# **II:  The Urban Unbanked in the United States**

This section uses a survey of households conducted in lower-income communities in New York City and Los Angeles to profile the unbanked and to explain why they are unbanked. The Office of the Comptroller of the Currency (OCC), the agency that charters and regulates national banks, conducted this high-quality survey of the use of financial services by residents in low- and moderate-income census tracts in both cities in 1998. The survey sampled 2,000 adults asking, among other things, numerous questions about how they receive and make payments. The surveys were conducted by telephone and in face-to-face interviews. The interviews were conducted in either English or Spanish depending on the respondent’s choice. Because of careful design and persistent efforts, the OCC obtained a remarkable 70 percent response rate. For people using the survey data, the OCC supplies a set of weights to convert the sample responses into responses representative of the 2.6 million adults living in the low- and moderate-income census tracts of the two cities. All of the tables in this paper based on the OCC survey use the weighted data.

For our purposes, there are two weaknesses to the survey. First, it focused on only the residents of two large cities who may not be representative of urbanized lower-income households generally. As a result the percentage of unbanked in this survey is higher than that given by the Federal Reserve’s 1997 percentage for the country at large<sup>5</sup> . Both of these cities, for example, have much larger Hispanic and immigrant populations than is typical of American cities. And New York has a lower percentage of homeowners than is typical of American cities. Second, the OCC with little discernable rational basis decided to omit a number of survey responses from the publicly released data base. Consider one example. The OCC survey asked people without bank accounts why they did not have an account and read a list of reasons that they could agree with, including such reasons as “don’t have enough money,” “bank fees are too high,” etc. The public data set includes peoples’ responses to this question. The OCC survey followed this question with an identical question with a second set of possible reasons, such as “you need a Social Security number to open an account,” “bank won’t let you open an account,” etc. The public data set does not include peoples’ responses to this question. Despite these weaknesses, the OCC data provides a number of insights into the use of financial services by lower-income urban households.

Table 1 presents an overview of the socioeconomic characteristics of the adults in the survey. As indicated in the table, almost 60 percent of the adults work and almost an equal percentage have household incomes of $30,000 or less. We will refer to these households as lowerincome households.<sup>6</sup> More than half (53%) of the surveyed population identified themselves as Latino and 33 percent as black non-Latinos. Slightly more than one-third (37%) of the adults did not have a deposit account of any type. In contrasting the data between the two cities, the most striking differences is the much greater representation of Latinos (63%) in Los Angeles, and the greater presence of younger individuals and individuals in the lowest income category in this city.

> 5 9.1%

> 6 In 2000, the median household income in New York City was $39,939 and the median household income in Los Angeles was $35,955.

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