1 To: Committee on Consumer Affairs, Chairperson Daniel R. Garodnick and the Committee on Immigration, Chairperson Daniel Dromm
CC: Charles Barron, Leroy. G. Comrie, Jr., Mathieu Eugene, Julissa Ferreras, Karen Koslowitz, G. Oliver Koppell, Michael C. Nelson, Ydanis A. Rodriguez and Jumaane D. Williams
From: The Financial Clinic by Haidee Cabusora, Director of Policy & Advocacy
Re: Better Banking for New York City Immigrants
Date: June 14, 2012
The written testimony is submitted by Haidee Cabusora, Director of Policy & Advocacy, of The Financial Clinic (the “Clinic”). It accompanies her oral testimony before The New York City Council regarding challenges that immigrants in New York City face when accessing mainstream financial services.
I. The Financial Clinic: Background
For the past five years, our non-profit financial development organization has been serving the working poor of New York City: families that earn “too much” for public assistance but “too little” to be self-sufficient. We offer comprehensive financial development services to build families’ and individuals’ financial security. By creating stability for customers through these services, and providing expertise to our partners, the Clinic aims to shape policy and lead the field of financial development.
The Clinic accomplishes its mission via a combination of services that include: immediate access to tax preparation and financial education workshops; “on-ramp” services around budgeting; improving banking engagement; legal assistance with bankruptcy, foreclosure, and consumer law; and long-term one-on-one financial coaching aimed at identifying goals as well as creating and maintaining the financial habits necessary to achieve those goals. The Clinic’s vision is that of systemic change. By leveraging our on-the-ground lessons, we seek to create system-level solutions that impact the working poor at scale. Collecting data, surfacing issues, and
researching policy options provides us with opportunities to highlight issues that prevent working poor New Yorkers from achieving financial security.
Our financial coaches work in 24 sites across New York City, including communities with substantial immigrant populations like East New York (Brooklyn). One financial coach is an Internal Revenue Service Certified Acceptance Agent who assists (undocumented) immigrant customers apply for Individual Taxpayer Identification Numbers (ITIN) each tax season so that they may file their tax returns. An estimated one-third of our annual 4,500 served families are immigrants.
II. Relationship Between Financial Security & Mainstream Banking Services
In financial coaching sessions, Clinic staff stress the relationship between financial security and regular use of mainstream banking services. Our coaches have helped hundreds of customers
2 open up bank accounts, leading to more than $20,000 saved by reducing the cost of banking fees and reducing the use of alternative financial services, including check cashers, payday lenders, and pawn shops.
With 54 percent of our customers making less than $10,000 per year, our customers need quick, reliable ways to access their money like direct deposit of pay checks and benefits. Bank accounts keep our customers’ money safe from theft, fire, and other catastrophes. If they bank online, and are comfortable using ATMs, having a bank account also gives customers easy access to their money outside of branch hours, and the ability to move it around to pay bills. For those workers who receive cash wages and have no proof of their income, having a bank account in which they deposit their earnings may help them prove their income in order to obtain the Earned Income Tax Credit, unemployment benefits, or win a case for unpaid wages. Most importantly, obtaining a bank account helps customers develop relationships with
financial institutions that offer other products ( i.e. including secured credit cards, home equity lines of credit, and mortgages) that may help build customers’ financial security and create a trajectory toward financial mobility.
III. Common Misconceptions About Documents Required to Open Accounts
One of the most common problems involves the bank’s customer identification procedure. The U.S. Department of Treasury requires every financial institution to develop and adhere to a customer identification program (CIP). At minimum, a bank’s CIP must collect proof of identity, a mailing address, and a physical residential address from all customers who want to open a bank account. 31 CFR 103.121. These provisions, passed as part of the USA PATRIOT ACT, were implemented to prevent terrorists from holding contraband funds in the United States.
Unfortunately, the practical application of these rules also thwarts immigrants from opening bank accounts. Many banks, including those within in neighborhoods with significant
immigrant populations, tell customers that they need a social security number and/or a United States government identification in order to open a bank account. This is misleading and unnecessary. Federal regulation only requires that banks confirm the identity of the customer opening an account. There is no prohibition against opening bank accounts for customers with foreign, rather than U.S. IDs, or for those without social security numbers. In other words, undocumented New Yorkers should, under federal law, be permitted to obtain bank accounts.
Proposed Solution 1: Develop a city-wide campaign highlighting to the public what documents
they need to open up bank accounts. Encourage customers who have been turned down to file a complaint with the Department of Consumer Affairs.
IV. Under-use of Lifeline Accounts
The Clinic educates all of its customers about the minimum requirements needed to open a bank account. We also encourage first-time account holders to learn how to maximize the benefits of a bank account by opening one of New York’s low-cost lifeline accounts. The
3 Omnibus Consumer Protection and Banking Deregulation Act, enacted in January 1995, requires state-chartered banks in New York to offer low-cost checking accounts. Lifeline accounts can be opened with as little as $25, have no minimum balance requirement, carry a maximum
maintenance fee of $3 per month, and must allow at least eight monthly transactions (New York State Banking Department 1996b).
But even those customers who know that they do not need a social security number or U.S. citizenship to open a bank account are prevented from doing so by unknowing, and sometimes poorly trained front line staff who don’t know the proper CIP procedures, and who have never heard of a lifeline account, despite the fact that New York law requires all financial institutions to offer the product.
Proposed Solution 2: City Council and the Mayor’s office should collaborate to train banks,
credit unions, and other financial institutions about CIP requirements and lifeline accounts. City Council may also consider asking each bank branch to designate one staff member as a
community liaison and “expert” on immigrant questions and concerns. Banks that participate in this “immigrant friendly” program, would receive a distinction that could be placed in their windows, signaling to the community that they are “immigrant friendly” and have completed a training to prove it.
Proposed Solution 3: Create a standard “Card” or “Voucher” checklist that lists the bare
requirements needed to open a bank account and that includes specific information about the lifeline account and other low-cost products that are available to consumers. The card could be taken into a bank branch and given to an unknowing teller.
V. Bank Deserts
It is well known that many immigrant and low-income communities in New York City are virtual bank deserts. Instead of a credit union or regional block serving the neighborhood,
checkcashers and pawnshops line the street. Each year, New York residents, nearly 40% of whom are immigrants, spend nearly $20 million on check-cashing services alone! New York City Council is in a prime position to change this disturbing trend.
Proposed Solution 4: City Council should offer incentives to financial institutions to provide
services in existing businesses in immigrant and low-income neighborhoods. In Brazil, for example, banks offer limited services in non-traditional settings (“bank correspondents”), such as neighborhood grocery stores. The benefit to the community is immediate. The bank is assured a dedicated clientele that already frequents a local business, and the customers receive those core banking services linked to reliable, mainstream institutions. Since 2000, the number of municipalities in Brazil without banking services has declined dramatically from 2200 to 30. By literally meeting the customer where they are, this innovative model has transformed bank deserts into banked communities.
4 VI. Misconception About The “Safety” of Bank-Deposited Funds
Commonly held myths also prevent immigrants from opening up and using mainstream bank accounts. One of the most popular myth among immigrants is that banks are untrustworthy and will lose customers’ money. Some immigrants may not know that the FDIC insures their funds up to $250,000.
Undocumented immigrants who use our free tax preparation services have also expressed concern that a bank account may be tracked by immigration officials. While both immigration and the treasury do track wire transfers in excess of $10,000, consumers’ money in bank accounts is not otherwise tracked. At the end of the year, customers with savings accounts may receive a tax form for the interest earned on their savings deposits. But even an undocumented person would be able to file taxes on that income without immigration consequences.
Proposed Solution 5: City Council should focus advocacy efforts on educating the greater public
about the role and reach of financial institutions/ banks. Further, we hope City Council will back a measure requiring all financial institutions to prominently display information about each borough’s Financial Empowerment Center. By referring skeptical or unprepared customers to the Financial Empowerment Centers, New York City’s financial institutions can help otherwise underserved City residents access the financial information, advice, and services that they need.
VII. Special Considerations For Immigrants Who Are Domestic Violence Survivors
Domestic violence survivors who are temporarily living in shelters are especially at-risk because of the permanent residential address requirement to open a bank account. Through a United Way of New York City initiative, Ready, Set, GreenLight, the Clinic has worked with all of the domestic violence shelters in New York City. Many shelter residents are undocumented or documented immigrants who are fleeing horrific abuse and are trying to rebuild their lives. Obtaining a bank account is an integral step in the healing and rebuilding process that cannot and should not be compromised. Without a bank account, immigrants of all financial
backgrounds struggle to build or sustain financial security.
Customer Story: Aviva- an undocumented immigrant living in a domestic violence shelter.
After working with one of our coaches at her domestic violence shelter, Aviva decided she wanted to open up a bank account to safeguard her money from theft at the shelter. She had been saving up for a security deposit for her own apartment so that after she left her shelter, she wouldn’t have to return to her abuser. But when she went to a local bank to open a checking and savings account, a teller told her she needed an ITIN in order to complete the transaction. Aviva had never filed her taxes and did not have an ITIN. She tried to explain her situation to the teller, but it was no use. She left the bank without an account and with little confidence that she would successfully transition to living on her own, away from her abuser.
5 Aviva is not alone. By preventing Aviva from obtaining an account, her local bank jeopardized her safety and her financial future. We must ensure that a customer like Aviva who has all of the qualifications to open a bank account is not turned away again.
Proposed Solution 6: We encourage City Council to work with decision-makers in Albany to
create an exception to the physical address requirement for domestic violence survivors who want to open bank accounts. As long as the survivor can prove who she is, we do not believe there is any need to provide a physical address. If a complete exception to this rule is not feasible, we hope City Council will work with state leaders to permit survivors to use the address provided to them through the forthcoming Address Confidentiality Program (“ACP”) in order to obtain a bank account.
In 2009, the Financial Crime Enforcement Network, a bureau of the Treasury Department charged with addressing financial crimes, issued guidance regarding the use of ACPs in acquiring bank accounts. The guidance explicitly permits financial institutions to accept addresses from an ACP as part of verifying a customer’s identity when obtaining a bank account. As the memo reasons, the Financial Crime Enforcement Network “understands the need to protect [domestic violence] victim anonymity” and is empowered to authorize exceptions to the CIP provisions implemented by the USA PATRIOT Act. In the interests of justice and in compliance with the ACP programs, financial institutions “should collect the street address of the ACP sponsoring agency for the purposes of meeting the CIP requirement.” VIII. Conclusion
Taking money out of an ATM, paying bills online, and having a safe place to keep money are perks of a bank account that many of us take for granted. But for thousands of immigrant New Yorkers, these mundane benefits remain out of reach. Turned away by unknowing staff and often stymied by misunderstood federal regulation, New York’s immigrant communities are forced out of the mainstream banking community and into fringe services. They deserve better. They need more mainstream financial institutions in their neighborhoods so that they can build savings to send their children to school, help their families back home, and maybe one day open their own business. New York City Immigrants need banks and credit unions that will help them build their credit so that they may qualify for a home loan or a mortgage in the future. These New Yorkers need your help. And we hope with the assistance of The Financial Clinic and our peer organizations gathered here today, City Council will rise to the occasion . Submitted by,
Haidee Cabusora
