Washington, Ebonya. 2006. “The Impact of Banking and Fringe Banking Regulation on the Number of Unbanked Americans.” Journal of Human Resources 41(1): 106–137.
Thirty-five to 45 percent of low-income American households do not possess a bank account. This statistic coupled with claims of price gouging by check cashers has prompted government intervention. I find that state legislation requiring banks to offer low-cost accounts slightly decreases the number of low-income minority unbanked households, but only with a substantial lag. Caps on check-cashing fees also lead to a small, but more immediate, reduction in the number of unbanked among this population. Because price caps may lead to a reduction in supply, welfare effects are indeterminate.
Ebonya Washington is an assistant professor of economics and political science at Yale University and a Faculty Research Fellow at the National Bureau of Economics. The author thanks Elizabeth Oltmans Ananat, Jonathan Gruber, Sendhil Mullainathan, James Poterba, Sherrie Rhine, participants in MIT’s public finance luncheon and two anonymous referees for helpful comments. Financial support from the National Science Foundation is gratefully acknowledged. The data used in this article can be obtained beginning August 2006 through July 2009 from Ebonya Washington, Yale University, Department of Economics, Box 208264, New Haven, CT 06520, ebonya.washington@yale.edu.