More and more specialty departments--not only in supermarkets, but in convenience stores and liquor stores--as well as a new proliferation of storefront "check cashing" and "money order" services, are taking over the traditional role of the neighborhood bank.
Increasingly, consumer activists complain, the Reagan Administration's deregulation of the banking industry is driving low-income Americans to alternative financial "institutions," to over-the-counter services where the cost per transaction is relatively high and where the customer has none of the safety and flexibility of services available to the average bank customer.
"For the average low-income American," Robert J. Hobbs, staff attorney for the National Consumer Law Center, said during a panel discussion of bank deregulation at the recently concluded 19th Annual Consumer Assembly in Washington, D.C, "there is no security--he has no choice but to carry cash and to pay in cash or to buy money orders somewhere. Last year alone, 77 privately owned and unregulated money order companies in seven states went bankrupt. And, with them, went the money of thousands of people who immediately faced eviction and the turn-off of utilities."
While, as Rep. Mary Rose Oakar (D-Ohio) told another meeting of delegates to the same Consumer Federation of America conclave, deregulation "has created a wide range of high-interest, low-fee bank accounts for people with money . . . it is rapidly removing low-income people from the system."
And it was a theme picked up by Hobbs, who accused the American banking industry of embarking on a policy of "de-marketing--catering to the upscale consumer with attractive services and fees, but increasing their charges and restricting their services to the low-income customer.
"Even among whites," he added, "only about 60% are banking customers today . . . the percentage among minorities is fractional . . . and only at an annual income of about $15,000 do customers start coming into the banking system.
"And everyone in the last five to six years," Hobbs said, "has a horror story of some kind about today's banking service."
Also attacking the industry's pricing of its banking services was Kenneth McEldowney, executive director of Consumer Action-San Francisco, who accused banks in the 1970s of using the soaring cost of money as its rationale for raising their own costs, but who have remained strangely silent on the subject as money costs have tumbled and as bank fees have stayed high.
"The truth of the matter," McEldowney said, "is that a lot of individual banks don't have firm data on what their costs really are. A recent study indicates that only about 40% of the banks using automatic teller machines have ever bothered to run a study as to what their savings--if any--have been as a result of the machines."
Thus, he said, banking fees range all over the landscape with no relation to what the service (returned checks, processing an active checking or savings account and so forth) actually costs the bank.
"And when you ask a banker why service costs continue to rise even though there's been a significant drop in the cost of money," McEldowney said, "he simply says that 'it's too complicated to try to draw such comparisons.' "
A spokesman for the American Bankers Assn., speaking at the same panel discussion, conceded that while bank-service fees do, indeed, vary widely, the focus of publicity falls on those relatively few banks at the high end of the range and ignores the vast majority of banks.
"The banking industry," Fritz Elmendorf, assistant manager of public relations for the Washington office of the ABA, said, "has received a lot of criticism because some banks have charged as much as $30 for a bounced check. However, a quick check with a recent survey conducted by Sheshunoff & Co. shows that less than one in 300 banks charged $25 or more for a bounced check. The average is about $10.
"However," he continued, "the survey also shows that one in 20 banks still offers free checking accounts. I'm not aware of any widespread publicity surrounding this statistic, but we're talking about roughly 750 banks in this country with completely free checking and only about 45 banks with high bounced-check fees."
And, for checking accounts generally, he continued, "the average monthly service charge is about $3--and I'm not talking about the latest development in checking--the so-called no-frills or basic checking account--which is even less. What other valuable service is available for a dime a day?"
And, in rebuttal to McEldowney's charge that banks don't really know what their services cost, Elmendorf said a 1983 study found "that the estimated average personal checking-account balance needed to generate sufficient income to banks to just cover the costs of offering these accounts as $1,380 for an interest-bearing account and $692 for a non-interest-bearing account."