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Language Barriers in Banking

The Price of Not Being Banked

The challenge of overcoming language barriers in banking

What is it being unbanked or underbanked?

In what percentages of the United States are unbanked?

What issues do bank language barriers cause?

Does the bank have translators?

The Bottom Line

Personal Finance Banking

Advocates try to generate interest in Fort Worth restricting payday lenders The challenge of overcoming language barriers in banking

Language obstacles make it difficult for some to get access to banking services

By Rebecca Lake

Published December 02, 2022

The factual information was verified by Suzanne Kvilhaug.

The United States, language barriers can make it difficult for non-English speakers to access banking services, so paying bills and saving money is more difficult.

About one in 12 people within the U.S. speak limited English, and many are unbanked.1 In the present banks like the Consumer Financial Protection Bureau (CFPB) and community banks are working to reduce the language gap so that more people can have access to the banking services that they require.

Let’s examine the effects of bank language barriers and how they can be taken care of.

Key Takeaways

People who aren’t fluent in English in 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 have access to traditional banking products or services.2

Hispanic households make up 12.2 percent of the unbanked people.

Language issues can make it hard for non-native English people to gain access to banking services, which can make things like making payments or saving funds more difficult.

Initiatives of the Consumer Financial Protection Bureau (CFPB) and community banks are helping to bridge the language gap.

Language Barriers in Banking

Language barriers can hinder the accessibility of financial services for people. 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 spoken language is higher. For instance, in Hispanic households, where Spanish is typically the main language, 12.2 percent are not banked as per the 2019 Federal Deposit Insurance Corp. (FDIC) data.4

A whopping 22% from the U.S. population speaks a language other than English at home – that’s 67.3 million people.5 A majority of them are fluent in English, but many don’t. One in 12 adults over 5 are in the range of being limited English competent (LEP), meaning that they are able to speak English less than well.1

Communities and individuals who aren’t proficient in English can find it difficult to access banking services in the U.S. Even if banks offer basic account information or services in a variety of languages financial disclosures and written documents might not be accessible in other languages than English. Furthermore, newcomers might struggle to understand how investments, bank accounts, and other financial products function in the U.S.1

The Consumer Financial Protection Bureau (CFPB) offers numerous tools online to help Spanish people to better comprehend U.S. banking concepts, products, and services.

The Price of Not Being Banked

It is costly to overcome a language barrier and cause you to be unbanked or underbanked. This means you have a checking account with a bank, but also use other financial services.

People who are not well serviced by banks that are mainstream typically rely on more more expensive financial services. For example, check cashing services may charge fees that range between 1% and 12% of the check amount.6 This could mean that you pay up to $120 for the check for $1,000. Banks are able to accept checks from non-customers, but it could still mean the payment of a fee ranging from $5 to $10. For people who get payed by check since they don’t have a bank account, these fees can be thousands of dollars per year.

It can also be expensive if you rely on alternative banking services. Options such as payday loans or car title loans have significantly higher rates of interest than conventional personal loans. Payday loans are typically accompanied by APRs (APRs) that are 300% or more, can create the cycle of debt that is difficult to escape.7

Each state has different laws regarding payday loans, including what interest rates and fees can be charged by lenders. Certain payday loans are considered predatory and are not permitted in some states.8

The challenge of overcoming language barriers in banking

In recent years there has been rising awareness of the effect of language barriers in limiting access to financial services and banking. Financial services firms and federal agencies are working to solve this issue.

For example, Mitchell Bank in Milwaukee is among the banks that are opening branches in areas with low service. It has a branch called Cardinal Bank in a Milwaukee high school with a 70% Hispanic immigrants 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 an FDIC money smart program in order to teach money skills for students and their parents.63

People with little or no English proficiency may also turn to government programs to help with banking needs. Many states and large cities have local immigrant advocacy organizations that can direct people to local banks offering services, education and outreach in other languages.

Finally, there is a Consumer Financial Protection Bureau (CFPB) provides assistance to people who do not have English proficiency. You can call (855) 411-2372 to get assistance in more than 180 languages. The CFPB also offers free educational materials on banking in a variety of languages.10

Note

Alongside addressing language barriers the financial and banking institutions too are taking measures to make banking accessible to people with hearing and speech disabilities, cognitive disabilities, and visual impairments.

What does it mean being unbanked or underbanked?

Being unbanked implies that you don’t have a bank account. Being underbanked implies the fact that you do have a financial institution account however, you are also using alternative financial services, such as check cashing services or payday loans.

How many people in the United States are unbanked?

About five percent from the U.S. population, or 7.1 million households, was unbanked 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 are the problems that bank language barriers cause?

The language barrier can make those with restricted English competence (LEP) more hesitant to look for banking and financial services. This can make it more difficult to manage their finances, pay their bills and save money. Additionally, they are more likely to utilize expensive banking options, such as check cashing services and payday loans.

Are banks equipped with translators?

Banks are able to use automated tools for translation and interpretation to reach out to customers with limited English proficiency. Banks are increasingly hiring translators and interpreters who can talk to customers on the over the phone, or even in person.

The Bottom Line

Language barriers can make it difficult for those with limited English to obtain the banking products or services they need, but initiatives are being taken to combat this problem across the U.S. As the banking sector becomes more inclusive individuals with less English proficiency may find it easier to open bank accounts and apply for loans and monitor their financial health without paying high fees in the process.

KAS

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