Lifeline Banking Coming to Fore: Commercial Banks to Get a Clear Message from Washington

Article excerpt

WASHINGTON -- Commercial banks soon will be getting a clear message from Washington -- from a federal regulatory agency, from Congress, and even from their own major trade group -- that lifeline banking services should be a standard part of their product offerings to the public.

Most recently, the Office of the Comptroller of the Currency said the federak agency plans to encourage banks to offer lifeline services. And the American Bankers Association is busy preparing a message to be delivered to its members this summer urging all commercial banks to voluntary provide such products.

Lifeline banking -- whereby a bank provides a low- or no-cost checking service to low-income customers -- has gained much attention but little broad support in recent years. Except for a flurry of bills introduced in Congress by liberal representative advocating such services by banks, there has been little substantive movement on the matter.

The issue is controversial and has divided both Washington and the banking industry.

Some argue that requiring banks to provide a low-cost checking product for the poor is bad business because it creates an unprofitable service which must then be subsidized by higher fees on other services and suggest that banking must operate as a utility in making its products available to all.

Others argue that a simple checking account can be offered at low cost without banks incurring losses, that broad public access to the payments system is good public policy, and that banks have been misled in recent efforts to cater new services to the wealthier public.

The tide here may be turning towards strong advocacy for voluntary offerings by banks of lifeline services. On Thursday, Michael Mancusi, senior deputy comptroller in the Office of the comptroller of the Currency, told a retail banking conference that his agency "will encourage national banks" to join those which already have developed such services. …