From a New York Times article:
When David Wegner went looking for a checking account in January, he was peppered with offers for low-end financial products, including a prepaid debit card with numerous fees, a short-term emergency loan with steep charges, money wire services and check-cashing options.
“I may as well have gone to a payday lender,” said Mr. Wegner, a 36-year-old nursing assistant in Minneapolis, who ended up choosing a local branch of U.S. Bank and avoided the payday lenders, pawnshops and check cashers lining his neighborhood. Along with a checking account, he selected a $1,000 short-term loan to help pay for his cystic fibrosis medications. The loan cost him $100 in fees, and that will escalate if it goes unpaid.
An increasing number of the nation’s large banks — U.S. Bank, Regions Financial and Wells Fargo among them — are aggressively courting low-income customers like Mr. Wegner with alternative products that can carry high fees. They are rapidly expanding these offerings partly because the products were largely untouched by recent financial regulations, and also to recoup the billions in lost income from recent limits on debit and credit card fees.
Banks say that they are offering a valuable service for customers who might not otherwise have access to traditional banking and that they can offer these products at competitive prices. The Consumer Financial Protection Bureau, a new federal agency, said it was examining whether banks ran afoul of consumer protection laws in the marketing of these products.
Financial institutions are increasingly reaching out to the unbanked and underbanked population, both as a way to increase overall revenues, but also to establish relationships that can grow over time.
Some of this population includes younger customers who are just starting out in their professional lives, and will need future banking services. For others, improving macroeconomic conditions will also provide opportunities for additional banking products and services in the future. Because of these factors, many financial institutions are keeping their options open as to how best to reach the estimated 30 million consumers who are unbanked or underbanked.
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