Last October, the Federal Deposit Insurance Corp. (FDIC) published its biennial FDIC National Survey of Unbanked and Underbanked Households. The survey seeks to determine why consumers do not have bank accounts. The following reasons were reported, in descending order of importance: not enough money; mistrust or dislike of banks; fees too high or unpredictable; identification, credit or banking history problems; privacy issues; inconvenient hours or location; banks do not offer needed products or services. The survey addresses rent-to-own in passing and some of the statistics in the study may be of interest to rental dealers.
The FDIC polled 41,000 U.S. households to compile the data, identifying households by type, ethnicity, age, disability status, education, employment status, family income, home ownership and geography. The survey notes the reasons why households closed bank accounts-a list that might just as well be entitled “Why rent-to-own customers fail to make timely renewal payments”: job or significant income loss; new job, retirement, significant increase in household expense; divorce or death, new marriage, birth or adoption; and a move or relocation.
The survey found that nearly 8 percent of households are unbanked, meaning that they do not have any kind of account at an insured bank. According to the FDIC, that is 9.6 million households and nearly 17 million adults. Another 20 percent of households are “underbanked,” defined as having used some type of alternative financial service (AFS) during the past 12 months. That translates into 51 million adults. Among the AFS options, the FDIC includes payday loans, refund-anticipation loans, rent-to-own, pawn shop loans and auto-title loans. With but one exception, the FDIC properly notes that RTO transactions do not involve the extension of credit.
While it does not focus on the AFS sector, the survey does examine the use of the various AFS products. Rental dealers may find this aspect of the study useful, as they can better see the demographic profile of households who used rent-to-own at some point during the previous 12 months.
The survey found that among the unbanked households who used some type of AFS, 7.1 percent used rent-to-own, or 1.2 million adults. Among the underbanked who used some type of AFS, 5.7 percent, or 2.9 million adults, used rent-to-own in the past 12 months. That is in no way an indication of the total number of consumers who chose an RTO option, as the survey only concerns itself with use of AFS during a 12-month period.
The survey breaks out the percentages of use for each of the different kinds of AFS identified. More unbanked households used rent-to-own than payday, refund-anticipation or auto-title loans. Among the underbanked, more households used RTO than auto-title loans. It also found that AFS use was higher among younger, less educated, lower-income and working-age-disabled households. There was also a higher proportion of unmarried female-headed households and non-Asian minority households using AFS.
The survey also reveals some important findings about mobile phones, smartphones and the Internet, as the FDIC sees rapid movement toward using new technologies in banking relationships. For example, among the general population, 83 percent of households have access to a mobile phone, two-thirds of which are smartphones. By contrast, 68 percent of unbanked households have mobile phones, only one-third of which are smartphones. Seventy-five percent of households have Internet access, either at home, school, work or at a public library. Among unbanked households, that percentage falls to 43 percent. Internet access and smartphone-use statistics should be of interest to rental dealers as technologies, properly explained and employed, will allow customers to make rental payments more conveniently – and convenience remains one of the hallmarks of rent-to-own.
