"Cash back fast!” their front windows promise. “Loans up to $255!” “C’mon in and get happy!"
Such pitches are an ordinary part of life in San Francisco’s Mission District, home to the city’s highest concentration of check-cashing outlets and pay day lenders. A single corner of Mission Street boasts two side-by-side outlets, nestled amid the laundromats and carnicerias that serve neighborhood residents, more than half of whom don’t hold traditional bank accounts.
"Bank on San Francisco is a pragmatic solution to a widespread problem, and a great example of the power of public-private partnerships."
– Amy Dominguez-Arms, director of the Irvine
Foundation’s California Perspectives program
Every year, these outlets siphon off millions of dollars from a community that can ill afford to lose it. They charge up to $40 just to cash a paycheck and up to 450 percent in interest rates on short term loans. For Mission District residents, many of them working two to three jobs just to get by, that can add up to hundreds or even thousands of dollars a year – for a service that most consumers get for free.
"In our city, the price you pay for using check cashers is so high, it really impacts the household. When you open a bank account, you benefit immediately, from day one," explains José Cisneros, San Francisco’s City Treasurer. Yet more than one in five San Francisco residents are "unbanked," including half of the city's African-American and Latino population.
The Bank on San Francisco program has exceeded its goals, helping city residents open more than 31,000 first-time and second-chance accounts. Of those, more than 80 percent remain active accounts, with an average balance of $980. Bank on San Francisco has already become a model for more than a dozen programs across the country.
Over the long-term, Cisneros said, access to banking services helps participants become financially self-sufficient, which in turn strengthens their families, neighborhoods and ultimately, the city as a whole.
"If you don't have a bank account, there's no way you can save to buy a home or pay for your kid’s college education," he says. "It's getting people on that first step toward the possibility of asset-building, and the long road to financial success."
"It really is a form of financial equality – financial justice in a way," Cisneros adds. "Nobody deserves to be left out."
Bank on San Francisco is changing the lives of participants like Tenderloin resident Virginia Johnson, 74. A history of bounced checks left her unable to qualify for a traditional account, but she hated bringing her Social Security checks to the local check-cashing outlet.
"It was uncomfortable and it was unsafe," remembers Roy Miller, Johnson's in-home caregiver, who sometimes accompanied her. "They cashed the check and you were walking out of there with hundreds of dollars of cash onto Market and Jones – not exactly a safe area."
Worse yet, check-cashing and money order fees were consuming nearly $200 a month of his client's meager income. So when Miller saw an ad for Bank on San Francisco on the side of a bus, he didn’t hesitate to call the toll-free number. Johnson was able to open an account at Northeast Community Federal Credit Union, just a few blocks from her apartment.
"It's great,” Miller says. "She gets all her bills paid all at once with free money orders. She gets $50 cash and leaves the remainder in the account, so it works as a money management tool as well." Miller has since brought four other clients to open accounts at the credit union.
Bank on San Francisco grew out of the city's effort to expand a local tax credit program for low-income, working families. Cisneros and other city officials were dismayed to learn how many of the checks that went to local residents had been whittled down by check-cashing fees. In early research on the program, focus groups showed that unbanked residents generally disliked check-cashing fees, and were hungry for alternatives.
"People really wanted a bank account," said Anne Stuhldreher, a fellow with the New America Foundation And earlier this month, Gov. Arnold Schwarzenegger announced Bank on California, which will officially expand the model into Fresno, Los Angeles, Oakland, San Jose and Sacramento.
Inquiries from other areas have grown so frequent, program managers for Bank on San Francisco are developing a how-to Web site including an online toolkit, with help from the Irvine Foundation.
"Bank on San Francisco is a pragmatic solution to a widespread problem, and a great example of the power of public-private partnerships," said Amy Dominguez-Arms, director of the Foundation's California Perspectives program. “Already, they've become a catalyst for positive change in the banking industry. We’re glad to encourage the spread of this model to other cities in California and the nation.