Sen. Daniel K. Akaka, D-Hawai‘i, introduced legislation recently to improve access to banks and alternatives to payday loans.
The bill is cosponsored by Sens. Charles E. Schumer, D-New York; Joseph Lieberman, ID-Conn.; and Daniel K. Inouye, D-Hawai‘i.
It is endorsed by The National Association of Federal Credit Unions, the Hawaii Credit Union League, the Council for Native Hawaiian Advancement, and the Hawaii Alliance for Community-Based Economic Development.
“About 45 million Americans do not have a bank or credit union account, denying them access to basic financial services,” Akaka said. “With these federal resources, mainstream institutions will be better able to bank the unbanked. This bill will also encourage banks and credit unions to provide an affordable alternative to predatory payday loans which typically carry exploitative fees.”
The bill creates two grant programs within the Department of the Treasury. The first authorizes grants intended to help low- and moderate- income unbanked individuals establish bank or credit union accounts, providing consumers with alternatives to rapid refund loans, check cashing services, and lower cost remittances. In addition, bank and credit union accounts provide access to savings and affordable borrowing opportunities.
The second provides consumers with a lower-cost, short-term alternative to payday loans by encouraging the development of affordable payday loan alternatives at mainstream financial institutions. Consumers who apply for these loans would be provided with financial literacy and educational opportunities. Loans extended to consumers under the grant would be subject to the annual percentage rate promulgated by the National Credit Union Administration’s Loan Interest Rates, currently capped at an annual percentage rate of 18 percent.