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1 1 (December 22, 2006)

handle is hein.crs/crsaiwv0001 and id is 1 raw text is: Order Code RS22146 Updated December 22, 2006 Expanded Access to Financial Services Act Pauline Smale Economic Analyst Government and Finance Division Summary The Financial Services Regulatory Relief Act of 2006 (P.L. 109-351) includes provisions that permit federally chartered credit unions to offer nonmember individuals access to a defined set of financial services and products. These provisions were originally passed by the House in a separate bill, H.R. 749 (the Expanded Access to Financial Services Act), on April 27, 2005. The intent of this legislation is to attract unbanked individuals (consumers that do not have an account with a depository financial institution) into the financial mainstream and to better serve low-income communities. To be eligible, the consumer must meet the criteria for membership in the credit union. The credit union could offer money orders, check cashing, and money transfer services. There was little public opposition to the legislation. This report provides background on the arguments offered in support of improved access, credit unions, and the legislation. This report will not be updated. Background Expanding and facilitating access to banking services and products for unserved or underserved communities has been an ongoing policy initiative for depository financial institutions, federal regulators, and Congress for the last two decades. Financial deregulation and technology have combined to create a wide range of financial services, products, and delivery systems for banks and thrifts. Nevertheless, a significant number of U.S. families do not hold a checking or savings account at a federally insured financial institution. Studies vary, but it is generally estimated that about 10 million U.S. households do not own a bank account.1 The costs associated with maintaining accounts, dislike of banking institutions, and the convenience offered by alternative service providers are among the more frequently given reasons for this. Reliance on alternative nonbank service providers (for example check-cashing outlets) can be expensive. In addition, individuals without an account relationship often forgo an opportunity to learn about and take advantage of other financial services and products offered by insured 1 Michael S. Barr, Banking the Poor, a working paper prepared for the Brookings Institution Center on Urban and Metropolitan Policy, July 2003, p.8.

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