Commentary: A Poor People's Campaign is needed today

A Poor People's Campaign filled the final year of the Rev. Martin Luther King Jr.'s life as he tried to draw attention to families in despair.

What's sad is that same all-out effort is needed today. A Federal Deposit Insurance Corp. survey found that the recession added 1.3 million households to the rolls of the "unbanked." They number 30 million now. These are people with little or no access to basic banking services.

Of those people who stopped having bank accounts in 2008, more than 31 percent said they closed them because of high minimum balance requirements, service charges or overdraft fees. About 34 percent said they didn’t have sufficient funds to need an account.

The survey said more than a quarter of U.S. households have no bank accounts or they use check-cashing services, payday loans and other alternatives. Poor people, minorities and immigrants are the most vulnerable.

The 2009 book "Insufficient Funds" said the costly alternatives flooded U.S. urban areas like Hurricane Katrina.

"The number of check-cashing outlets, pawnbrokers and rent-to-own businesses increased from 25,000 to 35,000 between 1995 and 1999," the book said. "Meanwhile the number of payday lenders grew nationwide from virtually no establishments in 1994 to 9,000 in 2000."

As banks and other conventional services left, the costly alternative services rushed in. "Insufficient Funds" said the unbanked "are economically more isolated and have worse job prospects than those with bank accounts."

The condition leaves individuals stranded in poverty.

The cash economy in which they live makes it tough to save money for calamities, health care, home- or business-ownership, college for kids or retirement. People are exposed with little leeway to overcome the worst of what can happen.

We need to realize as we celebrate what would’ve been King's 81st birthday today that the conditions of the unbanked would have outraged him because of a similar exclusion from banking services that blacks and other poor people faced when he was alive.

"Insufficient Funds" notes that "convenience and accessible hours" make payday outlets more attractive to low-income people along with the "expectation of being approved." The cost of interest can be "more than 7,000 percent ARP."

But to the unbanked, access to a quick loan far exceeds having utilities turned off, an eviction, being unable to keep a job because of a car breakdown and expensive overdraft fees that banks charge. "Put in this light, payday loans may be a lesser evil compared with policies that use interest-rate caps (or other vehicles) to drive out payday lenders, which could make the poor worse off," the book notes.

The FDIC last year asked banks what they were doing to improve low-income households' access to banking services. Less than 18 percent of the 685 banks surveyed said reaching out to underbanked communities was a priority. Only one in five had put new branches in low-income areas.

That would have left King in despair.

But "Insufficient Funds" offered some novel solutions to the unbanked crisis. It suggested that regulators help establish partnerships between banks and nonbanks to "provide a more responsive and beneficial range of services."

It suggested government trust funds such as those in Great Britain in which children in low-income families receive accounts at birth. The book notes, "there is absolutely no doubt that (the) child trust fund is transforming the nation’s savings habits and fundamentally changing the way parents think about saving for their children."

The book also suggested making savings a group activity, harnessing the great force of positive peer pressure. It succeeds in countries in South America, Africa and Asia. Why not here?

King would have loved these ideas. He would have supported "Insufficient Funds" pushing financial literacy for children in schools.

The time for marches and demonstrations in the streets has past. Today the sit-ins must be in schools with an insistence on good education and economics lessons, and in banks with a demand for broader services. Nothing else is acceptable.