like when suddenly your 

16 income drops significantly, as does probably your 

17 credit worthiness. So, you lose your job and then 

18 you get cut off. It is a double whammy. So, if 

19 you want it, we are happy to give it to you.

20 MR. ERNST: We will take you up on that 

21 offer. Thank you.

22 I have Alden and Jose.
197

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 MEMBER MCDONALD: I will be very short. 

2 In looking at the survey and navigating through it, 

3 a lot of these issues that were determined in the 

4 survey mirrors my institution, the fluctuation of 

5 income, the funding availability for example, 

6 Noah's shop, all funds are available immediately 

7 in our shop. And for that reason, that the 

8 availability of funds for our customer base is 

9 very, very important.

10 We have low fees across the board. So, 

11 I am offering our institution and the data that we 

12 have to your group to do the deep dives that has

13 been requested here. And I think our staff can 

14 also answer some of the questions that perhaps you 

15 may have.

16 So, we could be a good laboratory for 

17 you in this area. And in addition to that, I hope 

18 we will find some answers to some of the things we 

19 don't know the answers for as well.

20 MR. ERNST: It is always great to 

21 discover those. Thank you very much. It is a very 

22 generous offer.
198

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 And then Jose.

2 MEMBER CISNEROS: Yes, thank you very 

3 much for this work. The data you have on lack of 

4 trust and on also the presence of perceptions of 

5 the banks don't want my business. Those are two 

6 things that we have been observing in the ten years 

7 we have had the Bank On San Francisco program but 

8 seeing the actual data to back that up is very 

9 exciting.

10 What we did to try and deal with that 

11 was, of course, just the essence of the program 

12 itself was to put a voice behind the message you 

13 should consider getting a bank account, other than 

14 just the advertising coming from the banking 

15 industry. So, to use, hopefully, another voice 

16 that would say this would be a good thing for you 

17 to consider was one opportunity we tried to access 

18 to do that.

19 What we actually found, and all of this, 

20 of course, is only anecdotal, but we also found was

21 actually having another person, a trusted 

22 individual in an unbanked person's life, deliver 
199

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 that message you really should consider or you 

2 would be better off if you stopped going to the 

3 check casher and instead went to the credit union 

4 around the corner or the bank that I do business 

5 with or whatever.

6 Really anecdotally we heard the most 

7 successful way to get unbanked people to get over 

8 this hurdle, these challenges of I know they don't 

9 want me to walk into their bank or I can't trust 

10 that they won't harm me if they walk into their 

11 bank. And so we have really, from the very 

12 beginning of the program, we tried to leverage 

13 those human-to-human contacts, those trusted 

14 voices, when we reached out to community groups, 

15 when we reached out to faith leaders, when we 

16 reached out to labor leaders, when we reached out 

17 to employers and we said could you deliver the 

18 message please as part of our program. Partner 

19 with us and tell people they really would be better 

20 off. And if necessary, take their hand and walk 

21 with them to the bank or the credit union. Do 

22 whatever you can but what we found was that when 
200

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 we did that, it helped. We even found that a social 

2 worker, a city social worker who had a regular 

3 conversation with low-income benefits, supportive 

4 individual just took that person around the corner 

5 to the credit union, a 70-year-old woman who never 

6 had a bank account now got a bank account at a credit 

7 union, something she had never imagined she could 

8 do in her entire lifetime.

9 So, I guess my question is how can we 

10 find out more about what some of those trusted 

11 voices, trusted resources are in our community. I 

12 am guessing this isn't a survey question. This 

13 might be more of a focus group. This might be more 

14 of some pilot testing. This might be some more 

15 creative ideas like that.

16 We are, in our cities and our coalition, 

17 we are trying many, many things. Many of our 

18 cities are now putting individual one-on-one 

19 coaching opportunities in front of many of the 

20 people that we work with. And a one-on-one coach 

21 who is helping you improve your credit score, clean 

22 up your outstanding debt, and organize your 
201

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 finances can oftentimes be successful in helping 

2 you gulf that divide and go over to opening up a 

3 bank account.

4 In our children's savings account 

5 program, we are reaching out to teachers, to 

6 principals, and others to say why don't you 

7 encourage these kids and their parents to start 

8 saving for their college education? And I guess 

9 not that big of a surprise, their voices are more 

10 and more persuasive than say the city treasurer's 

11 or the bankers or whoever. And that is a great 

12 thing. If we can employ more of those trusted 

13 voices, those trusted individuals or 

14 organizations, I really think that is what we might 

15 be able to see as the key to bridging this gulf that 

16 seems really difficult.

17 MR. ERNST: Thank you. So, Mr. 

18 Chairman, I think we may have reached a point where 

19 we have an opportunity to move to the next panel. 

20 It may not last.

21 CHAIR GRUENBERG: I'm going to take the 

22 prerogative to take two more minutes. And I 
202

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 imagine it came up this morning but of all the 

2 things in this new survey, and the richness of it 

3 is really pretty remarkable in terms of the 

4 findings and there is a lot more to be developed. 

5 Think about the value of a bank account. 

6 And the most elementary thing that I was just struck 

7 by was the simple security of having a place to put 

8 your money where you won't get ripped off, 

9 hopefully. And the number that just jumped out was 

10 the 20 percent of unbanked households that are able 

11 to save, nearly 70 percent kept those savings at 

12 home or with a family member, effectively, under 

13 the mattress in one way or another, with all the 

14 vulnerability in terms of the security of the money 

15 and failure to generate any earnings off of it 

16 contrasted with banked households, where nearly 90 

17 percent keep that savings in an insured bank 

18 account, where it both secure and has the ability 

19 to generate income for the household and 

20 potentially access to other financial services. 

21 It is the most dramatic illustration to me from the 

22 survey of a threshold benefit of having a bank 
203

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 account and it is real and it is material but the 

2 numbers are dramatic.

3 So, it is just sort of, at least from 

4 my standpoint is the clearest illustration of the 

5 value of having access to an insured institution. 

6 It just may have come up this morning but it just 

7 was so striking just in underscoring the point we 

8 are trying to make about the value to people of 

9 having access to an insured institution.

10 MR. ERNST: Thank you.

11 MR. REYNOLDS: Good afternoon, Mr. 

12 Chairman. Shall I begin?

13 Good afternoon. As many of you know, 

14 the FDIC has a long-standing commitment to 

15 financial education, as it is a critical component 

16 of our efforts for low-economic inclusion. In 

17 fact, this is the 15-year anniversary of the Money 

18 Smart Financial Education Program. And as many of 

19 you know, we are a member of the Financial Literacy 

20 and Education Commission, which Congress created 

21 to develop a national strategy for financial 

22 education. And since 2012, the FLEC community 
204

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 strategic focus has been on helping young people 

2 have an understanding of financial -- basic 

3 understanding of finances as they start their 

4 careers. 

5 Under that strategic framework, the 

6 FDIC and the CFPB have been collaborating together 

7 on the set of activities to help young people become 

8 more financially capable.

9 In October of 2013, we sought your 

10 insights on our next steps for our financial 

11 education work. One of the things that we heard 

12 was the value of experiential learning, in 

13 particular experiential learning involving a bank 

14 account.

15 In April of 2014, I joined a few of my 

16 colleagues from Treasury and CFPB to share some new 

17 research and gain some insights on next steps for 

18 our youth savings work, including the idea of a 

19 Youth Savings Pilot.

20 In May of 2015, we introduced a Youth 

21 Savings Guidance and Chairman, for you, the pilot 

22 had just gotten underway. We got some good ideas 
205

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 that shaped our work.

2 Today, I am pleased to be part of a panel 

3 that will convey to you some of the key lessons we 

4 learned from the pilot and invite your ideas and 

5 suggestions on our next steps.

6 Ron Jauregui will start us off by 

7 overviewing what the pilot was and conveying the 

8 key lessons from the pilot. Ron is speaking on 

9 behalf of the core project team that he led, which 

10 also consisted of Nicole Lynn Meyers, Tracie 

11 Morris, and Sherrie Rhine.

12 Then we will hear from two bankers who 

13 led their institutions in collaborating with 

14 schools on new savings programs. You can get a 

15 better understanding of how some of the programs 

16 in our pilot worked.

17 Then, you will hear from an educator. 

18 You will hear an educator who was collaborating 

19 with one of the banks in the pilot to hear how a 

20 program worked from the eyes of an educator.

21 Ron.

22 MR. JAUREGUI: Thank you, Luke.
206

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 Okay, the pilot has served to help us 

2 identify promising practices in which banks are 

3 combining financial education delivery with access 

4 to savings accounts. Prior to the pilot, we knew 

5 that many banks had a long history of relationships 

6 with schools wherein they offered financial 

7 education. However, we had also become aware of 

8 a growing number of banks that had questions on how 

9 best to support both Youth Savings Accounts, youth 

10 savings, and financial education. And it had 

11 become increasingly apparent to us that there was 

12 limited information on how successful bank/school 

13 partnerships could make positive impacts on our 

14 country's youth. 

15 Our pilot will culminate with a report 

16 we expect to issue near the end of the year to 

17 communicate lessons learned from the pilot and to 

18 convey promising practices for banks to use when 

19 working with schools or other organizations to 

20 combine financial education with access to savings 

21 accounts.

22 Through our individual interviews, 
207

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 group calls and surveys, we learned about startup 

2 and implementation efforts. We also got to 

3 discuss expansion issues, ideas, and challenges. 

4 Our conversations also dealt with changing 

5 circumstances requiring modification on ongoing 

6 efforts. And we conversed about emerging issues 

7 and potential resolutions, while also taking the 

8 opportunity for general information sharing.

9 Having a two-year pilot was especially 

10 useful in that it allowed us to give context to 

11 evolving circumstances. The surveys we developed 

12 were designed to elicit basic quantitative 

13 information on the number of accounts and student 

14 participants involved in the bank efforts. They 

15 were also designed to help us engage our banks in 

16 dialogue that would produce a useful narrative for 

17 us.

18 Pilot banks followed three approaches. 

19 The school branch approach: these are managed by 

20 experienced bank adult employees with student 

21 bankers working as customer service 

22 representatives, student tellers, et cetera. 
208

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 They are often linked to peer-to-peer engagements, 

2 such as one-on-one financial education activities 

3 or classroom question and answer games.

4 In-school banking approach: These are 

5 temporary banks set up in cafeterias, gyms, 

6 libraries, et cetera. These setups are aimed at 

7 encouraging students to open and add to savings 

8 accounts. They are often linked to individual 

9 classroom or school-wide financial education 

10 engagements led by bank staff, students, school 

11 personnel, or nonprofit partners.

12 Student volunteers operate the bank and 

13 take deposits, sometimes bank staff or other 

14 volunteers also do so. Bank staff will later turn 

15 or return to their corporate branch and process the 

16 transactions, while providing deposit slips to 

17 students thereafter. 

18 Nearby branch visits is another model. 

19 In this model, banks will collaborate with schools 

20 or nonprofit partners to provide financial 

21 education to students and sometimes to their 

22 parents, while encouraging students to open up 
209

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 savings accounts at a nearby branch. Some banks 

2 even provide transportation to a corporate branch, 

3 especially when distance or logistical concerns 

4 are an issue. They will also provide students, 

5 sometimes, with opportunities to tour the branch 

6 and engage bank staff.

7 This is simply a visual on how the 

8 models break down among our pilot participants. 

9 Again, some pilot banks use more than one model 

10 simultaneously.

11 These preliminary lessons learned 

12 mirror our upcoming report on the pilot, regarding 

13 strategies, for instance. Sometimes the 

14 relationship with a school simply starts with a 

15 spouse of a bank official who happens to teach 

16 locally. At other times, it is a strategic 

17 customer relationship that already exists with the 

18 school district and both decide to work jointly in 

19 order to increase the financial capacity of the 

20 entire student population.

21 Examples of challenges. Securing 

22 opportunities to get face time with students is no 
210

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 easy tasks, as teachers are rightly jealous of 

2 their time with students. But banks can succeed, 

3 especially when they speak about how financial 

4 education could complement math and social studies 

5 courses.

6 Winning over parents can be a challenge 

7 as well but offering them enjoyable financial 

8 opportunities helps.

9 Finally, managing engagement with 

10 students as they move on to higher grades and 

11 graduate is also a challenge.

12 In the second year of the pilot, our 

13 participants created over 4,500 new accounts. 

14 About 300 of those were accounts opened by the four 

15 banks that started brand new Youth Savings Programs 

16 during their time in the pilot. The remainder were 

17 opened by the banks that entered our pilot with 

18 well-established programs or had expanded their 

19 existing programs to new schools.

20 Regarding the types of accounts, all 

21 pilot banks offered students the opportunity save 

22 and some banks were able to offer checkless
211

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 checking accounts and online or mobile features. 

2 These options, arguably, made participation more 

3 attractive for the students.

4 Account structures: decisions on what 

5 account structure to offer depended on a variety 

6 of factors. And even banks that used a single 

7 structure, like noncustodial accounts, often had 

8 different reasons for doing so. Some banks that 

9 offered noncustodial accounts, for instance, did 

10 so because they were convinced as to the importance 

11 of empowering students to take ownership of their 

12 own savings habits. Other banks offering that 

13 same structure had determined that students were 

14 more likely to want to save when their savings were 

15 not subject to withdrawals by guardians who might 

16 do so without their permission.

17 Regarding program features, some banks 

18 have opted to provide monetary and/or nonmonetary 

19 incentives to increase student participation in 

20 the savings components of their program. Many 

21 banks provide a seed amount that can be matched by 

22 students upon opening the account. Other banks 
212

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 encourage students to maintain their accounts by 

2 matching dollars when the student has maintained 

3 their balances for a certain length of time.

4 There is a range of formal instruction 

5 options that the banks pursue. Sometimes schools 

6 provide financial education classes that are 

7 offered to the general student population. At 

8 other times, the bank staff play the key role. 

9 Some lead impromptu groups with students. Other 

10 banks choose to use structured programs like the 

11 Money Smart for Young People curricula, focusing 

12 on the interactive aspects of the curricula. 

13 Still, other banks choose to leverage student 

14 tellers to lead fun and engaging sessions.

15 A few banks rely on the occurrence of 

16 the savings transaction to advise or merely share 

17 information with the student depositor.

18 Regarding teacher involvement, 

19 teachers seem more prone to increase their 

20 involvement when they see personal growth in their 

21 students over and above their grasp of financial 

22 issues.
213

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 Banks sometimes use a single curricula 

2 at the end. At other times, they will use multiple 

3 products or programs. Some banks relied on 

4 nonprofits, who used proprietary programs that 

5 seemed customized to specific cultural nuances.

6 Money Smart for Young People was the 

7 curricula most commonly cited as a program that was 

8 easy to use and digest.

9 It was notable that bankers in the pilot 

10 often said that their staff gained satisfaction 

11 from the community good will earned from the 

12 program. This might suggest that it is important 

13 for banks to allow their staff to directly see the 

14 impact that their efforts are making on the student 

15 populations.

16 When a student population represents an 

17 LMI demographic, then there is also the potential 

18 that the bank could earn CRA consideration. While 

19 improving the financial skills of the student 

20 population should be the primary driver of efforts, 

21 such activities might also provide a tangential 

22 benefit providing a ready pipeline of future bank 
214

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 customers. Meanwhile, some schools were drawn to 

2 the potential enhancement of student academic 

3 performance as a result of their interactions with 

4 a bank.

5 This slide shows some of the 

6 investments that were made by pilot participants. 

7 It is important to note, as we intend to do in our 

8 pilot report, that not all banks track costs 

9 specifically and even when they do, each treats 

10 them differently driven by their particular 

11 accounting practices.

12 This slide displays the list of banks 

13 that were selected by the FDIC to participate in 

14 pilot. You will note that we attempted to have a 

15 diverse pool of participants. Some are national 

16 in scope, others are regional, some are small 

17 community banks. The asset range they hold is 

18 wide. We also succeeded at getting banks from 

19 every FDIC region. And not all of our pilot banks 

20 have the FDIC as their primary regulator.

21 Finally, in formulating your questions 

22 to us, we thought you might find it useful if I were 
215

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 to remind you as to the criteria that we used in 

2 selecting the banks that you see on this slide. In 

3 general, we sought banks that one, used the FDIC's 

4 model safe template, Safe Account Template; two, 

5 banks that focused on the LMI demographic; and 

6 three, that had a thoughtful onboarding process.

7 Thank you and now we will turn to Julie 

8 Thurlow of Reading Cooperative Bank.

9 MS. THURLOW: Good afternoon, ladies 

10 and gentleman. I am here representing Reading 

11 Cooperative Bank. We are a half a billion dollar 

12 mutual bank out of Reading, Massachusetts. So, I 

13 am actually here just to talk about our student 

14 branches but I wanted to step back and talk a little 

15 bit about how we ended up where we are right now.

16 From our Board's standpoint, Michael 

17 Porter wrote a white paper about shared value 

18 strategy and we actually embrace that as a bank and 

19 as a Board. We are a mutual. We were created by 

20 our depositors. So, in that same vein, we actually 

21 took a look out at our market and said okay, what 

22 is the financial need that is out there. If we are 
216

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 going to solve a societal problem, what can we, 

2 within the framework of our demographics, where are 

3 those needs. And we identified seniors and youth 

4 and financial literacy, really looking back at 2007 

5 and if we were more highly educated in the financial 

6 markets, if everybody had a better understanding 

7 of their banking relationship, then maybe we 

8 wouldn't have had the struggles that we had.

9 And at the same time, the Federal 

10 Reserve Bank of Boston published a Color of Wealth 

11 in Boston. It really matches a lot of what we saw 

12 today and really when you are looking at the future, 

13 it really is a stark concern as far as all of our 

14 markets are concerned.

15 So, that is who we are and how we got 

16 to where we were. One of the things I probably 

17 should mention, the city of Lawrence is within our 

18 market area. It is a gateway city and there is a 

19 fair amount of unbanked and underbanked 

20 individuals in that market and it really operates 

21 as more of a cash-based society. So, we are 

22 working on identifying ways to reach into that 
217

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 market.

2 So, we actually have three different 

3 models that I am going to tell you about. First 

4 of all, we have two bank branches. The Reading 

5 Memorial High School is a student-run branch which 

6 pairs with a banking class that is the academic 

7 class and it really serves as a lab for the 

8 students.

9 Ninety-nine percent of the students do 

10 go on to college. From there, they become 

11 employees of the bank. So, it supports us. It is 

12 a win-win. Again, society benefits but we can 

13 benefit as well. And the bank serves as a lab for 

14 the academic course. And the students in the class 

15 end up doing peer-to-peer training and financial 

16 education across the model.

17 And I have to say, again, doing good and 

18 doing well because of it, the community has really 

19 rallied around that educational source and the 

20 feedback that we get, it is a positive for our brand 

21 as well.

22 So, we also opened, more recently, this 
218

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 past year in the Northeast Vocational High School. 

2 Vocational schools, I'm not sure how many states 

3 have them but it is basically a school where you 

4 can learn a trade. You can learn business and pair 

5 that with academics. And so in that branch, the 

6 business program that we paired with, the students 

7 actually run the branch one week and the following 

8 week, they end up going into their academic 

9 courses. 

10 And as far as what we offer, anything 

11 that can be gotten at our branch in our main offices 

12 are available through our branches. So, we give 

13 the kids a checking account. We give them a 

14 savings account. We allow them to have online 

15 banking. And the biggest success has been rolling 

16 out mobile to them two years ago. Over the last 

17 two years, when we go back and look at the student 

18 accounts, they used to, especially in the Reading 

19 High School branch, they used to open the account 

20 and use it while they were at home. And then when 

21 they would leave for school, they would have to 

22 leave their checking account as well. Mobile has 
219

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 allowed us to navigate straight through that for 

2 the last two years. We have not lost a single 

3 account for our students that have gone away to 

4 college. So, we are really happy with that.

5 And we have enjoyed having the kids 

6 back, as far as coming back as employees, they just 

7 give you shot in the arm. At 21 years old, they 

8 are going to save the world and they are really good 

9 for us culturally as well.

10 I did put in that just because it was 

11 so rewarding for us, a testimonial from one of our 

12 students at the Vocational School just talking 

13 about how she feels she is a better person because 

14 she has been involved in the banking program. She 

15 has learned about security and that is one of the 

16 things that was surprising to me is the students 

17 don't realize that once they put their money in a 

18 bank that it is secure. And they also don't 

19 realize that it if a breach occurs and they weren't 

20 the cause of the breach, that we are responsible 

21 to put them and make their account right. And so 

22 that was something that all of them are really 
220

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 surprised to find out.

2 The last program that we actually run 

3 is a literacy program. We just started it this 

4 year. We started it in September. It is in the 

5 city of Lawrence. And if you want to talk about 

6 challenges, I think the biggest challenge for these 

7 programs is getting into the schools. They are 

8 focused on academics. They only have the kids for 

9 a certain number of hours. So, Stacey, the woman 

10 who we worked at the Lawrence High School really 

11 carried this for us. And we are in there every 

12 single week. We are teaching life skills from 

13 opening a checking account, to interviewing for a 

14 job, for how you fill out your resume, what your 

15 paystub is going to look like, making sure that they 

16 take advantage of a match on a 401k. There is just 

17 all these little values in life that you learn from 

18 your parents that when you are talking about a 

19 gateway city, maybe their parents don't understand 

20 and they are not able to mentor them.

21 So, we’re offering a semester-long 

22 literacy program with all the things that are 
221

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 listed above. We are giving them all a savings 

2 account. This is actually starting, I didn't 

3 mention, with the sophomore class. Get them 

4 before they have a job. So, we are teaching them 

5 at sophomore about all the things that they need 

6 to know in life. We are pairing them with a banking 

7 coach. And when they get their job, they are 

8 allowed to open a checking account. The parent is 

9 not on the account. That was very important. The 

10 year before we started this program, we actually 

11 used the kids as a focus group and asked them what 

12 is important to you. And it was very clear that 

13 they don't want their parents on their accounts. 

14 And I will admit that I am on every single one of 

15 my children's accounts and I monitor their behavior 

16 all the time. So, I get it.

17 So, we are setting up savings goals. 

18 When they attain a goal, we are giving them a reward 

19 for that. They do need a Social Security number 

20 to open an account with us. That is something that 

21 is a requirement of our system and our regulator. 

22 So, we use the student ID and a Social Security as 
222

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 far as identification to get them into the account, 

2 as I said, the mobile app and savings coach. But 

3 we did learn that texting works best. Don't send 

4 an email to them. And they have turned around and 

5 totally they have asked us for our PowerPoint decks 

6 after we have done a class. I just did a class last 

7 week on credit score, how you improve it, what it 

8 is, et cetera and the kids wanted it for their mom 

9 because their mom wanted to buy a house.

10 So, when you talk about building trust, 

11 the opportunity to work with kids, build the 

12 relationship with them, show them how to use the 

13 tools that we are offering and then they are going 

14 to bring it home, or so we hope.

15 So, I mentioned the safety and the kids 

16 do have examples. One student told us that she 

17 wanted the account because the way she was punished 

18 was to have her savings taken. So, this is then 

19 an opportunity for her to keep her money and keep 

20 it safe.

21 I did make a couple of notes. So, 

22 again, I mentioned that the administration and 
223

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 having them onboard is really imperative. The 

2 only other thing as far as challenges, one thing 

3 I will mention and I know you have heard it before 

4 during EGRPRA, but as we were migrating to mobile 

5 only for these kids, they are going to be 

6 transferring a lot more. So, the Reg D limitation 

7 on the maximum number of transfers out of a savings 

8 account into a checking account, that has become 

9 an impediment for kids because they do a lot of 

10 transferring. Transactions are big for them and 

11 we want to encourage saving, not discourage it.

12 And then the only other challenge that 

13 I would say after listening to some of the remarks 

14 here, the BSA policies have caused banks to say we 

15 don't want that business here. And so if we are 

16 not going to cash checks for noncustomers because 

17 we are afraid of the BSA implications, how are we 

18 going to be able to monitor their behaviors as check 

19 cashers so that we are willing to give them a 

20 checking account? So, developing recommendations 

21 or pathways to get an unbanked account into the 

22 banking system would be really helpful. Thank 
224

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 you.

2 MR. REYNOLDS: Thank you, Julie. 

3 Michelle.

4 MS. HUDDLESTON: Good afternoon. 

5 Thank you very much for having me here today.

6 I am Michelle Huddleston. I am the 

7 Executive Vice President and Chief Operations 

8 Officer of Commercial Bank in a town called 

9 Harrogate, Tennessee. Commercial Bank is a $980 

10 million bank. We have 22 offices in Eastern 

11 Tennessee and Eastern Kentucky.

12 We started our program called Smart 

13 Cents in 2015 school year, '15-'16 school year and 

14 we partnered with a long-term friend of our bank, 

15 Harlan County, Kentucky Public School System. We 

16 are in eight of the schools in Harlan County, 

17 concentrating on kindergarten through grade 8.

18 Again, we have a long-standing 

19 relationship with the Harlan County Board of Ed and 

20 we set a strategic goal to create and service an 

21 in-school savings account as a result of one of our 

22 employees in that market. Her name is Abby Walker. 
225

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 Abby is a lifetime resident of Harlan County and 

2 had seen most jobs and wealth leave this area as 

3 the coal mining industry had left. 

4 So, she lobbied our bank management and 

5 our Product Review and Development Team for three 

6 years and we agreed to create this product last 

7 year. And it was one of the best things that we 

8 have ever done. It has been a great personal 

9 experience for me. 

10 But she really wanted to stop the 

11 bleeding and believed that the teaching of our 

12 children to have hope and to make smart financial 

13 decisions would save the community and be a huge 

14 part of the economy of Harlan County.

15 Smart Cents has two separate parts. 

16 Students are not required to participate in both. 

17 We offer a savings account. And again, our Product 

18 Review and Development Committee, we have agreed 

19 we would pay a higher rate of interest to it. We 

20 would have no opening deposit requirement. We 

21 would take a different route to our Customer 

22 Identification Program and working with the school 
226

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 system in doing the verification and 

2 documentation. We do require a custodian on the 

3 account but we never require the custodian or the 

4 student to come into our bank. 

5 We start those at the beginning of the 

6 school year but a student can open at any time. And 

7 they make deposits throughout the year when we 

8 visit, which is typically biweekly.

9 We give incentives with each deposit 

10 that is made and also on their birthday, regardless 

11 of the balance in the account. So, a penny gets 

12 the same prize as $100. And we have seen deposits 

13 of both.

14 We have several local business owners 

15 who are very excited about the program and 

16 throughout the year. And as we continue it, they 

17 are donating incentives or supporting the program 

18 like giving a meal in their restaurant on a 

19 birthday, or we are sponsoring end of the year 

20 programs for them, field days, popcorns, waters, 

21 those kind of things, movie tickets. So, it is 

22 becoming a really popular thing that is known 
227

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 throughout the community.

2 In the school district, Harlan County 

3 has about 2,000 total students with about 1,100 of 

4 those being K through 8. And last year, we opened 

5 200 accounts. Only one was closed and that student 

6 moved into another school district. 

7 And now we have started the program 

8 again this school year. We are one month in and 

9 we have already opened an additional 125, which is 

10 bringing our total to over 300 and about 18 percent 

11 of the total student population.

12 The second part of the partnership is 

13 a commitment that Commercial Bank made to teach 

14 financial education classes throughout the year. 

15 Our employees logged over 300 hours of service in 

16 the schools last year and that included our 

17 planning and travel time as well.

18 We completely use the FDIC Money Smart 

19 Program. Bankers are certainly not teachers that 

20 have a lot of good classroom control. So, we have 

21 found that to be a very good tool for us and it is 

22 a very enjoyable time for us as well.
228

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 Also, those programs are helping and 

2 the teachers see value with that program and the 

3 curriculum requirements that are in there.

4 We have already had three other systems 

5 contact us about bringing the program into their 

6 school. Word is traveling.

7 What we have learned: there is a 

8 reluctance of teachers to get onboard because of 

9 concerns of their time. They assume it is another 

10 thing for them to do in the day and they already 

11 have enough to do. We have really good teachers 

12 who care immensely but they just have a lot of 

13 pressures in their every day.

14 So, we made a change. Last year, we 

15 asked them to send the paperwork home and explain 

16 how the account would work. This year we took the 

17 time. We went into each classroom. We did that 

18 ourselves and we really feel like that is what has 

19 put those numbers up so quickly this year.

20 Also, spending a year in their 

21 classrooms teaching financial education, 

22 improving the value and the benefit to them has 
229

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 certainly made a difference in that as well, in that 

2 support. But without that teacher support, the 

3 program is nonexistent.

4 Another problem or thing that we have 

5 learned is that children get very excited about the 

6 program but it isn't always supported at home for 

7 a variety of reasons. The most challenging thing 

8 for us in this particular market has been that the 

9 custodian on the account doesn't want to reflect 

10 assets in the bank because of their benefit 

11 programs that they are recipients of. So, they are 

12 very hesitant in that respect. They participate 

13 very heavily in the financial education part but 

14 they are not willing to open those accounts and go 

15 on record.

16 The second hurdle that we have had is 

17 the parents. They don't want to put the money in 

18 the bank because they are afraid of the parent using 

19 the money.

20 And then the third problem that we have 

21 is that a lot of these children are not being raised 

22 by their parents. There is a grandparent or an 
230

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 extended family member who is raising them. And 

2 there is just simply not enough energy or financial 

3 resources for them to participate.

4 Well, those are things that are very 

5 challenging, hard for us to overcome, but we are 

6 working with community groups to try to do that.

7 And the third thing that we have learned 

8 is that it is very important to start early. We 

9 had a really hard time getting any kind of 

10 conversation going in the middle schools, the fifth 

11 through eighth grade. It was not cool for the bank 

12 lady to be handing out stickers. The only thing 

13 they might be interested in is if they got out of 

14 class but we were doing it during lunch and so we 

15 didn't help with that either. So, and they really 

16 didn't care about our cute piggy bank.

17 So, we went back to marketing and we 

18 came up with a new way that we are doing it this 

19 year. And have got like a punch card. Every time 

20 they make a deposit, again, we don't care if it is 

21 a penny. We don't care if it is $100. They get 

22 a punch card. And after so many, we are giving 
231

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 bigger prizes to those students and we are trying 

2 other ways through being in their classroom, doing 

3 projects where we have got two classrooms now that 

4 we are working with where challenge them to put a 

5 penny in the first day, the student put two pennies 

6 in the next day, and so on. And then we are 

7 matching that at end of the year as they are doing 

8 some classroom community service-type project, 

9 typically. One has already earmarked something 

10 that they want their school to have.

11 So, it is very interesting.

12 And just in closing, I want to say that 

13 Smart Cents is definitely in a partnership with the 

14 school system. We meet periodically and both 

15 sides have contributed to the success of the 

16 program. We have no doubt that Smart Cents is 

17 making a difference in our next generation of 

18 consumers and business owners.

19 I have been a banker for 29 years, 22 

20 of those with Commercial Bank, and it is the most 

21 rewarding thing that I have ever done, as far as 

22 just getting to see the benefit and the value to 
232

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 the community as a banker.

2 And I want to thank you for the 

3 opportunity to participate today and for the 

4 encouragement to our industry to make this 

5 difference.

6 Thank you.

7 MR. REYNOLDS: Thank you, Michelle. 

8 Susan.

9 MS. BISTRANSIN: Good afternoon. My

10 name is Bistransin and I am a fulltime family and 

11 consumer sciences teacher at Parkdale High School 

12 in Prince George's County, which is right across 

13 the D.C. border. I could metro in today.

14 If you are not familiar with family and 

15 consumer sciences, when all of us were in school, 

16 it was called home ec.

17 And us family and consumer science 

18 teachers or home ec teachers have been teaching 

19 consumer education since the dawn of time. And my 

20 course load this year consists of teaching fashion 

21 design and financial literacy. We have had some 

22 good times with that.
233

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 So, one of the courses in my class load 

2 is I am the student banking coordinating for the 

3 ten interns that work for our Capital One 

4 student-run bank branch. And you can see, I bring 

5 pictures. Teachers always love pictures.

6 So, these are some pictures of the 

7 student bankers that we had last year and really, 

8 really a tremendous program. I am very excited to 

9 talk about it.

10 We have several goals and objectives 

11 within the program. We want to demonstrate the 

12 need to safely manage your finances as a critical 

13 life skill. We are providing critical life skills 

14 training for those interns. We connect the 

15 students to the banking professionals for 

16 mentoring opportunities and they have become a part 

17 of the Capital One family. They develop career 

18 awareness and work readiness skills and we 

19 influence their academic achievements in several 

20 different ways. One of those is providing college 

21 preparatory guidance. And the other way that we 

22 influence these ten bankers' academic achievements 
234

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 is I become their mom and I check their grades every 

2 four weeks, which works beautifully.

3 There are basically four facets to this 

4 program, four ways that we achieve these goals. 

5 The first is the students go through a rigorous 

6 interview process as juniors. Ten students are 

7 selected and the start in the summertime and go 

8 through teller training and they work in branches 

9 during the summer. They participate in a 

10 week-long leadership camp, where they discover 

11 that they could do things that they never thought 

12 they could do before. 

13 And they are given in the course of this 

14 time family scenarios. They are partnered up and 

15 they have to compete in a budget project. So, 

16 their budget competition is consistent. They will 

17 get let's say your family is a maintenance worker 

18 and the wife works at Target. They have two 

19 children and they want to buy a car. So, come up 

20 with budget. Where do they live? What are their 

21 life day-to-day expenses and how are you going to 

22 adjust a budget so that they can manage this 
235

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 financial goal? Definitely a practical real-life 

2 application of financial literacy because, as they 

3 work on this, they can't believe how expensive the 

4 rent is and how much it costs to drive the car and 

5 they are actually looking up these things in 

6 real-time.

7 They compete against each other. Our 

8 competition is going to be next week, actually, and 

9 our winning team will go to New York and compete 

10 with the other Capital One bank branches. They 

11 have three; two in New Jersey -- I'm sorry, two in 

12 New York and one in New Jersey. So, they will do 

13 that and prepare their presentation and be able to 

14 compete against them.

15 The third facet is college preparation 

16 and Capital One provides a dedicated college 

17 advisor to help them prepare for college. He is 

18 a no holes barred, tells it like it is guy and he 

19 gets them to write college essays, apply for 

20 colleges, research colleges, does an awesome job 

21 with them.

22 The fourth facet of this program is peer 
236

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 education. And so what we do with these students, 

2 one of their expectations is that they will take 

3 their financial knowledge, prepare lessons, and go 

4 out into the school, and teach their peers about 

5 several different financial topics, savings, 

6 credit, identity theft is another big on that they 

7 do cover when they do that.

8 So they go out into the classrooms in 

9 the spring semester and reach students. Last 

10 year, I believe, we reached over 250 students 

11 through this peer-to-peer education in the 

12 classroom. They also spend their time, when they 

13 are in their branch, and our branch is positioned 

14 right next to our cafeteria, who are open during 

15 lunch hours and they are out there talking to their 

16 peers, encouraging them to come on in, open an 

17 account. This is what you really want to do. We 

18 have got these great services. Come talk to me.

19 We have video announcements going on at 

20 the school. So, they advertise the program that 

21 way and are continually in contact with their peers 

22 and asking them to come in and do set up an account.
237

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 Student-run branches are real 

2 branches. We have vaults, we have cash on hand. 

3 Same level of security as other branches. We are 

4 licensed by bank regulators and we are not open to 

5 the public. We are only open to students, 

6 teachers, and administrators within the building.

7 We focus on offering savings products. 

8 We have recently added checking accounts to 

9 students who are over 18. So, we have added that 

10 to them as well.

11 And the bankers' role, these student 

12 bankers are bankers. They perform teller and 

13 relationship banker roles. They conduct 

14 transactions. They participate in lobby 

15 leadership. They shadow the branch manager. 

16 They are responsible for everything the tellers are 

17 always responsible for. They teach their peers 

18 the importance of budgeting and savings. They 

19 improve their readiness for college.

20 They, in a sense, become role models for 

21 their peers. And they are pretty proud of the fact 

22 that they are role models. We are a school that 
238

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 has school uniforms and so on the days that they 

2 work, they dress in business attire. So, they 

3 stand out.

4 And we have asked them over the course 

5 of time, how does it feel when you are walking 

6 around in a jacket and tie and you are in a business 

7 suit in school. And they are like everybody looks 

8 at me and says man, you look really good. Tell me 

9 about that bank.

10 So, they become role models for their 

11 peers just by walking around the building, which 

12 is really awesome.

13 In turn, they have opportunities. 

14 They work one day a week in the bank branch. We 

15 are open three days a week. So, they each work one 

16 day a week in the bank and are missing classes 

17 during that time. That is one of our challenges. 

18 There are teachers who are not too happy about them 

19 not being in class and we work very hard with that 

20 to help the kids make sure that they make up stuff 

21 and don't take advantage of it.

22 After their first quarter report cards 
239

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 come out, if their grades are really good, Capital 

2 One will extend the offer to let them work in 

3 branches on the weekends and holidays so that they 

4 can make a little bit more money.

5 So, we have had some really, really 

6 awesome stories. In fact, the young man that you 

7 see in this slide right here -- let me back up one. 

8 And I will show you that is the same young man. 

9 This was the year -- he was one of our very first 

10 student bankers. His name is Vladimir. He was a 

11 real nice kid but had issues at home and was 

12 involved in gang problems and things like that. 

13 And this opportunity was open to him. He wasn't 

14 sure whether he wanted to do it or not but when he 

15 was selected to become a banker, he went all-in. 

16 And this is Vladimir today. He is 

17 still working at Capital One, on track to graduate 

18 from college. He is going to college part-time but 

19 he still is working with Capital One and one of 

20 Capital One's great success stories. And he has 

21 testified before many committees and said this 

22 program truly changed my life. It turned me into 
240

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 the person that I am. 

2 And I have countless stories like that. 

3 I have one young man told me last year he had a rough 

4 year. He wasn't interested in participating in 

5 the bank but his buddy said come on, I want an 

6 interview; sign up with me. Well, the buddy didn't 

7 get in and he did. 

8 And he liked the program. He didn't 

9 like the college aspect. His dad was in 

10 construction. He figured he would do that. He 

11 never did well in school. His grades were really 

12 bad. So, he figured no college is going to take 

13 me. He was constantly warring with his dad 

14 throughout the entire year.

15 And as the year came to a close, he was 

16 going to go on to community college to save a little 

17 bit of money. He still wasn't too sure about it. 

18 So, the following fall he came back to visit with 

19 me. And this was one of my best days as a teacher. 

20 And he came in and he said you know I have to tell 

21 you this. He said I started out school this week 

22 and I came home and my mom asked me how my day was. 
241

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 She never asked me that in 12 years of school but 

2 she wants to know, now that I am in college, how 

3 was school. And he said it made me cry. I was so 

4 excited.

5 And that night, his dad came home and 

6 his dad asked him about how his day was. And he 

7 said son, I'm really proud of you. You are 

8 becoming a man and you are putting yourself right 

9 where you need to be. He said my dad had never told 

10 me he was proud of me ever before in his life.

11 So, these are the kind of stories that 

12 are coming out of this wonderful program. I wish 

13 we had more than ten students in it but for the ten 

14 that we have, they become my other children. And 

15 we develop a great relationship and I look forward 

16 to seeing each one of them and see what they become 

17 as time goes on.

18 So, this is absolutely one of my 

19 favorite programs to work with and thank you very 

20 much for letting me share it with you.

21 MR. REYNOLDS: Thank you so much. I 

22 just wanted to wrap up quickly, first, and then we 
242

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 will get to hear some ideas from you. I just want 

2 to remind everyone that February of last year, 

3 FDIC, FinCEN, and the other financial regulators 

4 issued guidance to encourage financial 

5 institutions to participate in Youth Savings 

6 Programs and answer frequently asked questions

7 that arose.

8 One of the most frequently asked 

9 questions I get and I think we get pertaining to 

10 Youth Savings Programs is whether a bank can open 

11 a deposit account for a minor without requiring a 

12 parent or guardian to be a custodian on the account.

13 The guidance is very clear a bank needs 

14 to look to state law, talk to their legal counsel, 

15 look to state law. That is where it can get a 

16 little bit tricky because some states have specific 

17 statutes that say a bank may enter into a deposit 

18 account contract with a minor and it is valid. 

19 Other states are silent and other states have less 

20 clear laws.

21 And I have seen even in states where 

22 there are laws, banks don't always know these laws 
243

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 exist. Thanks to the leadership of John Ryan, the 

2 Conference of State Bank Supervisors survey its 

3 members and compiled a directory that is viewable 

4 by state so now it is easy to find state-specific 

5 rules or related resources pertaining to youth 

6 savings, that includes statewide youth savings 

7 collaborations that some state treasurers run.

8 So, now if a bank is looking whether it 

9 can offer a noncustodial account to minors, we can 

10 refer them to the guidance. And then using the 

11 guidance, based on the guidance, they can look at 

12 the CSBS website, talk to the legal counsel, and 

13 make a determination on how they want to proceed.

14 Tomorrow, the banks in our pilot will 

15 join together in a symposium we are hosting. We 

16 are hosting in large part because banks asked for 

17 it. They felt they can gain a deeper value of 

18 understanding from talking and seeing one another. 

19 We also see this as a way to gain a deeper level 

20 of understanding into their programs. While the 

21 symposium is closed to the public, you can watch 

22 the webcast starting at 8:30 tomorrow through the 
244

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 FDIC website.

2 Now, we want to hear from you. After 

3 we answer any questions you may have based on what 

4 we just shared, these are some questions in 

5 particular we would like to gain insights from you 

6 so we can formulate next steps for our youth savings 

7 work.

8 MEMBER CISNEROS: Thank you. Thank 

9 you, Luke. Thank you all for being here. The work 

10 you are doing is exciting.

11 I just personally want to say that this 

12 pilot is inspirational. In San Francisco and a 

13 number of other cities and our Cities for Financial 

14 Empowerment Coalition, as many of the people in the 

15 room know, we have a program called Summer Jobs 

16 Connect, where we are working with many of our 

17 cities Summer Job for Youth Programs in trying to 

18 connect at least, if not earlier, at least a youth's 

19 first paycheck with the opening of a bank account 

20 so they are not left with nowhere to go but a rip-off 

21 check casher.

22 And unfortunately, what we are finding 
245

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 is we find very, very, very few banks that are 

2 willing to open up noncustodial accounts for youth 

3 under the age of 18. In fact, in San Francisco, 

4 we have no bank that is willing to do that with us. 

5 And we have located one credit union that is opening 

6 up now hundreds of accounts each year for the past 

7 few years with us.

8 So, we look forward to working with you 

9 all continuing going forward to hopefully change 

10 that landscape.

11 But I am curious about some of your 

12 experiences. I know you talked about, in some 

13 cases, you guys have a bank branch in the school 

14 with safes and all that. But I am curious about 

15 experiences you guys have had with taking deposits 

16 remotely. So, in other words, going to a school 

17 and taking deposits. Because I have another 

18 program where we have opened 27,000 children's 

19 savings accounts for kids starting in elementary 

20 school in kindergarten and now they are grown up 

21 into elementary school. And we want these 

22 families to make deposits. And of course, they can 
246

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 always go to our great partner, Citibank and walk 

2 into a bank branch, which most of them actually do, 

3 when they make their deposits. But we know we 

4 would probably see an increased amount of deposits

5 if we could take deposits remotely in the 

6 classroom, in the schoolyard, somewhere. But I 

7 cannot fathom how we would deal with the risk of 

8 taking those deposits and somehow transporting 

9 them back to the bank. So, I am curious if you have 

10 any insight you can share with me on how any of you 

11 might have done that.

12 MS. THURLOW: It might be because we 

13 are a community bank, so our markets are close by 

14 but we send two people. And everything is logged 

15 in advanced through dual control and then it is 

16 revalidated when it comes back to the main office.

17 MEMBER CISNEROS: So you actually have 

18 two bank employees you say that you are sending to 

19 a remote location, a school, I presume.

20 MS. THURLOW: We do it there. We also 

21 do it at senior centers as well.

22 MEMBER CISNEROS: Okay and then a 
247

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 deposit, obviously needs a deposit slip and the 

2 cash or check so that you can track and know it is 

3 going into the right place.

4 MS. THURLOW: And handwritten receipt 

5 for the customer.

6 MEMBER CISNEROS: And handwritten 

7 receipts, wow! That is -- Bob --

8 MS. THURLOW: Bob is choking.

9 We go to our assisted living facilities 

10 as well. The same thing, two employees go out. 

11 They bring a small cash box with them. It is 

12 verified on its way out. It is verified on its way. 

13 And you have a logging mechanism for receipts.

14 MEMBER CISNEROS: It is inspirational, 

15 honestly. I mean and whether that is scalable or 

16 sizeable or not, who knows. But at least if we have 

17 some precedent, some models we can look at, maybe 

18 we can find a way to adapt something like that and 

19 with other type of supports, get something like 

20 that done. Do you guys do anything similar?

21 MS. HUDDLESTON: We are doing it almost 

22 exactly the same way.
248

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 MEMBER CISNEROS: Really?

2 MS. HUDDLESTON: We are.

3 MEMBER CISNEROS: God, I need your 

4 help.

5 MS. HUDDLESTON: We have a primary 

6 person. We have two individuals in the market and 

7 they kind of figure it out together. On deposit 

8 days, one will go and spend that time but before

9 they leave, the second one is there for the actual 

10 security function of that. We are handwriting 

11 receipts. We have a process that we go through.

12 MEMBER CISNEROS: Fantastic. But the 

13 form is largely preprinted. So, it is just filling 

14 in a couple of account number or something like 

15 that, an amount, and handing back the receipt. And 

16 it probably can be made pretty efficient.

17 Thank you very much. You are 

18 inspirational.

19 MEMBER BOSTON: What size deposit? 

20 You said a penny, two cents?

21 MEMBER CISNEROS: She said over $100.

22 MEMBER BOSTON: Yes, but I just want to 
249

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 get an idea of the size. And then also, do you find 

2 the parents actually coming to have a relationship 

3 with the bank? That is just a question we have --

4 I have.

5 MS. HUDDLESTON: I'll go first on this 

6 one. I think we found at the end of the year that 

7 we had an average balance at the end of the year 

8 of around $25 to $30. I can't remember 

9 specifically. But we do have some who, at the end 

10 of the year, probably only had $0.50. And then we 

11 did have a couple that would be in excess of $500. 

12 So, there had been significant savings on that 

13 student's part. They were mowing grass and those 

14 kind of things and were putting part of that money 

15 into savings.

16 And I'm sorry, the second part of the 

17 question?

18 MEMBER BOSTON: Do parents come into 

19 the branches? I guess the other question, someone 

20 is going to ask, is this financial viable? It is 

21 a good thing to do but I am just asking because you 

22 have two employees, they are going there. They are 
250

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 spending time. How are you justifying this from 

2 a business model?

3 MS. HUDDLESTON: Well, in large, 

4 because of the relationship with the school system 

5 overall in the individual schools. But we really 

6 felt like something had to be done or we couldn't 

7 sustain a presence in those communities. So, we 

8 had to begin to teach the next generation of 

9 consumers and small business owners. So, we felt 

10 it was a long-term. It is not a profitable 

11 situation for us but we felt it was a long-term 

12 investment in staying in that community.

13 And we are seeing some impact to the 

14 family's relationship. Again, we have a lot of 

15 hesitation because of benefit programs. We are 

16 not seeing significant change in that prospect. 

17 But what we are seeing are the schools are asking 

18 us back into parent educational opportunities. 

19 And so we are beginning to make some impact there 

20 that we feel is very positive.

21 MR. REYNOLDS: Andrea?

22 MEMBER LEVERE: So, I just want to 
251

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 thank you. I was ready to cry after each one of 

2 your presentations. And I will be with you 

3 tomorrow because you are part of a national 

4 movement and Jose referenced children savings. 

5 And I will talk tomorrow about the Campaign for 

6 Every Kid's Future, where we now have over 80 

7 programs in the United States with the goal of 1.4 

8 million children having a children's savings 

9 account by 2020. 

10 But I want to give one data point and 

11 ask one question, which is Julie spoke to this issue 

12 of the children wanting an account in their own name 

13 and I know there is a piece of it which is they 

14 didn't want their parents to have access to it and 

15 others. But one of the most powerful pieces of 

16 research which has been done by Professor Willie 

17 Elliott at the University of Kansas has really 

18 spoken to this issue of what it means to a child 

19 to have an account in their own name and how a child 

20 with a savings account with as little as $500 in 

21 their own name has three times as much going to 

22 college and four times as much graduating.
252

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 So, it goes back, I also think, to what 

2 Michelle and Susan said about the sense of hope. 

3 You know the phrase we use all the time is parents 

4 will do for their children but they won't do for 

5 themselves. And in your cases, it took a little 

6 bit longer than you would have liked. You know as 

7 a parent myself to think it was until the child is 

8 18 when you said you were proud of them just breaks 

9 my heart but it finally came.

10 My question is how many of the children 

11 you work with, and obviously Capital One is 

12 different, had an incoming account before this 

13 program.

14 MS. THURLOW: If I speak of the 

15 Lawrence Public High School, the sophomores, they 

16 don't have accounts.

17 MEMBER LEVERE: None of them had 

18 accounts.

19 MS. THURLOW: None of them had 

20 accounts. And I think there is a lot of feelings, 

21 even from a banking system, you are talking about 

22 a community where 60 percent of people speak 
253

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 Spanish as their primary language but yet there is 

2 not a single Spanish-speaking website, Spanish 

3 written materials, mobile app, et cetera. I think 

4 the banking community has to meet people halfway. 

5 And we have a team at our bank that are fluent in 

6 Spanish and they are actually on this team that are 

7 imagining how we are going to reach out to this 

8 community. But I think building trust, you have 

9 to meet people halfway and respect where they are 

10 coming from and understanding, reach out in the way 

11 that works best for them.

12 And that is why I think going through 

13 the schools was our first step. Let's take the 

14 children and allow the information to float up, so 

15 that we are building next generation customers, 

16 people who don't have a financial literacy 

17 understanding, the aha moments that happen, just 

18 like you are saying in the classroom, when the 

19 lightbulb goes on. As soon as we told them about 

20 having and offering the opportunity to open an 

21 account, the very next week, they were on the 

22 teacher. When are we opening these? When are we 
254

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 opening these?

2 So, they really get the fact that they 

3 need to get on a ladder of success and financial 

4 literacy is the first step.

5 MEMBER LEVERE: Michelle, how many of 

6 the kids you work with? 

7 MS. HUDDLESTON: We didn't track that. 

8 So, I don't know an exact number but I would 

9 estimate that the largest percentage did not. 

10 Probably in excess of 90 percent this would be their 

11 first relationship with a bank.

12 MEMBER LEVERE: And Parkdale, do you 

13 have any idea how many of those kids? Because it 

14 is a little bit of a different demographic.

15 MS. BISTRANSIN: It is a different 

16 demographic, yes. We are about 70 percent free and 

17 reduced lunch population.

18 MEMBER LEVERE: Right.

19 MS. BISTRANSIN: And I do have 

20 statistics on how many accounts are open. For the 

21 2015-2016 school year, we opened 100 accounts and 

22 our student body is about 2,100 students.
255

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 MEMBER LEVERE: And 70 percent farm?

2 MS. BISTRANSIN: Yes.

3 MEMBER LEVERE: Yes.

4 MR. REYNOLDS: Bob?

5 MEMBER ANNIBALE: It is so 

6 interesting. Thank you. You have really worked 

7 at this in such an intimate scale and so closely. 

8 And so there is a lot of learning. And it is 

9 challenging as a platform like we are, the bankers 

10 to the 27,000 kids in San Francisco. But what 

11 would you say on even a larger scale, for example, 

12 with just all that technology, that platform we

13 built will now be in Tagalog, and Chinese, and 

14 Spanish. Because parents won't be able to read it 

15 otherwise, even we knew that even in English was 

16 challenging.

17 But one other thing that I am looking 

18 at other cities in scale like New York where you 

19 have 1.1 million kids in the school systems, huge 

20 numbers that are foster care and in disruptive 

21 households for many of them and many of them are 

22 undocumented.
256

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 San Francisco, the whole program 

2 includes documented or undocumented children for 

3 the way we structured it. It's okay. But do you 

4 use ITIN numbers as well? In other words, if they 

5 don't have a Social Security number? You know the 

6 IRS quite happily takes interest whether you have 

7 a Social Security number or an ITIN number they call

8 it. I would think you might want to look into that, 

9 too, because it would allow children who are 

10 undocumented or their parents to open a bank 

11 account, even if their documented status doesn't 

12 give them a Social Security number.

13 MS. THURLOW: We have been lucky in 

14 this case in the district that we are in that the 

15 students all have Social Security numbers and the 

16 student ID long with being part of the school 

17 community. But you are right, that is the reason 

18 why we didn't go straight to the parents. But I

19 have heard about using the ITIN numbers and it is 

20 something we want to take a look at.

21 MEMBER BECK: Nice job. Very nice 

22 job.
257

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 But in looking at why these three have 

2 been successful, there is really three things that 

3 come together. There is a trained teacher. There 

4 is a financial institution that is willing to not 

5 be so ROI-focused. And there is a school 

6 administration that is giving them shelf space. 

7 Shelf space is continually a problem we run into 

8 in schools. Teachers often sneak programs in 

9 under math or something else because they think 

10 their kids need this.

11 So, if you are looking for a success 

12 model, which is one of your questions, saying to 

13 the groups you are working with is these are the 

14 three folks you have got to get onboard. There is 

15 teaching training available. The teachers have to 

16 be motivated and have to be good at it. You have 

17 got to find a financial institution that is willing 

18 to work with you over time and it is not just gee, 

19 I never do this; I am going to try it. And you have 

20 got to get the school board, administrators, 

21 whomever is the decision-maker saying this is 

22 something we are going to carve out time for because 
258

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 of that long-term return. Because if anybody 

2 thinks there is a six-month return on this, there 

3 isn't. But there is a long-term return. So, in 

4 scalability, you are going to get a bunch of little 

5 successes but those add up. But you have got to 

6 get those three elements onboard. And these are 

7 three prime examples of where it has worked.

8 So, thank you.

9 MR. REYNOLDS: Thank you.

10 MEMBER MCCOY: Thank you, Luke. This 

11 is so inspiring. So, thank you so much.

12 I was curious, intrigued at your bank's 

13 opening noncustodial accounts and your banks focus 

14 on custodial only. And I was wondering if you 

15 would be interested in the dialogue about what were 

16 the considerations in upper-most in mind of each 

17 bank as to why to go one direction or the other and 

18 was part of it regulatory considerations, know your 

19 customer, or anything like that?

20 MS. THURLOW: So we did have the 

21 information as far as what we could do for on a 

22 state-by-state basis. So, thank you for that.
259

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 From our standpoint, it was a question 

2 of contract law. So, can we enforce it against a 

3 student if they are younger than 18? No, we could 

4 not. However, if we structure the account in the 

5 right way, don't allow overdrafts, and minimize a 

6 loss, is that a risk that we are willing take? And 

7 if we believe that financial literacy is going to 

8 create a better customer in the future, hopefully, 

9 they are going to come to us first and we have 

10 created a wonderful new opportunity with a new 

11 customer base that is fully educated. So, that is 

12 how we roll the dice.

13 MS. HUDDLESTON: And I would say that 

14 the reason we require a custodial relationship is 

15 because of the age of the students that we are 

16 working with and a matter of state law as well.

17 We do have, outside of the context of 

18 this particular program, but we do have some 

19 flexibility within our bank on checking accounts 

20 for working minors at the high school level.

21 MEMBER EAKES: I wanted to ask what 

22 ages you focus at and what difference across 
260

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 different ages. 

2 And then Michelle, I just wanted to say 

3 how nice it was to have someone with no accent here.

4 (Laughter.)

5 MS. HUDDLESTON: I definitely have 

6 been drawn to you, too.

7 Well, we are in kindergarten through 

8 eighth grade. Again, we have not had a lot of 

9 success in that fifth through eighth grade last 

10 year. We continued on but we did not have a lot 

11 of success with account.

12 This year, we agreed as a group when we 

13 met with the school system that we would focus most 

14 of our efforts in the third, fourth, and fifth 

15 grade. We felt we got the most attention in that 

16 age group and that there was more retention of the 

17 subject and that they could actually begin to apply 

18 it and understand it, even in their lives at that 

19 particular point or recognize parental behavior or 

20 things that were going on.

21 So, that is where we are.

22 MS. BISTRANSIN: My program is 
261

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 strictly high school with nine through twelve.

2 MS. THURLOW: So, we actually have two 

3 programs. We actually do the Savings Makes Cents 

4 program early on and that is somewhere in an 

5 elementary school. So, we hit about 1,200 to 1,500

6 students a year in April doing those programs. So, 

7 that is just -- this is all about savings. 

8 And then we focus now on high school or 

9 eighth grade, before they are coming into high 

10 school, to get them into the account so that they 

11 are then in a self-contained environment, where 

12 they have somebody there that they can come to and 

13 they have the advice kind of surrounding them 

14 with the high school branches.

15 MEMBER EAKES: Anybody but middle 

16 schoolers, it sounds like.

17 MS. HUDDLESTON: I will say this on 

18 that note, we are already finding out that those 

19 that we had in fourth grade, now that are fifth 

20 grade, they are continuing to participate. So, we 

21 feel like there is a trust factor, I think, even 

22 at that young age that they have already made that 
262

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 relationship with us. So, we do feel that they are 

2 continuing it.

3 CHAIR GRUENBERG: I would like to ask 

4 each of you about the role of the school district 

5 in your program. Was it at the school district 

6 level that a program was established that allowed 

7 the bank to establish a program at the school? And 

8 what was the chicken and the egg here? Did the bank 

9 approach the district or the school or did the 

10 school district establish a program that the bank 

11 was then able to participate in? Or was there some 

12 other means through which the program got set up?

13 MS. BISTRANSIN: As far as Capital One 

14 is concerned, this is their fourth student bank 

15 branch and they were looking to expand in the D.C. 

16 Metro area. And so they had a meeting with local 

17 school systems and principals to put out the fact 

18 that they are interested in doing this and to see 

19 what type of interest there was.

20 And from what I understand, the person 

21 who ran the meeting had to leave immediately. She 

22 got on a plane and before she could even take off, 
263

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 my principal had called her and said we want this 

2 program at my school.

3 CHAIR GRUENBERG: I see.

4 MS. BISTRANSIN: But our school board 

5 has been incredibly supportive of it and I would 

6 say the teachers have been reasonably supportive 

7 of it. Just in terms of taking kids out of class 

8 but I have been working very hard to fix those 

9 relationships and it seems to be coming along.

10 MS. HUDDLESTON: We approached the 

11 school system and they didn't let us get in our cars 

12 that day. They were very excited about the 

13 opportunities. And so they very much embraced it 

14 all levels. It was more hesitation at the 

15 classroom teacher level but it has been very 

16 successful.

17 CHAIR GRUENBERG: For the same reason 

18 that Susan --

19 MS. HUDDLESTON: Yes, that is the only 

20 reason.

21 MS. THURLOW: So, the superintendent 

22 of schools in the Town of Reading actually 
264

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 approached us and that was our first foray. The 

2 next call was from the superintendent of the 

3 vocational school. They wanted an ATM. We said 

4 no, we think you should have this program. So, we 

5 have worked with partnership and launched that this 

6 year.

7 The Lawrence Public School was an 

8 outreach that started in the middle school that 

9 ended up at the attention of the principal and we

10 put the program together.

11 CHAIR GRUENBERG: Thank you.

12 MR. REYNOLDS: John, I think --

13 MEMBER RYAN: I just wanted to 

14 acknowledge how important this is not just as a 

15 forum but as a network. So, the issue of state law 

16 as an impediment to these sorts of programs was 

17 raised a year and a half, two years ago. And so 

18 I had followed up and said what can we do about this.

19 So, ultimately, Luke approached me and 

20 we were able to work together. The FDIC was a great 

21 help in coming up with a survey and the information 

22 needed. And what we have come to is that it is an 
265

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 impediment. There are some differences. There 

2 are half a dozen states that are silent on the issue 

3 of noncustodial accounts. The vast majority 

4 permit. There are a few that permit with some 

5 limitations.

6 But I want to offer up kind of the next 

7 wave is if you -- I am going to ask Luke to send 

8 around the map that we built out. It has all the 

9 citations, everything, the details of the 

10 questions. If this is seen, if some of the 

11 differences are seen as an impediment to the 

12 program for those who want to scale it on a 

13 multi-state basis and we need to think about model 

14 laws that open up that conversation as well 

15 because, as a system, we really see the value in 

16 doing this. 

17 And thank you, as educators and 

18 institutions. But I want to make sure that not 

19 only are we not creating impediments, but we are 

20 making it as easy as possible for all of you to have 

21 these sorts of programs.

22 MEMBER ANNIBALE: And John, for 
266

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 national banks, it is particularly important to 

2 think this, too, of where we open the accounts and 

3 under what law are we going to have the accounts 

4 domiciled and governed under. And it is 

5 conflicting.

6 So, and also your cooperation in being 

7 able to look now and see by state, I think will be 

8 very interesting.

9 MEMBER RYAN: It will make it a lot 

10 easier. We have all the citations, everything.

11 MR. REYNOLDS: I realize I am out of 

12 time. I also realized I was going to share the 

13 address for the websites the CSBS created. I 

14 understand that facts.csbs.org/survey --

15 facts.csbs.org/survey. Then, I am out of time. 

16 Thank you.

17 MEMBER RYAN: Maybe we could just email 

18 it around.

19 MR. REYNOLDS: And we will email it 

20 around as well.

21 MEMBER LEVERE: Can I just -- a former 

22 member of this body, Peter Tufano, had this 
267

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 brilliant idea to help solve your teacher problem. 

2 And he just never succeeded but I just want to put 

3 it on the table. He tried to change the questions 

4 on the SAT and take out those ridiculous questions 

5 about the train going this way and the train going 

6 that way and replace them with questions that were 

7 designed around financial issues and financial 

8 literacy. And that is the way to scale --

9 MEMBER BARR: I like that train 

10 question.

11 MEMBER LEVERE: -- all the way down 

12 because then people will teach to that and then 

13 people would look -- and I always champion. Now, 

14 he is, unfortunately, in England, so he is not as 

15 concerned with the SAT. But I just thought that 

16 was a brilliant idea for really creating the 

17 incentive structure to do this broadly.

18 So, I just wanted to give our former 

19 member --

20 MR. REYNOLDS: And I just note that 

21 idea was picked up by the CFPB in one of their white 

22 papers for youth financial education around 
268

NEAL R. GROSS

COURT REPORTERS AND TRANSCRIBERS

1323 RHODE ISLAND AVE., N.W.

(202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com

1 standardized tests. So an adaptation of that 

2 idea.

3 MEMBER LEVERE: And it is the most 

4 powerful institution I think, in America. Right? 

5 We will crack it.

6 MR. REYNOLDS: Thank you.

7 MEMBER LEVERE: Yes, ETS.

8 CHAIR GRUENBERG: Any other questions 

9 or comments for this panel?

10 I very much want to thank you all. Just 

11 terrific.

12 And I think that concludes our agenda 

13 for today and we will come up with something else 

14 to talk about the next time.

15 (Laughter.)

16 CHAIR GRUENBERG: Thank you.

17 (Whereupon, the above-entitled matter 

18 went off the record at 3:22 p.m.)