Aims to steer consumers away from predatory lenders


May 22, 2019

SPRINGFIELD — Illinois Comptroller Susana A. Mendoza’s bill to give more Illinoisans access to banking services was passed unanimously by the House of Representatives today and will be sent to the governor’s desk.

Senate Bill 1332 would expand access to banking in Illinois by using Bank On, a proven, national model that connects consumers with reliable, affordable and equitable financial products.

The measure would establish a Bank On program in the Office of the Comptroller. Under this program, the comptroller would partner with governmental entities, representatives of the community and financial institutions to certify financial products for low-income customers and promote the program throughout Illinois

“A bank account is the first step to financial independence. It means freedom from crippling check-cashing fees, the opportunity to save for the future, and the ability to secure a mortgage or small business loan at a fair interest rate,” Mendoza said. “I look forward to the governor signing this measure so that we can change the lives of consumers and give them access to affordable, dependable banking services through the Bank On program.”

Bank On programs certify products that provide fair financial service options, such as no maintenance fees, low minimum deposits, low or no overdraft fees and alternative IDs. They also provide secured personal loans — low-risk lending that allows consumers with low credit scores to begin rebuilding their credit.

Rep. Debbie Meyers-Martin, D-Olympia Fields, sponsored the legislation in the House. She said families without bank accounts and other basic financial services are continually forced to shell out money to pay extremely high fees and interest rates from predatory service providers.

“For thousands of Illinois families, this means a seemingly perpetual cycle of poor credit, lack of access to affordable loans and thousands taken out of their paycheck every year,” she said. “In today’s economy, families need the resources that modern banking provides to survive and build a better life for their families. Bank On Illinois is a proactive approach to connect people with affordable financial services so they can escape exorbitant fees and provide the financial stability they need to build wealth for themselves and our communities.”

More than a fifth of Illinois households conduct their financial business outside of the traditional banking system, according to a 2015 report from the Federal Deposit Insurance Corporation (FDIC). Unbanked individuals often take their financial business to predatory lenders such as auto title lenders, cash checkers, payday lenders and pawnshops, which charge exorbitant fees for basic services, like check cashing, and high interest rates on lending.  

The Brookings Institute found that, on average, a full-time worker who doesn’t use traditional retail banking products is charged roughly $40,000 in lifetime fees. Low-income and immigrant consumers are more vulnerable to being targeted with long-term fees, in exchange for low-information lending documentation.

Lack of access to traditional banking is a problem in both rural and urban areas all over the state. Cook County has a combined unbanked and underbanked rate of nearly 30 percent. Macon County in central Illinois and Alexander County at the southern tip of the state both have unbanked rates of roughly 35 percent.

The Senate approved the Bank On proposal without opposition on April 4. Sen. Cristina Castro, D-Elgin, is the sponsor of the legislation in that chamber.