A significant portion of the U.S. population, largely legalized immigrants or those in low-income brackets, do not have bank accounts. Many of these individuals are intimidated by the Bank of Americas, Wachovias and Citibanks of the world, at which impersonal service reigns supreme and a basic knowledge of financial services seems to be a prerequisite to entry. So these people turn to predatory lenders, unscrupulous cash checkers and high-cost remittance agencies. In 2006, the United States was the origin of $42.2 billion worth of remittances, the vast majority of which was sent through unregulated vendors at significant cost to the customer.

To expand access to financial services, policymakers should aim to provide loans, grants, tax cuts and other forms of financial assistance toward the opening of community banks in low-income areas. Community banks have the advantage of offering personalized, attentive service, providing a safe haven for those apprehensive about the traditional banking sector. Also, unlike large national banks, which may take deposits in one area and make loans in another, thus transferring wealth, community banks keep the wealth in their communities.

Community banks can be profitable by specifically tailoring their policies to suit their customer base. Legacy Bank in Milwaukee implemented free checking accounts with a $25 minimum deposit and low overdraft fees. It mitigated the risk from continual overdrafting with personalized banking (employees monitored accounts, observing overdrafting tendencies and contacting customers directly), as well as remedial financial literacy classes. As a result, it was able to accept customers with histories of check bouncing who had been turned away by other banks.

Additionally, in offering payday alternative loans, banks could win customers away from unregulated lenders. North Side Bank in Chicago has gained over 1,000 new members through its PAL program. In comparison to the average $500 payday loan, which would cost the customer over $540, the PAL loan has a six-month term and will cost the customer at most $54.

Connecticut already has a program, called Individual Development Accounts, through which the state matches deposits in savings accounts for first-time, low-income account holders. To truly tackle the current inequality in access to banking services, however, the state needs to do more.

A program in which the state insures loans and covers overdraft fees for community banks offering services to first-time bankers would provide more incentive for these banks to open in low-income areas. On the federal level, Congress should consider community bank legislation as part of a broader financial reform package.

Lisa Marrone is a senior in Jonathan Edwards College, and Seth Extein is a junior in Branford College .