The Struggle for an Equal Opportunity to Bank

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The United States is founded on the premise of equal
protection. Equal protection is the scheme of legislated equality which
encompasses notions of fairness, goodness, fraternity and social justice. It’s
about maintaining a social stratification system which encourages any person to
achieve their fullest potential by preventing the worst forms of social
distinctions to arise. For years, members of our society, our elected officials
and governing bodies have fought vigorously to implement programs and laws that
promote this idea. In just our recent history, we have seen the passage of the
Fair Housing Act, Title VII and The American’s with Disabilities Act.  However, little has been done to combat the social
inequalities that our financial institutions have created by the painstaking road
blocks they have constructed to gain access to mainstream financial services. These
hurdles have prevented valuable members of our society from gaining admittance
to a world driven by ecommerce. They have been disallowed from reaping the
myriad benefits that savings accounts and electronic banking afford to more
financially endowed individuals. That was, until the Financial Service Centers
of America (FiSCA) and NetSpend Corporation took it upon themselves to
collaborate and create The All-Access NetSpend National Savings Program.[1]

                The U.S.
Treasury estimates that between nine and ten percent of households in the U.S.
do not have a bank account.[2] The majority of this statistic is comprised of
low-income individuals and immigrants who have fewer financial options than
Americans.[3] The lack of financial services available to this one tenth of
households has undeniably created excessive hurdles that have essentially cut
off a large percentage of our society from economic progression. FiSCA’s
position in the financial service industry provided a unique opportunity for
NetSpend to tap into a market of these unbanked and under-banked consumers.[4] With
FiSCA representing more than 7,000 financial service centers and serving
approximately 30 million customers each year, NetSpend was afforded an
opportunity to reach customers beyond the checkout lines at Target. [5]

                In 2005,
FiSCA recognized the growing need for a low cost secure mechanism to handle
check cashing transactions. This upgrade would provide a real savings
opportunity and access to electronic commerce.[6] For millions, the outdated
method of storing cash in a coffee can and in the mattress which offered little
security, potential for growth and accessibility was no longer a suitable
alternative to a bank account.[7] What evolved was the innovative and revolutionary
NetSpend National Savings Program allowing customers to obtain a no-fee, no
minimum balance, FDIC- insured, interest-bearing savings account linked to a
reloadable debit card.[8] This program provides an opportunity for consumers to
create a savings fund for long-term financial empowerment, while finally
opening the door to electronic banking. Furthermore, the program offers these
consumers a level of security with their finances that they have never been
given before. The savings program is just one of three components that encompass
FiSCA’s Consumer Empowerment Program. The other two components include the PRBC
(Payment Reporting Builds Credit) and a Financial Education Program. The PRBC
is “consumer reporting agency and repository that enables consumers and small
businesses to build a credit file and score, based on their history of making
rent, utility, phone and other recurring bill payments” that are used to
demonstrate the consumers creditworthiness.[9] The Financial education program
is a customized instructional plan designed to satisfy the actual needs of
financial service center customers.[10]  These
three components comprise a comprehensive collection of services designed to
provide customers with financial services that otherwise may be unavailable or
unaffordable to them.[11]

                The
NetSpend National Savings Program accounts are held by Inter National Bank, in
McAllen, Texas and insured by the Federal Deposit Insurance Corporation (FDIC)
up to the $100,000 limit in aggregation of other deposits that the customer may
hold at INB.[12]  The program essentially
creates “two buckets – one for spending and one for saving.”[13] Consumers can
transfer funds conveniently between the debit card and savings account via the
internet and phone.[14] In addition, automatic, recurring transfers can be set up
to facilitate easy savings.[15] There are no minimum balance requirements and
monthly user fees.[16]  The lack of
stringent entry requirements and maintenance costs make this program not only
affordable, but possible for a whole new segment of consumers. The savings
program is offered free to all new and current NetSpend prepaid
debit-cardholders. Additionally, to combat the difficulties facing unbanked
immigrant consumers The NetSpend National Savings Program is offered both in
English and Spanish.[17] These supplementary resources assist in opening doors to
consumers that have been unable to obtain the necessary aid in understanding
the complexities of the financial services arena.

                The most
surprising aspects of the program are the interest rates. The program offers a 5
percent interest rate on debit card deposits, which is substantially greater
than the 1.46 percent average for interest-bearing checking accounts.[18] This
figure is not only competitive, but is higher than those offered by most
commercial banks for this entry-level savings account. This rate means that the
money participants do set aside will grow at a rate that surpasses that offered
by financial institutions that actively impose regulations that restrict their
services to specifically qualified individuals. This 5% annual yield provides
an incentive to consumers to save who typically are unable or do not because of
the lack of disposable income they have to spare.

                With
these above market returns it’s not surprising that customers are taking
advantage of the prepaid debit card and savings component to help them manage
their money. As of February 2009, over 104,000 NetSpend National Savings
Program accounts have been opened.[19] Those accounts encompass more than one
hundred million dollars that have been deposited into the savings account since
the program’s inception in 2005.[20] Given the strenuous economic times it is
important that low-to-moderate income customers have a non-bank savings
alternative that strives to promote fiscal responsibility and money management.
Furthermore, these individuals are being rewarded with higher than market value
interest rates.  It’s about time that all
individuals are provided equal protection and opportunity to secure, invest,
spend and save their money.

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{page:SectiThe United States is founded on the premise of equal
protection. Equal protection is the scheme of legislated equality which
encompasses notions of fairness, goodness, fraternity and social justice. It’s
about maintaining a social stratification system which encourages any person to
achieve their fullest potential by preventing the worst forms of social
distinctions to arise. For years, members of our society, our elected officials
and governing bodies have fought vigorously to implement programs and laws that
promote this idea. In just our recent history, we have seen the passage of the
Fair Housing Act, Title VII and The American’s with Disabilities Act.  However, little has been done to combat the social
inequalities that our financial institutions have created by the painstaking road
blocks they have constructed to gain access to mainstream financial services. These
hurdles have prevented valuable members of our society from gaining admittance
to a world driven by ecommerce. They have been disallowed from reaping the
myriad benefits that savings accounts and electronic banking afford to more
financially endowed individuals. That was, until the Financial Service Centers
of America (FiSCA) and NetSpend Corporation took it upon themselves to
collaborate and create The All-Access NetSpend National Savings Program.[1]

                The U.S.
Treasury estimates that between nine and ten percent of households in the U.S.
do not have a bank account.[2] The majority of this statistic is comprised of
low-income individuals and immigrants who have fewer financial options than
Americans.[3] The lack of financial services available to this one tenth of
households has undeniably created excessive hurdles that have essentially cut
off a large percentage of our society from economic progression. FiSCA’s
position in the financial service industry provided a unique opportunity for
NetSpend to tap into a market of these unbanked and under-banked consumers.[4] With
FiSCA representing more than 7,000 financial service centers and serving
approximately 30 million customers each year, NetSpend was afforded an
opportunity to reach customers beyond the checkout lines at Target. [5]

                In 2005,
FiSCA recognized the growing need for a low cost secure mechanism to handle
check cashing transactions. This upgrade would provide a real savings
opportunity and access to electronic commerce.[6] For millions, the outdated
method of storing cash in a coffee can and in the mattress which offered little
security, potential for growth and accessibility was no longer a suitable
alternative to a bank account.[7] What evolved was the innovative and revolutionary
NetSpend National Savings Program allowing customers to obtain a no-fee, no
minimum balance, FDIC- insured, interest-bearing savings account linked to a
reloadable debit card.[8] This program provides an opportunity for consumers to
create a savings fund for long-term financial empowerment, while finally
opening the door to electronic banking. Furthermore, the program offers these
consumers a level of security with their finances that they have never been
given before. The savings program is just one of three components that encompass
FiSCA’s Consumer Empowerment Program. The other two components include the PRBC
(Payment Reporting Builds Credit) and a Financial Education Program. The PRBC
is “consumer reporting agency and repository that enables consumers and small
businesses to build a credit file and score, based on their history of making
rent, utility, phone and other recurring bill payments” that are used to
demonstrate the consumers creditworthiness.[9] The Financial education program
is a customized instructional plan designed to satisfy the actual needs of
financial service center customers.[10]  These
three components comprise a comprehensive collection of services designed to
provide customers with financial services that otherwise may be unavailable or
unaffordable to them.[11]

                The
NetSpend National Savings Program accounts are held by Inter National Bank, in
McAllen, Texas and insured by the Federal Deposit Insurance Corporation (FDIC)
up to the $100,000 limit in aggregation of other deposits that the customer may
hold at INB.[12]  The program essentially
creates “two buckets – one for spending and one for saving.”[13] Consumers can
transfer funds conveniently between the debit card and savings account via the
internet and phone.[14] In addition, automatic, recurring transfers can be set up
to facilitate easy savings.[15] There are no minimum balance requirements and
monthly user fees.[16]  The lack of
stringent entry requirements and maintenance costs make this program not only
affordable, but possible for a whole new segment of consumers. The savings
program is offered free to all new and current NetSpend prepaid
debit-cardholders. Additionally, to combat the difficulties facing unbanked
immigrant consumers The NetSpend National Savings Program is offered both in
English and Spanish.[17] These supplementary resources assist in opening doors to
consumers that have been unable to obtain the necessary aid in understanding
the complexities of the financial services arena.

                The most
surprising aspects of the program are the interest rates. The program offers a 5
percent interest rate on debit card deposits, which is substantially greater
than the 1.46 percent average for interest-bearing checking accounts.[18] This
figure is not only competitive, but is higher than those offered by most
commercial banks for this entry-level savings account. This rate means that the
money participants do set aside will grow at a rate that surpasses that offered
by financial institutions that actively impose regulations that restrict their
services to specifically qualified individuals. This 5% annual yield provides
an incentive to consumers to save who typically are unable or do not because of
the lack of disposable income they have to spare.

                With
these above market returns it’s not surprising that customers are taking
advantage of the prepaid debit card and savings component to help them manage
their money. As of February 2009, over 104,000 NetSpend National Savings
Program accounts have been opened.[19] Those accounts encompass more than one
hundred million dollars that have been deposited into the savings account since
the program’s inception in 2005.[20] Given the strenuous economic times it is
important that low-to-moderate income customers have a non-bank savings
alternative that strives to promote fiscal responsibility and money management.
Furthermore, these individuals are being rewarded with higher than market value
interest rates.  It’s about time that all
individuals are provided equal protection and opportunity to secure, invest,
spend and save their money.

 

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1.       Press
Release, NetSpend Corporation, Revolutionary Savings Program Helps Unbanked
Americans Save for the Future (May 3, 2005) (on file with author)

2.       Press
Release, United States Treasury, Remarks by Treasury Secretary Lawrence H.
Summers Before the U.S. Conference of Mayors Building Safer, More Prosperous
American Cities (Jan. 28, 2000) (on file with author)

3.        Andrew Martin et al., Prepaid, but Not Prepared for Debit Card Fees, N.Y. TIMES, Oct. 6,
2009, available at http://www.nytimes.com/2009/10/06/your-money/06prepay.html

4.        Financial Service Centers of America, https://www.netspend.com/info/pr2005-05-03.shtml
(last visited Oct. 22, 2009).

5.        Financial Service Centers of America, http://www.fisca.org/Content/NavigationMenu/AboutFISCA/FiSCAFactSheet/FiSCAFactSheet-Background-FINAL-Revised7-1-08.pdf
(last visited Oct. 28, 2009).

6.       Press
Release, Financial Service Centers of America, Revolutionary Partnership
Provides “Virtual” Bank Accounts and No-Fee Savings Accounts to Unbanked
Americans, Empowering Them to Save for the Future (May 2, 2005) (on file with
author)

7.        Mary Wisniewski et al., Company Lets People Use Card as a Saving Vehicle, CHI. SUN-TIMES,
May 6, 2005

8.       Scott
K. McClain, Statement of Financial Service Centers of American Before the U.S.
House of Representatives Committee on Ways and Means Subcommittee on Social
Security (June 24, 2008)

9.        Press Release, NetSpend Corporation, FiSCA and
NetSpend Celebrate “America Saves Week” With $100 Million Savings Milestone
(Feb. 27, 2009)(on file with author)

10.     Press Release, NetSpend Corporation, FiSCA and
NetSpend Celebrate “America Saves Week” With $100 Million Savings Milestone
(Feb. 27, 2009)(on file with author)

11.    Press
Release, NetSpend Corporation, FiSCA and NetSpend Celebrate “America Saves
Week” With $100 Million Savings Milestone (Feb. 27, 2009)(on file with author)

12.    Press
Release, NetSpend Corporation, Revolutionary Savings Program Helps Unbanked
Americans Save for the Future (May 3, 2005) (on file with author)

13.    Mary
Wisniewski et al., Company Lets People
Use Card as a Saving Vehicle,
CHI. SUN-TIMES, May 6, 2005

14.    Mary
Wisniewski et al., Company Lets People
Use Card as a Saving Vehicle,
CHI. SUN-TIMES, May 6, 2005

15.    Mary
Wisniewski et al., Company Lets People
Use Card as a Saving Vehicle,
CHI. SUN-TIMES, May 6, 2005

16.    Jeff
Harrington, Amscot’s New Offer: Savings
Accounts,
ST. PETERSBURG TIMES, Aug. 24, 2005

17.    NetSpend,
https://www.netspend.com/account/index.m
(last visited Oct. 20, 2009)

18.    Mary
Wisniewski et al., Debit-Card Saving Rate
Beats Checking Account,
CHI. SUN-TIMES, Oct. 30, 2006

19.    Press
Release, NetSpend Corporation, FiSCA and NetSpend Celebrate “America Saves
Week” With $100 Million Savings Milestone (Feb. 27, 2009)(on file with author)

20.    Press
Release, NetSpend Corporation, FiSCA and NetSpend Celebrate “America Saves
Week” With $100 Million Savings Milestone (Feb. 27, 2009)(on file with author)

 

 

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