ARCADIA, Fla. — A new crop of digital wallets, apps and financial tech companies are fighting for customers’ banking business. The push comes as federal data shows the Tampa Bay region hit a six-year high for the number of people living without banking accounts or easy access to credit.
One in every four people in the Tampa Bay area either do not have a bank account or lack access to at least some banking services, such as credit cards or loans, according to United Way.
But I-Team Investigator Kylie McGivern took a hard look at those struggling to get by without bank accounts and the apps promising a simple solution. The apps can have hidden costs and little oversight. One app even pays pastors at churches where it markets to parishioners.
Apps like Earnin promise early access to your paycheck in exchange for “tips” – promoting in one commercial, “There’s no fees or interest. You just pay what you think is fair.”
The New York State Department of Financial Services is now investigating the app’s tipping setup after reports that Earnin caps credit for those who choose not to tip.
“If something is said to be optional but is actually in fact required, that’s a problem,” said Aaron Klein, an expert on banking regulation and technology with the Brookings Institution.
In an email to the I-Team, an Earnin spokesperson said, "This is a brand new model, so we expect, and welcome, questions. It’s important that our community and the industry trust us, as we build products for the 80% of Americans who live paycheck to paycheck. We appreciate having a constructive dialogue about our business.”
It’s expensive to be poor
Those without a banking account are charged high fees for access to their money.
Americans spend $7 billion a year cashing checks at payday lenders and $25 billion a year on payday loans, according to Klein.
Those that do have bank accounts spend $35 billion a year in bank overdraft fees – costs and disproportionately shouldered by lower income workers, according to Klein.
“It’s very expensive to be poor in America,” said Klein.
Until recently, Amber Hatcher struggled to get by without a bank account. She recently started working at Goodwill in Arcadia and before that, she worked as a babysitter.
“The most that I made at a time was like $40 and that’s not enough to start a bank account anywhere,” said Hatcher.
She lives just outside of Arcadia, where an estimated 37% of the population either don’t have a bank account or access to credit, according to United Way Suncoast.
“I don’t drive, and I live in a rural area,” said Hatcher. “I don’t have access to public transit, so it’s very hard for me to get anywhere, especially within bank hours.”
Those without a bank account or access to credit are more likely to fall into a debt trap, according to experts.
What is a debt trap?
Say you need a $500 loan, but you don’t have access to a credit card or bank account.
In this example, you turn to a payday lender, which happens to charge $20 for every $100 borrowed. That means when you get paid in two weeks, you will owe that payday lender $600.
If you can’t afford to pay off that loan after two weeks, you can add another $100 to your loan, which buys you an extra two weeks. The problem is, another $100 buys you an extra two weeks, but now you owe $700 – the original loan, plus a whopping 40% interest.
St. Petersburg pastor Angel Marcial acknowledged some of his parishioners don’t have a bank account and said one factor is a lack of trust in banks.
“It becomes a big issue for us in the Latino community to not only trust the banks, but trust them with the personal information,” said Marcial.
One of his parishioners, Galo Cruz, said he sees people without bank accounts all the time in his work as a medical case worker at a nonprofit.
“They want to open an account. However, they don’t have any social security or any ID,” said Cruz.
New app markets to Hispanic churches and pays pastors
A new app, ViVi Wallet, is hoping to fill that need, marketing to Tampa Bay area churches and the more than 40,000 others in the National Hispanic Christian Leadership Conference.
Company spokesperson Stephen Harkey told the I-Team the app sets up a bank account using a tax identification number – instead of a social security number – for $4.95 per month.
The app allows users to make deposits, transfer money and shop with a credit card attached to the account.
ViVi Wallet has all the appearances of a bank.
“We are not a bank,” said Harkey. “We are the conduit between the bank and the customer. All of our accounts are in an FDIC-insured bank.”
|TIP: To protect your money, experts say to always look for FDIC-insured banks or institutions. That way, if the bank goes under, you won’t lose your money.|
But the I-Team uncovered the company that runs the ViVi Wallet app also paid pastors at the same churches where it is now marketing its services.
“We’ve asked pastors to do research for us,” Harkey said.
That consumer-testing research was provided in exchange for a paycheck to some pastors. The company also donates to churches letting it set up information tables.
When asked if that connection creates a conflict of interest, Harkey said, “No, I don’t believe so at all. Did we make donations to churches for helping us? Absolutely. And we would do it again in a heartbeat.”
Pastor Carlos Ortiz, a director for the National Hispanic Leadership Conference, was one of those paid consultants, according to the company.
I-Team Investigation Kylie McGivern asked Ortiz, “What kind of sense of responsibility do you all feel, given the influence you have with your parishioners to recommend something?”
Ortiz said, “Imagine that – it’s over 17 million people that we have, so definitely we need to partner with the right partner. It’s extremely important to make sure that what we’re telling people is the truth because, you know, they trust us. And so it is very important that we check everything out before we actually spread the word.”
Ortiz said he’s satisfied that ViVi Wallet rose to the standards set by the National Hispanic Leadership Conference.
“We were concerned in the beginning but after a couple months of knowing them and working with them and seeing what they have to offer and checking every single piece of information, we just feel safe that it was good for our people,” said Ortiz.
Apps versus traditional banks
First Citrus Bank President and CEO Jack Barrett said customers can trust their money is safe in a bank.
“They’re federally insured deposits,” said Barrett. “It’s rational, transparent investment and you know where your money is. You can sleep better at night.”
Barrett, who has 30 years of experience in banking, said the new fintech apps popping up can be risky.
“There’s not a lot of clarity,” said Barrett. “There’s not a lot of transparency with these different venues to put your deposit money.”
“I’m worried that with this new technology it’s going to allow new scams to develop that promise people lots and then end up delivering them into more financial hardship,” said Klein.
Help for those without a bank account
The I-Team was with Hatcher as she set up her first bank account – through a mobile app.
“It makes me feel like, like an actual member of society,” said Hatcher.
Hatcher benefited from Bank On Suncoast, a program through United Way which partners with organizations like Goodwill to connect people with banking options without overdraft fees.
Linlin Liang of Bank On said, “We have seen some payday-related apps also populating and emerging in our market and we want to make sure that our consumers are aware of that. This is not free. There is always a catch.”
Visit Bank On's website for more information on how to sign up for banking through United Way partners.