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Language Barriers in Banking
The costs of not having a bank account
Overcoming Language Barriers in Banking
What does it mean to be unbanked or underbanked?
What percentage of people living in United States are unbanked?
What are the problems that language barriers in banking cause?
Does the bank have translators?
The Bottom Line
Personal Finance Banking
Banks: Overcoming language barriers
Language barriers make it hard for some to get access to banking services
By Rebecca Lake
This article was published on December 02, 2022.
Confirmed by Suzanne Kvilhaug
Within the United States, language barriers could hinder non-English speakers to access banking services. Therefore, paying bills and saving money is more difficult.
One in 12 individuals living in the U.S. speak limited English and many are unbanked.1 Today, however banks like the Consumer Financial Protection Bureau (CFPB) and community banks are making efforts to bridge the gap in language to help more people gain access to the banking services they need.
Let’s examine the effects of bank language barriers and how they can be addressed.
Important Takeaways
People who aren’t fluent in English within the United States may not have an easy access to the banking services they require.
A total of 4.5 percent from the U.S. population is unbanked and therefore don’t have bank accounts or use traditional banking products or services.2
Hispanic households account for 12.2% of the unbanked people.
Language barriers can make it difficult for non-native English users to get access to banking services. This could make making payments and saving money more difficult.
Initiatives of the Consumer Financial Protection Bureau (CFPB) and community banks are helping to bridge the language gap.
Language Barriers in Banking
The language barrier can affect people’s access to financial services. A little over 5% of the population living in the U.S. were unbanked, or had no bank account, in 2020.3 However, the proportion of communities in which English is not the first language is significantly more. For example, among Hispanic households, where Spanish is often the primary language, 12.2 per cent aren’t banked, according to 2019 Federal Deposit Insurance Corp. (FDIC) data.4
A whopping 22% of the U.S. population speaks a language other than English at home, which is 67.3 million people.5 A majority of them are proficient in English however, many of them don’t. More than one in 12 people over the age 5 are restricted English skilled (LEP) which means that they can speak English not very well.1
People and communities that are not fluent in English may have difficulty to access banking services in the U.S. Although banks may provide basic account information or services in a variety of languages, financial disclosures and written documents may not be accessible in languages other that English. Furthermore, newcomers might struggle to understand the way that bank accounts, investments, and other financial products operate in the U.S.1
The Consumer Financial Protection Bureau (CFPB) provides a variety of online tools to assist Spanish people to better comprehend U.S. banking concepts, products, and services.
The Price of Not Being Banked
It can be costly to overcome a language barrier and cause you to be unbanked or underbanked. This means you have a bank account , but also use alternative financial services.
The people who aren’t serviced by banks that are mainstream typically depend on more costly financial services. For instance, check cashing services can charge fees ranging between 1% and 12 percent on the total check amount.6 It could cost you up to $120 for a $1,000 check. Banks are able to cash checks for noncustomers, but it could still mean paying a fee of $5 to $10. If you are payed by check since they don’t have a bank account, these charges can be thousands of dollars each year.
It can also be costly if you depend on alternative banking services. Solutions like payday loans or car title loans are significantly higher in rates of interest than conventional personal loans. Payday loans, often with APRs (APRs) that are 300% or higher could create an unsustainable cycle of debt that’s difficult to escape.7
Each state has its own set of laws regarding payday loans, including what interest rates and fees may be charged by lenders. Some payday loans are considered predatory and are not permitted in some states.8
Overcoming Language Barriers in Banking
In recent years there has been increasing awareness of the effects of language barriers on access to financial services and banking. Both financial service companies and federal agencies are trying to solve this issue.
For example, Mitchell Bank in Milwaukee is one of the banks that are which are opening branches in the areas of low-service. The bank has a branch named Cardinal Bank in a Milwaukee high school with a 70 percent Hispanic immigrant population.9 Cardinal Bank offers financial literacy classes, which help customers with no Social Security numbers apply in the form of Internal Revenue Service (IRS) Individual Taxpayer Identification Numbers (ITINs) and utilizes its FDIC Program Money Smart to develop money skills for students and their parents.63
People who have restricted English proficiency may also look to government programs to help with banking services. A lot of states and cities have local advocacy for immigrants organizations that can direct people to local banks that offer services, education, and outreach to other languages.
Finally, The Consumer Financial Protection Bureau (CFPB) can provide assistance for those who have limited English proficiency. Call (855) 411-2372 for assistance in more than 180 different languages. The CFPB also provides educational materials on banking in a variety of languages.10
Note
In addition to the need to address difficulties with language, bank and other financial establishments are also taking steps to make banking more accessible to those with hearing and speech disabilities or cognitive impairments, as well as visual impairments.
What does it mean to be unbanked or underbanked?
Being unbanked means that you don’t have an account with a bank. Underbanked means the fact that you do have a financial institution account but you also utilize other financial services, like check cashing services or payday loans.
How many people in the United States are unbanked?
About 5% out of U.S. population, or 7.1 million households, was not banked as of May 2021. The number of unbanked households was higher in Hispanic, Black, and low-income families.3
What problems do language barriers in banking cause?
The language barrier can make those who have low English proficiency (LEP) less likely to look for banking and financial services. This could make it harder for them control their financial situation, settle bills, and save money. They could also be more likely to make use of expensive banking options for example, check cashing service or payday loans.
Are banks equipped with translators?
Banks can use automated tools for translation and interpretation to reach out to customers with only a little English proficiency. More banks are hiring interpreters and translators who are able to communicate with customers on the over the phone, or even in person.
The Bottom Line
Language barriers can make it difficult for individuals to access the banking products or services they require, however initiatives are being taken to address this problem within the U.S. As the banking sector becomes more inclusive individuals with less English proficiency may have a better chance of opening bank accounts and apply for loans and monitor their financial health without incurring excessive fees.
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Article Sources
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