Independent Bankers Group Backs Low-Cost Services for Poor People

WASHINGTON - The Independent Bankers Association of America has endorsed legislation to require banks to cash government checks and provide low-cost services to the poor.

The community banking lobby joined forces this week with the influential American Association of Retired Persons in supporting the so-called lifeline requirement.

Their joint endorsement substantially increases the likelihood that a lifeline provision will be included in the banking reform bill moving through Congress-even though much of the rest of the industry adamantly opposes the provision.

A Fight Is Promised

"We will continue to fight it, but it makes our argument much harder," said an angry Edward L. Yingling, chief lobbyist for the rival American Bankers Association.

"Members of Congress facing a tough vote will use it as an excuse to vote for basic banking," he added. "I'm amazed [the IBAA] would do this."

But the Independent Bankers claims it is acting in the industry's best interests.

Robert Hawkins, president-elect of the Independent Bankers, said the AARP negotiated in good faith and helped develop legislative language acceptable to both sides. That language, he said, has been incorporated in the bill to be considered by the Senate Banking Committee.

Senior citizens, Mr. Hawkins said, "are our best customers," and the IBAA is eager to accommodate their views. Moreover, he added, "the vast majority of our members are already offering basic banking."

Strong Emotions Acknowledged

Mr. Hawkins acknowledged that the issue aroused strong emotions among his members, most of whom strongly opposed the notion only a few years ago.

"On the other hand, anyone who really thinks that sooner or later there would not be legislation of some sort has not thought it through," he said. "The issue keeps coming back, and back, and back, and my experience with legislation is that sooner or later it will pass."

The Independent Bankers recently announced an alliance with the AARP, seeking to prevent some of the more far-reaching reforms proposed in the Treasury Department's banking bill.

Kenneth Guenther, executive vice president of the Independent Bankers, said the AARP helped the Independent Bankers by agreeing to remain neutral in the fight over interstate banking, despite entreaties from big banks and a feeling among some AARP representatives that their members might benefit from a relaxation of interstate barriers.

Their lifeline compromise is similar to the provisions included in the draft bill unveiled this week by Senate Banking Committee Chairman Donald W. Riegle, D-Mich.

Sen. Riegle's bill, which is expected to be the subject of committee votes later this month, would require all financial institutions to offer a low-cost account that would feature either government check cashing or basic transaction services.

Institutions would be permitted to charge fees sufficient to yield a 10% profit on the accounts. In return, they would be required to cash checks issued by the federal government or the institution's own state or local government for up to $1,500.

Customers that chose basic banking could maintain transaction accounts with balances of $25 to $750. The institution would be required to permit at least 10 withdrawals a month and could aggressively market, but not require, direct electronic deposit.

The Independent Bankers have been engaged in long talks on the issue with the AARP, which it saw as a natural ally in the fight to protect insurance coverage of multiple accounts.

Battle Over Multiple Accounts

The Independent Bankers flirted with endorsing basic banking services last month, but withheld its support because the AARP declined to join in opposing interstate branching.

In a July 16 letter to members, IBAA president David Ballweg described the battle over multiple accounts as "the fight of our lives," and said community bankers could not have won a vote in the House without the AARP's help.

Moreover, he said, Mr. Riegle was heavily influenced by the AARP in his decision to protect multiple accounts in the draft bill he unveiled this week.

But the ABA's Mr. Yingling said the senior citizens lobby was "a very minor influence" in the House Banking Committee vote to preserve multiple accounts. That fight was won because of efforts by the ABA, the IBAA, and the U.S. League of Savings Institutions, he said.

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