The ‘unbanked’ problem in Indian country

Indian country is crying out for banking services for the thousands of employed American Indians and Alaska Natives that live in tribal areas, and to deter payday lender rip-offs of those who can’t even cash government checks without a fee.

According to the National Community Reinvestment Corp. and the National American Indian Housing Council, which spotlighted the problems of the unbanked here recently, Indian country is an especially fertile ground for the problems associated with lack of access to financial services.

Chester Carl, former chairman of NAIHC and chief executive at the Navajo Housing Authority, spoke at an NCRC news conference, while current NAIHC Chairman Russell Sossamon, also chair of the Choctaw Housing Authority, testified on the problem before the House Financial Services, Housing and Financial Institutions subcommittee.

Carl said it was a "travesty" that while in urban areas multiple bank branches can be found on the same street, on his tribal homeland, the size of West Virginia, there are only four bank branches total.

And he noted that the Navajo Nation had to sue to get one of those branches.

"It’s time regulators took some action," he said. "Nationwide, there are almost one million Native American people living on reservations and more than half of them are in the work force. That means there are slightly more than 500,000 hard-working Native Americans with paychecks in need of basic financial services."

Carl noted that on the Navajo Nation, "approximately 45 percent of Navajo tribal members are in the work force, meaning there are 81,000 people with a real need for basic banking services. Yet, we have just four full-service bank branches and a few ATMs on the reservation."

Carl praised Wells Fargo Bank, the institution with four branches on the Navajo, for having what he said were 17 branches in tribal areas, the most nationwide.

"But ladies and gentlemen," he pointed out, "there are 562 tribes. There remains a serious need that begs to be addressed. Many reservations have no banks whatsoever for populations as large as 7,000 to 8,000 people with at least half employed."

As a result, elders on the Navajo have to go to payday lenders to get risk-free Social Security checks cashed. "The difficulty in accessing banks that are too far away forces them to pay exorbitant fees from their already meager income to unscrupulous payday lenders."

NCRC and NAIHC have conducted joint studies of predatory lending, and the two groups believe "the occurrence of predatory lending would be reduced if more traditional banks opened up branches and made loans in Indian country."

Carl noted the recent merger agreement between Bank of America and Fleet National Bank, noting that Bank of America as a branch near the Navajo reservation but not on it. "We hope to persuade Bank of America and other large banks to come to Indian country."

Although Carl did not mention the possibility, he was clearly alluding to recent Community Reinvestment Act challenges to big bank mergers, which allege federal regulators should not allow them to proceed if the institutions are excluding any group in their service area from banking services.

He urged banks to create partnerships with tribes and to work on ideas like setting up mobile bank branches in grocery stores, or through traveling bank vans like the one that serves the Pine Ridge Reservation of the Oglala Lakota in South Dakota. Even opening a bank branch for one day a week would help, he said, as would bank offerings of financial literacy courses for Indians.

"These options will work," said Carl. "It simply will take some cooperation on the part of financial institutions and tribes."

Sossamon made similar points in his testimony before Congress, and he asked lawmakers to step in and address the issue. "We need the support of our leaders to levy fines, and prosecute the perpetrators of these crimes to save current and future generations of Native Americans from becoming victims of predatory lenders."

Sossamon mentioned several financial institutions, including San Francisco-based Wells Fargo, Washington Mutual Bank, also Seattle, PMI Mortgage Insurance, also San Francisco, and Fannie Mae, that are already working with Native Americans.