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Language barriers in banking

The costs of not having a bank account

Banks: Overcoming language barriers

What is it to be underbanked or unbanked?

How many people in the United States are unbanked?

What are the problems that banks’ language barriers create?

Are banks equipped with translators?

The Bottom Line

Personal Finance Banking

Overcoming Language Barriers in Banking

Language obstacles make it difficult for some individuals to gain access to banking services

By Rebecca Lake

The publication was made public on December 02, 2022.

Confirmed by Suzanne Kvilhaug

The United States, language barriers can make it difficult for non-English-speaking customers to gain access to banking services. Therefore, making payments and saving money may be more difficult.

One in 12 residents within the U.S. speak limited English and a large portion of them are unbanked.1 In the present the Consumer Financial Protection Bureau (CFPB) and community banks are taking steps to close the language gap to ensure that more people get the access to banking services that they require.

Let’s take a look at the consequences of language barriers in banking and how they can be dealt with.

The most important takeaways

People who have limited English within the United States may not have easy access to banking services that they need.

An estimated 4.5 percent of the U.S. population is unbanked which means they don’t have bank accounts or have access to traditional banking products or services.2

Hispanic households make up 12.2% of the unbanked population.

Language obstacles can make it difficult for non-native English people to get access to banking services. This could make things like paying off bills and saving money more difficult.

Initiatives by the Consumer Financial Protection Bureau (CFPB) and community banks are helping reduce the gap in language.

Language Barriers in Banking

Language barriers can impact people’s access to financial services. Around 5% of people living in the U.S. were unbanked, or didn’t have a bank account in 2020.3 However, the percentage for communities in which English isn’t the main language is significantly higher. For instance, in Hispanic households, where Spanish is often the primary spoken language 12.2 per cent aren’t banked according to the 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 Many of these people are fluent in English, but many don’t. Over one-in-12 people older than 5 are restricted English proficient (LEP), meaning that they can speak English less than very well.1

People and communities not proficient in English can find it difficult to gain access to banking services in the U.S. Even if banks offer basic account information and customer services in a variety of languages financial disclosures, as well as written documents might not be available in languages other that English. Furthermore, newcomers might struggle to understand how bank accounts, investments and other financial products function in the U.S.1

The Consumer Financial Protection Bureau (CFPB) provides a variety of online tools to assist Spanish speakers learn more about U.S. banking concepts, products, and services.

The Price of Not Being Banked

It can be costly to have a language barrier cause you to be unbanked or underbanked, meaning you have a checking account with a bank, but also use alternative financial services.

People who are not well provided by the mainstream banks typically use more costly financial services. For example, check cashing services can charge fees ranging from 1% to 12% on the total check amount.6 That can mean paying up to $120 for a $1,000 check. Banks are able to cash checks for noncustomers, however, this could mean paying a fee of 5 to $10. For people who get paid by check because they do not have a bank account, these charges can add up to thousands of dollars every year.

It can also be expensive if you rely on other banking services. Options like payday loans or car title loans offer significantly higher rates of interest than traditional personal loans. Payday loans typically have annual percentage rates (APRs) of 300% or more, can create an unsustainable cycle of debt that’s difficult to escape.7

Each state has different laws regarding payday lending, including what interest rates and charges can be imposed by lenders. Some payday loans are considered predatory and are regulated in specific states.8

Overcoming Language Barriers in Banking

In recent times there has been rising awareness of the effect of language barriers to access to banking and financial health. Both financial services companies and federal agencies are trying to tackle this issue.

For instance, Mitchell Bank in Milwaukee is among the banks opening branches in underserved areas. There is a branch known as Cardinal Bank in a Milwaukee high school that has a 70% Hispanic immigrant population.9 Cardinal Bank offers financial literacy programsthat help customers who do not have Social Security numbers to apply for Internal Revenue Service (IRS) Individual Taxpayer Identification Numbers (ITINs), and uses its FDIC Money Smart program to develop financial skills for students as well as their parents.63

Individuals with restricted English proficiency are able to seek out government programs to help with banking needs. A lot of states and cities have local advocacy for immigrants organisations that can guide people to local banks that offer assistance, education, and outreach to other languages.

In addition, there is a Consumer Financial Protection Bureau (CFPB) can provide assistance for those who do not have English proficiency. Call (855) 411-2372 for assistance in more than 180 different languages. The CFPB also offers free education materials about banking in many languages.10

Note

Alongside the need to address language barriers, the financial and banking institutions too are also taking steps to make banking accessible for people who suffer from speech and hearing impairments, cognitive disabilities, and visually impaired.

What is it that it means to be underbanked or unbanked?

Being unbanked means that you don’t have an account at a bank. Underbanked means the fact that you do have a financial institution account, but you also use alternative financial services, such as check cashing as well as payday loans.

What percentage of people living in United States are unbanked?

Around five percent of the U.S. population, or 7.1 million households, was not banking at the time of May 2021. The percentage of households that were not banked was disproportionately higher among Hispanic, Black, and low-income families.3

What issues do bank language barriers cause?

Language barriers can make people with restricted English proficiency (LEP) more hesitant to look for banking and financial services. In turn, this can make it more difficult to manage their finances, pay off bills and save money. They may also be more likely to use costly banking alternatives, like check cashing services and payday loans.

Do banks have translators?

Banks can use automated tools for translation and interpretation to reach out to customers who have only a little English proficiency. Banks are increasingly hiring translators and interpreters who are able to communicate with customers on the phone or in person.

The Bottom Line

Language barriers can make it more difficult for individuals to access the banking services or products that they need, but initiatives are being taken to tackle this issue within the U.S. As the banking sector becomes more inclusive individuals with less English proficiency might be able to open bank accounts or apply for loans and monitor their finances without having to pay high fees in the process.

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