With about 300,000 unbanked residents in Los Angeles the city is the third least banked market in America. In an effort to enourage residents in low-income communities to open up bank accounts the city has begun the Bank on L.A. initiative which is meant to provide banking services in the low-income areas of Los Angeles.
To determine which areas were in the most need of banking services or lacked the presence of banks, a survey of unbanked and under-banked residents in Los Angeles, conducted by Emerging Markets, Inc., determined that residents in the areas of Westlake, Boyle Heights, Pacoima and Vernon Central, used cash-checking services more frequently than they did banks. Reasons behind this trend included the absence of banks in these areas, a large immigrant population and the frequent usage of credit cards
Rudy Espinoza, associate at Emerging Markets Inc., said some potential customers that are newly arrived to the country may have had a negative experience with banks in their home country and therefore are wary to trust any banks here in the United States. Another reason behind the high usage of cash checking services by newly arrived immigrants is because they may be undocumented.
“People that are undocumented might not feel comfortable going into a bank and filling out the paperwork and have the feeling like their being tracked,” Espinoza said. “Through this campaign though we are saying that if you do have an official foreign ID you could open up a bank account in some cases.”
Cesar Trelles of Union Bank of California said that not having the proper documentation at times could be a problem for those immigrants who would like to start a bank account.
“In the case of immigrants it’s documentation sometimes,” Trelles said. “The issue in getting a driver’s license or an ID or a social security number may be a problem. But what many need to know is that immigrants can also open an account with Matricula Consular or Consular IDs from other countries and some banks will recognize those as valid and people with those forms of ID can open a bank account.”
Educating the community and making banks more accessible is also part of the campaign. Espinoza said the campaign is encouraging banks to work with non-profit organizations within these low-income communities to educate people and get the word out about bank accounts. Non-profit organizations involved with the initiative include East L.A. Community Corporation, Community Financial Resource Center, Pacific Asian Consortium in Employment, Valley Economic Development Corporation and United Way of Greater Los Angeles.
“We have begun training lead agencies to raise awareness about the benefits of banking and getting them to connect and refer them to local branches,” Espinosa said. “We are trying to get the word out through word of mouth and tell people that no matter what’s going on the FDIC insures your deposits.”
Bank of America customer Fidel Felix said before he opened up a bank account he frequently used cash checking services but said he got fed up with paying $5 each time he cashed his checks.
“I cashed the checks with them because I needed the money right then,” Felix said. “At the time, there was only so much you could take out from the ATM, but now that you can take out more than $300 and that is very helpful. Plus with the way the economy is going five dollars to cash a check is just too much money right now.”
But Joshua Thompson, who does not have a bank account, said he does not think the fee that check cashers ask for is much different than that of a bank.
“If you need to cash your check and you don’t have a bank account, banks will ask you to pay a fee,” Thompson said. “These cash check services do the same thing.”
The Bank on L.A. initiative has begun their initiative in Westlake, Pacoima, Boyle Heights and Vernon Central. If successful, the initiative will move forward toward other low-income areas of the city.
“There’s an urgency to re-stabilize what’s going on,” Espinoza said. “Financial institutions are really important to our communities and are often times the center of the community. They are the ones that often not only hold people’s money but they lend money, they help them in the development of any neighborhood.”