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"The Unbanking Of America"

Ideas We Should Steal: Debit ID Cards

Philly’s long-delayed municipal ID program may have stalled again. That gives us a chance to do it better

Philly’s long-delayed municipal ID program may have stalled again. That gives us a chance to do it better

If you’ve ever tried to enter a government building, or pick up your kid from school, or get drug or alcohol treatment, or do any of a myriad of activities, you know there’s one thing you need: A valid photo ID. Now imagine you didn’t have one. And more than that: Imagine you also didn’t have a checking account. Life would be a damn sight more difficult, right?

That is the reality for the thousands of Philadelphians, who lack a valid ID and a bank. But the city of Oakland, California might have a solution for Philly.

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In 2013, Oakland became the first city in the United States to issue municipal ID cards that doubled as debit cards. The idea had two prongs. First was to address the issue of low-income Oaklanders not having available identification to help them survive in a normal civic environment. Acquiring a standard issue ID, say a driver’s license or a passport, requires a lot of documents that many people can’t easily access, such as birth certificates and social security cards.

That’s why there’s been a major push in metropolitan areas—Philadelphia included—to create a city card that can function as a valid ID. Phoenix, Chicago and Detroit have all moved to introduce municipal ID cards in the past two years; Los Angeles, as well, plans to introduce a municipal ID card.

It’s the second prong that’s unusual in Oakland: Addressing underbanking and lack of access to the digital economy.

Underbanking and unbanking—having either little or no access to bank accounts—is a massive, if well-hidden, problem in the U.S. A 2015 study found that 7 percent of U.S. households were completely unbanked, meaning they had no bank account at all. Another roughly 20 percent were underbanked, meaning that they lack, at very least, a checking account or access to banking service. Philadelphia regularly ranks among the 10 most underbanked cities in the country, according to the FDIC; a report from a few years back found that 23.5 percent of Philadelphia households were underbanked.

The results of underbanking and unbanking are dire: Not only does underbanking often prevent folks from participating in electronic economies—everything from GoPuff to Amazon to Uber—but it also prevents people from building credit scores. And without credit scores, they can’t apply for a home or car loan, or even get a reasonably-priced cell phone. Instead, they are reliant on check cashing joints with predatory interest policies that take as a fee a percentage of a paycheck, and that almost always open in neighborhoods with no banks. Or, in the case of those who work for cash, they have to carry around bills—which puts them in danger of being robbed.

There are loads of factors that lead to under and unbanking. Some are simple and practical: Banks simply do not open branches in minority and poor neighborhoods. But others are more fundamental, and revolve around the very notion of having an ID. Opening a bank account can require a not-inconsequential amount of documentation, including proof of residency, social security number and, of course, valid ID, in the form of a driver’s license, a passport or a birth certificate.

This was the impetus behind Oakland’s debit ID card program. After getting a municipal ID—which costs a one-time $15 fee—Oaklanders can turn those IDs into debit cards issued by SFGlobal, LLC, a company that provides FDIC-insured prepaid MasterCards. After that, they can deposit money onto the card via any Western Union in the city, and can then use their debit cards to pay for things, or to retrieve cash from an ATM—the way you might with a debit card associated with a regular checking account.

Not only does underbanking often prevent folks from participating in electronic economies, it also prevents them from building credit scores. And without credit scores, they can’t apply for a home or car loan, or even get a reasonably-priced cell phone.

The several hundred participants have included immigrants, folks recently released from prison, elderly people who didn’t have access to all their documents, recently emancipated youths—and surprisingly, normally-banked people who didn’t want to have a major bank card, because major banks are more likely to be targeted in hacks.

“The segment of the community that the card was intended for were very much driven by [cash] currency,” says Arturo Sanchez, a former deputy city administrator in Oakland, and the current assistant city manager of Sacramento, who was at the forefront of implementing Oakland’s debit ID cards a few years back. “That created barriers for them to buy things at a lower rate than most of us can, because we have access to a debit card, or a credit card or other things. That was a really big draw for people who applied; the two things together were incredibly beneficial.”

The Oakland program has faced some hurdles. SFGlobal at first charged excessively high fees, for which it received a lot of criticism; now it only charges withdrawal fees. And the city’s marketing budget is still too small to reach all the folks who would benefit from the program. But that hasn’t stopped cities from around the country from taking note of the debit card aspect of Oakland’s ID program. New Haven, CT, now has a similar program, and debit services on municipal ID’s are being discussed in cities including Boston, Hartford and Baltimore.

And why shouldn’t they? A dual municipal ID and debit card kills three birds with one stone: It tackles the scourge of under-identification among underprivileged people, provides them with the ability to begin a credit profile, and shifts local economies away from cash-only dependency, which benefits tax revenues.  

“This was about giving people an option, who didn’t have an option otherwise,” says Paule Cruz Takash, who runs the Debit ID card program for SF Global. “Some people have been blackballed, others don’t have the second ID necessary to open a bank account. This achieved what the city and community organization wanted.”

Cruz Takash, who is the former director of the North American Integration & Development center at UCLA, says she has had conversations with several municipalities about implementing a debit aspect into their municipal ID’s, most recently Providence, RI—and Philadelphia, where Councilwoman Maria Quinones-Sanchez has been watching the ups and downs of Oakland’s debit ID program for months. Quinones-Sanchez has been at the forefront of the fight for municipal IDs for years now, and she’s done a lot of thinking about what a debit ID might look like in Philly.

Municipal ID’s are becoming more and more common in major metropolitan areas, and Philly is actually falling behind. Out of the six most populated cities in the U.S., Philadelphia is the only city without a municipal ID card program established or not scheduled to be released by the end of 2017.

Unlike in Oakland, Quinones-Sanchez says she’d run the city’s program through a local credit union like the Philadelphia Federal Credit Union. Credit unions are non-profits which pass profits back to members, and, as such, have low fees.

“Anything that ties into responsible banking, and opportunities for folks to do basic things like deposit checks is important,” says Quinones-Sanchez. “If we have check cashing places on every corner with all these fees, we’re not doing a service to our constituents.”

The cost of implementing such a program is unlikely to be terribly burdensome: San Francisco’s municipal ID program cost somewhere between $500,000 and $3 million to get off the ground, and New Haven, CT’s municipal ID program was started with a $250,000 grant from First City. Chicago, a city of more than 2.7 million people, has only had to set aside $1 million to set up their municipal ID program.

Municipal ID’s are becoming more and more common in major metropolitan areas, and Philly is actually falling behind. Out of the six most populated cities in the U.S., Philadelphia is the only city without a municipal ID card program established or not scheduled to be released by the end of 2017.

Quinones-Sanchez, with then Councilman Kenney as a co-sponsor, first proposed the idea in 2013. Early last year, she again introduced a bill calling for the creation and implementation of municipal ID’s in Philly, with language that did not delineate specific benefits. The bill is currently in committee, but despite the fanfare when it was introduced and Kenney’s public support, its fate is unknown, and Quinones-Sanchez won’t speculate about when it might come up for discussion.

Partly, she says, that’s because the city is watching, and trying to learn from, the municipal ID drama that has been unfolding in New York City, where the two-year-old program—with 1 million users—may be at risk after a Republican state legislator filed a bill to functionally federalize IDNYC, remanding the information of potentially thousands of undocumented immigrants to the Department of Homeland Security.

Perhaps that delay could become an advantage—the perfect opportunity to craft a debit card system, like in Oakland. It would be a much-needed boon to a population that desperately needs it.

Header Photo: Darren Breen

The Philadelphia Citizen will only publish thoughtful, civil posts. We want to be a communal space. But that doesn’t mean you have a First Amendment right to be an idiot. Send us an insulting, offensive and/or wildly off-topic comment and not only will we refrain from posting it -- we will laugh at you before we hit delete.

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