The Unbanked and the Uncredited

In recent years, there have been various efforts within the U.S. banking system to "reach out to the unbanked". That is, to reach out to those individuals without checking or savings accounts who, presumably, cash their paycheck every week and walk around with wads of money in their pockets, occasionally stuffing a bit of it in a cookie jar or maybe under a mattress.

This all makes good sense.

Being able to pay bills by check and letting someone else do the math as a savings account grows are part of mainstream American society. Well, not so much the savings anymore, but certainly paying bills is still an important part of the culture.

Bank of America seems to be taking the "reaching out" idea to the next level. In this report($) from the Wall Street Journal, we find that while illegal immigrants have been able to buy real estate, they haven't been able to obtain credit cards.

Bank of America is fixing that problem.

In the latest sign of the U.S. banking industry's aggressive pursuit of the Hispanic market, Bank of America Corp. has quietly begun offering credit cards to customers without Social Security numbers -- typically illegal immigrants.

In recent years, banks across the country have begun offering checking accounts and, in some cases, mortgages to the nation's fast-growing ranks of undocumented immigrants, most of whom are Hispanic. But these immigrants generally haven't been able to get major credit cards, making it hard for them to develop a credit history and expand their purchasing power.

The new Bank of America program is open to people who lack both a Social Security number and a credit history, as long as they have held a checking account with the bank for three months without an overdraft. Most adults in the U.S. who don't have a Social Security number are undocumented immigrants.

The Charlotte, N.C., banking giant tested the program last year at five branches in Los Angeles, and last week expanded it to 51 branches in Los Angeles County, home to the largest concentration of illegal immigrants in the U.S. The bank hopes to roll out the program nationally later this year.

"We are willing to grant credit to someone with little or no credit history," says Lance Weaver, Bank of America's head of international card services, whose team designed the program based in part on the bank's experience in markets like Spain, which lack conventional credit bureaus to rate a client's credit-worthiness.

The credit cards involved aren't cheap. They come with a high interest rate and an upfront fee. And the idea of catering to illegal immigrants is controversial.

Bank of America defends the program, saying it complies with U.S. banking and antiterrorism laws. Company executives say that the initiative isn't about politics, but rather about meeting the needs of an untapped group of potential customers.

"These people are coming here for quality of life, and they deserve somebody to give them a chance to achieve that quality of life," says Brian Tuite, the bank's director of Latin America card operations and one of the architects of the program.

Naturally, the anti-immigration crowd is upset at the generosity of Bank of America in making the U.S. quality of life so easily accessible to those who are here illegally.

With mandatory security deposits and interest rates at over 21 percent, three percent higher than the average credit card, it is clear the bank has duly assessed the risk-reward for the quality of life improvements it now provides - they are not doing this out of the kindness of their hearts.

Let them borrow and spend just like the rest of us...

It's still hard to get over the fact that illegal immigrants could buy a house (through Wells Fargo) before they could obtain a credit card - that speaks volumes about the state of mortgage lending today.