A new report issued by the U.S. Congress Joint Economic Committee (JEC) found that roughly 20% of U.S. adults are either unbanked or underbanked, meaning they lack access to a bank account or rely on alternative financial services.

Further, the report, entitled “People of Color and Low-Income Communities Are Disproportionately Harmed by Banking and Financial Exclusion”, said that a disproportionate share of that 20% comprises lower-income earners or people of color.

U.S. Rep. Don Beyer (D-VA), Chairman of the Joint Economic Committee, commented in the report publication that, “Access to banking and financial services are vital to actively participate in our economy. Yet too many workers, consumers and entrepreneurs from low-income communities and communities of color are being underserved by our financial system. Barriers to full financial inclusion—like banking deserts and predatory lending practices—harm not only the marginalized communities that are directly affected, they also cause economy-wide losses by exacerbating racial and wealth inequality. The body of evidence shows that ensuring all workers and families can fully participate in the economy expands economic activity and ensures economic growth is stronger, stable and more broad-based”.

Among the report’s findings:

• Black and Hispanic Americans are more than twice as likely as white Americans to be unbanked or underbanked, and families at the bottom of the income distribution are more than six times as likely as families at the top to be among the unbanked or underbanked.

• In many Black and Hispanic communities, check cashers and payday lenders are more common than bank branches and offer more accessible hours, and prior to the coronavirus pandemic, financially underserved, unbanked and underbanked Americans spent an estimated $189 billion in fees and interest on financial products. 

• Black and Hispanic households are more likely than white households to be denied or not receive as much credit as requested when applying, and the racial gap in credit access widens for consumers with family income greater than $100,000.

“Low-income communities and communities of color have been burned over and over by our financial system, so it’s no wonder they don’t trust banks and face huge barriers to opening a bank account, cashing a paycheck, and applying for a loan. As we work to create a more inclusive and worker-focused economy, we must eliminate discrimination in our banking system, protect Americans from financial predators, and expand access to quality financial services for everyone”, said Senator Brown, Chairman of the Senate Banking, Housing, and Urban Affairs Committee to report publication.

“The first sentence of this report, ‘access to banking and financial services is essential to economic mobility and opportunity for all Americans’ says it all,” said Darrick Hamilton, PhD., Henry Cohen University Professor of Economics and Urban Policy, and Founding Director of the Institute on Race, Power and Political Economy at The New School. “With America’s dramatic and persistent wealth divide and nearly 40 percent of Black Americans unbanked or underbanked, decentralized private finance and fintech have never been enough. This report proposes direct actions in the form of public banking, alternative credit assessment, and Baby Bonds or other down payment assistance to ensure universal and affordable access to capital, credit and account services. I applaud Chair Beyer and members of the Joint Economic Committee for their clarity and blueprint forward”.

According to the official publication of the report, Saqib Bhatti, Co-Executive Director of the Action Center on Race and the Economy said, “Big banks have a long history of preying on communities of color with discriminatory and extractive practices. In the past, they have targeted Black and brown communities with racist exclusion through practices like redlining and the creation of banking deserts. Now we are seeing a trend towards predatory inclusion, where Wall Street is targeting the same communities with risky and unregulated fintech products. We need lawmakers to hold banks accountable and compel them to provide high-quality, safe, and affordable financial services to all people”.