Financial Industry Told to Share Costs of Lifeline Banking

By Garsson, Robert M.; Sudo, Philip T. | American Banker, October 30, 1984 | Go to article overview

Financial Industry Told to Share Costs of Lifeline Banking


Garsson, Robert M., Sudo, Philip T., American Banker


Banks, thrifts, brokers, and other financial services companies that provide transaction services should share the cost of providing the poor with access to the payments system, Chase Manhattan Bank's top consumer banker says.

"If we reason that banking services are a necessity, like food, we should parallel government's response to that problem, which is food stamps," said Frederick S. Hammer, executive vice president for consumer banking at Chase.

"Since supermarkets aren't required to give food away, neither should banks be required to give banking services away, but merely to play the distributor as supermarkets do," Mr. Hammer added.

Mr. Hammer, who commented on "lifeline banking" in a speech before the Consumer Banking Conference of the New York State Bankers Association, conceded that his solution "flies in the face of political realities, since it requires that government not only create the solution, but pay for it as well."

Because the federal government is not likely to finance lifeline services for those who cannot afford them, Mr. Hammer added, all financial services companies that are participants in the payments systems should share the cost.

Nonbanks, which "benefit handsomely" from the payments system, Mr. Hammer said, could provide their own lifeline services, join a consortium of lifeline providers, or pay other providers a share of their costs. Necessary Services

Lifeline banking assumes that payments system services are so important that everyone must be guaranteed access to them, even if they cannot afford to pay. As banks have begun raising service charges recently, some states have begun to look at lifeline banking bills.

Most recently, Massachusetts enacted a law prohibiting state-chartered banks from levying fees on persons under 18 or over 65.

In his speech Monday in Rye, N.Y., -- a text of which was released in New York by Chase -- Mr. Hammer contended that bankers, as responsible members of the business community, must address "the possibility that explicit pricing may bar certain customers from access to the payments system. …

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