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February 20, 2024

Federal Agencies Must Re-Imagine How They Approach Financial Inclusion

Better Markets filed a comment letter to the Treasury Department on their Request for Information (RFI) regarding the development of a National Strategy for financial inclusion.

Why It Matters. Despite the efforts of the Treasury Department and more than 20 other federal agencies, financial inclusion remains an urgent problem that affects all Americans. The Treasury’s Financial Literacy and Education Commission (“FLEC”) was established in 2003 and was originally directed to develop a national strategy on financial education, with the goal of promoting greater financial literacy thereby improving access to the financial system. Yet decades later, and a significant number of resources already spent, wealth inequities persist. Today, the top 1% of income earners hold 23% of the total wealth, more than the 20% they owned in 2003, with the bottom 40% only owning 7.7%, less than the share they held in 2023 when the Treasury’s efforts first began. The wealth gap is even wider when measured by race. In 2023, Black Americans held only 3% of total wealth and Hispanic Americans only held 2%. Furthermore, according to the Federal Deposit Insurance Corporation’s (“FDIC”) 2021 National Survey of Unbanked and Underbanked Households, 11% of Black households and 9% of Hispanic households were unbanked in comparison to only 2% of White households. This should come as no surprise, given the hostility and unfair treatment that minorities routinely encounter at banks.

What We Said. We fully support the implementation of a new national strategy to tackle the persistent racial inequity in the financial system, but more urgency and action is needed. Specifically, we urged Treasury to dramatically increase and improve the operation of Minority Deposit Institutions (MDIs), require the use of alternative methodologies to expand access to credit for underserved communities, aggressively strengthen oversight of unlawful conduct by banks toward minorities, further diversity among both public and private leadership staff, and immediately enhance federal data collection efforts.

Bottom Line. Previous efforts to address the persistent gap in financial inclusion for low- and middle-income communities have proven ineffective. Federal agencies must re-imagine how they approach this critical issue, and a new national strategy is a step in the right direction. We urge Treasury to consider our comments in their implementation efforts.

You can find the full comment letter here.


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