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Banking program may save money

Profile image for By Peggy Heinkel-Wolfe / Staff Writer
By Peggy Heinkel-Wolfe / Staff Writer

Outreach effort aimed at reducing residents’ financial expenses

Beginning this fall, area bankers hope to open 1,000 new accounts through a community outreach program aimed at reaching new residents and others who are “underbanked.”

Bob Dickson, executive vice president of Northstar Bank, is heading the local launch of BankOn, a new United Way of Denton County program that seeks to work with residents who don’t have a bank account.

New residents, in particular, often use more expensive services to manage their financial affairs, such as purchasing money orders, paying wire fees and using check-cashing services, because they aren’t comfortable with the banking system, Dickson said.

Most area banks are participating in Denton’s new program, and some of those have branches participating in the program in other cities and states.

BankOn was championed by former California Gov. Arnold Schwarzenegger and adopted by several major California cities that saw more than 110,000 accounts opened in 2009, according to Eloy Villafranca of the Federal Deposit Insurance Corporation in Dallas, who helped with the program in California.

In Denton, the program started partly in response to a proliferation of payday and title lenders in the city. Some local charities had found they were helping increasing numbers of people in a financial crisis that was triggered in part by a high-cost, short-term loan.

Local bankers cataloged the products they had available and learned that all of them had the needed low-cost banking services already available, Dickson said. However, they could do more to find the customers most likely to use them.

Banks are required by the Community Reinvestment Act to meet borrowing needs throughout a community, including the middle- and low-income populations. When banks are reviewed by banking regulators, they receive a compliance score under the act.

Dickson said that the requirements of the act play a role in programs such as BankOn but that it’s also good business.

“There is an aspect of the community that has been good to the bank, and we haven’t been serving them that well,” he said.

BankOn Denton has set a goal of 1,000 new accounts each year for the next five years, Dickson said.

Each one of those new accounts can represent a lot of savings for individuals and families who make the change, Villafranca said.

For example, a wage earner who pays $5 to cash a weekly paycheck spends approximately $240 a year on the service. Some BankOn programs have estimated that in that scenario alone they have been able to save a customer more than $160 a year, since they would pay less than $80 in banking fees for the same level of service, according to Villafranca.

If that wage earner pays $10 to $15 per money order to pay bills, the person’s spending on alternative financial services can increase quickly, Dickson said.

Banks aren’t targeting that sector, Dickson said, but he was confident that their services cost less and could help Denton consumers save a significant amount of money.

Officials with the United Way of Denton County hope to launch BankOn, which includes financial education programs and other help for those who need a second chance at banking, in September.

PEGGY HEINKEL-WOLFE can be reached at 940-566-6881 and via Twitter @phwolfeDRC.