Pandemic closures complicate life for the unbanked

The coronavirus pandemic has undeniably hit low-income workers hard: 10 million Americans applied for unemployment insurance in just the last two weeks, many of them laid off from restaurants, retail outlets, and bars. And for a segment of these workers — people without a traditional bank account — everyday life has become particularly difficult as seemingly everything from government services to traditional retail moves online. This is the situation a full quarter of U.S. households with incomes under $15,000 find themselves in, according to data from the FDIC.

Most U.S. households without a bank account say they don't have enough money to open one, according to the FDIC. Many banks require a minimum deposit, or require account holders to keep a minimum amount in an account to avoid high fees. For workers who don't make enough money paycheck to paycheck to set any aside, that can be nearly impossible.

And as more services move online with the closing of government offices and retail outlets, that complicates life for the 7.7 percent of the South's population without a bank account who often rely on cash. Most Southern states are now under shelter-in-place or stay-at-home orders, with the exceptions of Alabama, Arkansas, South Carolina, and Texas. Within all of those states except Arkansas, several municipalities have instituted local stay-at-home orders, meaning in most cases that physical stores which accept cash are closed. And some that remain open are no longer taking cash, a decision driven by exposure concerns but one that limits poor people's ability to shop. Obtaining a prepaid debit card is still a possibility, but requires a trip to a physical store and potential exposure to the virus. 

Many Southerners will be left behind by online services because they lack the ability to pay. And because of low rates of broadband access in the South, especially in rural areas, compounded by closures of libraries and fast-food restaurants where many people could previously access Wi-Fi, the internet itself is becoming inaccessible for many people. They may not be able to renew their driver's license or vehicle tags online, for example, which could compromise essential workers' ability to go to their job.

The South has the highest rate of unbanked people in the country — 1.2 percentage points higher than the national average, according to the FDIC's most recent data. States in the Deep South have especially high unbanked levels: In Mississippi, the unbanked rate is nearly 16 percent. In Louisiana, it's about 15 percent.

Unbanked people may not be able to order necessary medical or food supplies online. Households that include a person with a disability — which in many cases means that a person is immunocompromised or otherwise at increased risk of contracting the novel coronavirus — are much more likely to be unbanked than other households. Nationwide, 18 percent of households including a person with a disability are unbanked. In Louisiana, where the virus has already taken a huge toll, it's over 25 percent. In Mississippi, it's more than one-third.

Unbanked rates are especially high among black and Latino communities nationwide, and that's true in the South as well. Nationally, 17 percent of black households are unbanked, as are 14 percent of Latino households. But in Mississippi and Louisiana, nearly one-third of black households don't have a bank account. And in Texas, 16 percent of Latino households face the same battle. Nationwide, just 3 percent of white households are unbanked; the rates are higher across the South but don't reach over 8 percent in any Southern state.

Free banking plan stalled

It will also be harder for unbanked households to access the coronavirus relief checks that have been promised to most Americans.

The CARES Act, the federal stimulus bill Congress passed late last month, will provide $1,200 checks to adults earning up to $75,000 a year, and $500 for each child in a household. For low-income families, these checks will be vital to help pay the rent and buy groceries. But they'll also be harder to get. The federal government plans to use the last direct deposit and address data on file with the IRS and Social Security to disperse the money. If a person hasn't filed taxes — as many low-income individuals aren't required to do — and doesn't have an address on file with Social Security, they'll need to file tax paperwork to receive the check. And if someone doesn't have a bank account on file, it could take until September for a paper check to reach them.

"And then, if you don't have access to a bank account, people may feel like they have to go to a check casher, which will charge really high fees to cash the check," said Diane Standaert, who directs the Hope Policy Institute, the policy and advocacy arm of Hope Credit Union, a community development financial institution that works with low-income communities across the Deep South.

During the debate over the stimulus bill, U.S. Sen. Sherrod Brown, an Ohio Democrat, proposed legislation that would have allowed anybody to create a free bank account into which their check could have been deposited, in part to avoid predatory check cashing by payday lenders, which are concentrated disproportionately in Southern states. However, the proposal didn't make it into the March stimulus bill and has stalled in the Banking Committee.

State and municipal governments face an unprecedented crisis in how to deliver goods and services to their populations while protecting public health. Many small counties and towns are doing so with budgets that are already stretched thin. In rural Mississippi, as in many other parts of the region, many local governments barely had functioning websites before the pandemic. Now they're scrambling to upgrade their sites and make information accessible. Some places are opening Wi-Fi hotspots in parking lots so students can log in to virtual classrooms and parents can connect to the internet.

Indivar Dutta-Gupta, the co-executive director of Georgetown's Center on Poverty and Inequality, told Facing South that the scale of the pandemic is an argument for an expansive government response. "This is an unprecedented crisis where we have to ask ourselves, at all levels of government, 'What extraordinary steps can we take to make life easier?'" he said. "I think delaying altogether, or temporarily suspending, collections of fees for public services can make sense."

The longer the economic crisis wrought by the pandemic goes on, the more it will deepen the South's existing inequities — at least without a policy intervention. "People, institutions, and communities in the Deep South have very little cushion at the best of times," said Standaert. "COVID is exacerbating challenges that already exist in the region, and could cause them to be prolonged for even longer after everybody else has recovered from the crisis."