03/25/2009 - Juan Murillo used to spend hundreds of dollars a year at check-cashing outlets because he was too intimidated by the U.S. banking system to open an account and did not speak enough English to write a check himself.
When he finally summoned the courage to open a checking account at Bank of America, he found that he could withdraw cash, write checks and transfer money to his family in Mexico at no additional cost. And the best part, he said, is that "my tax refund is deposited directly into my account."
Nearly 300,000 Los Angeles households do not have a bank account, more than in any other U.S. city, Mayor Antonio Villaraigosa acknowledged at a news briefing Tuesday. Without these tools, low-income families can't put money away for their children's education or the down payment on a home, establish a credit record or pay their bills without giving up a large portion of their salaries to storefront check-cashing outlets, payday loan operations and pawnshops.
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Banks have been slow to open branches in low-income neighborhoods, where storefront operations have proliferated in their place. According to research by The Pew Charitable Trusts, these high-cost alternatives now outnumber traditional banking institutions in Los Angeles, with 944 check-cashing outlets, 312 payday lenders and 85 pawnshops identified in 2006, compared with 694 bank and credit union branches.
Read the full article New Program Encourages Low-Income L.A. Residents to Open Bank Accounts on the Los Angeles Times' Web site.
Pew is no longer active in this line of work, but for more information visit the Safe Banking Opportunities Project on PewHealth.org.