Access to Financial Services for Unbanked and Underbanked Consumers
WHEREAS, there is a substantial population of American consumers that do not have access to traditional sources of consumer credit or banking services, and
WHEREAS, consumers that do not have or maintain traditional bank accounts are considered “Unbanked”, and
WHEREAS, consumers that have limited or insufficient credit files are considered financially “Underbanked”, and
WHEREAS, estimates indicate that over 75 million American consumers are considered to be Underbanked or Unbanked, and
WHEREAS, this constitutes approximately one out of every three adult consumers, and
WHEREAS, financial products and financial companies serving these consumers, and laws governing both those transactions and the practices of those companies, have evolved substantially since the mid-1990’s, and
WHEREAS, the economic development potential of the United States and each State and its communities is limited by the large number of Unbanked or Underbanked consumers, and
WHEREAS, the access to traditional installment credit, secured and unsecured, as well as mainstream financial services is a key enabler to wealth for all Americans, and
WHEREAS, many states have not had a comprehensive review of their various lending laws and whether they foster availability and access of responsible personal installment lending, utilize sources of financial literacy, or leverage the favorable changes that have occurred in the national marketplace in products, business practices, credit information and operations technology, and
WHEREAS, the states have the responsibility to provide adequate consumer protection, to encourage economic development, and to provide the regulatory framework necessary for financial services organizations to operate.
THEREFORE BE IT RESOLVED, [insert state here] supports the efforts of States to bring financial service choices to the Unbanked and Underbanked consumer by:
1. Reviewing the respective academic or economic studies, consumer protection laws and corporate best practices for consumer installment finance; and
2. Investigating the potential of whether business models and regulatory economic incentives could serve to transition and graduate consumers from sub-prime to prime credit scores resulting in increased chances that they may accumulate wealth; and
3. Determining whether the lending process is understandable, fair, and efficient and that optimum disclosures show terms and conditions so that consumers can understand the product being offered and make a comparison or reasoned decision; and
4. Identifying the economic impact of raising credit scores and also requiring wider reporting and creditor consideration of payments for alternative “credit- like” accounts, such as rent or utilities to major credit bureaus; and
5. Determining the impact and availability of financial education or incentives to raise personal financial literacy, as well as personal credit or financial counseling by companies providing the customer financial services; and
6. Determining the appropriate regulatory mechanism where consumers will benefit from the fostering of a market-based, competitive business environment.
Approved by ALEC Board of Directors on January 2008.