Credit Union Journal

May 14, 2007 


The Woodstock Institute has issued a "Reinvestment
Alert" called "Measuring the Provision of Banking Services For The
Underbanked: Recommendations for a More Effective Community Reinvestment Act
Service Test."


A research think tank focusing on community economic
development, evaluated how the largest banks deliver financial services to
communities throughout the Chicago
area, examining how federal examiners evaluate the distribution of bank
branches and the quality and relative affordability of basic financial
services, such as checking accounts.


said it found "glaring omissions, inconsistent evaluation methods and a
lack of performance-driven measurements."


"The implementation of the service test needs major
improvements before the test can capture the reality of an institution's
delivery of banking services to lower-income people and communities," the
institute said, suggesting the following changes would help to resolve the


1. Branch distribution should be measured in a consistent
manner against the percent of households living in low-and moderate income
neighborhoods in the bank's assessment area.


2. Standardized data on new and existing retail checking
and savings accounts should be collected and analyzed by regulatory agencies.
These data should include information on account holder census tract, year
opened, and average annual balance.


3. Since many lower-income people do not live in
lower-income zip codes, examiners should also conduct sample surveys of the
income and race/ethnic distribution of an institution's retail customers to
determine the percent of those customers that are lower-income and/or members
of minority groups.


4. Examiners should institute a systematic analysis of
the full cost of retail products that will allow for comparisons among


5. Examiners should also construct and report a
systematic analysis with quantitative data of the number and income/race of
customers who use alternative ways of accessing financial products telephone
and internet banking, smart ATMs with such features as automated money orders,
and wire transfers to other countries.


6. Banks should report data on the services they provide
to unbanked households and their success in using those services to recruit new


7. Examiners should carefully examine banks'
relationships with high cost fringe lenders and determine whether those fringe
lenders' disclosure activities (as opposed to just disclosure notices) costs,
terms and conditions have a deceptive impact on their customers.


8. Banks should be required to report quantitative
details of their community development services including the number of people
who attend financial literacy events and the number of new accounts that result
from such events.


9. Large banks inundate customers with debt products
including credit card solicitations and passive checks. Banks should be
penalized if these offerings are likely to have a deceptive impact on the
average customer.


10. Banks should also be examined to see whether they effectively
market savings products to lower-income consumers.