Charlene CrowellColumnistsFinancial Literacy

Communities of Color on Fringes of Banking System

One of the most reliable measures of a community’s economic vitality is convenient access to full-service banking. Regardless of whether a community is urban, suburban or rural, both consumers and local businesses rely on brick-and-mortar bank branches for a wide array of products and services.

New research that measures how well banks serve communities found that America’s access to banking expanded from 2015 to 2017 – except when it comes to more than 53 million Black and Latino consumers or others with low incomes or less education.

In summarizing its new survey findings on banking activity during the past 12 months, the Federal Deposit Insurance Corporation (FDIC) noted that one in five U.S. households — 22.7 million — did not use mainstream credit and that “Black and Hispanic households at every income level evaluated in the survey were more likely to be in this condition than white households.”

“The good news is that our nation’s banking system is serving more Americans than ever before,” said FDIC Chairman Jelena McWilliams. “The bad news is that even as the overall number of people who are unbanked has declined, 8.4 million households continue to lack a banking relationship.”

McWilliams’ statement did not directly address how FDIC found that another 48.9 million adults are underbanked. The difference is important.

Underbanked consumers are those who have a bank account but also turn to alternative fringe financial services like payday and auto loans or check cashing services. By comparison, unbanked consumers are those who have no relationship with mainstream banking at all.

Even more importantly, FDIC’s new survey proves how the nation has a nagging, two-tiered system when it comes to financial services: one that serves white consumers at a growing rate; but leaves behind consumers of color, regardless of income.

Despite this deplorable data, another federal financial agency, the Office of the Comptroller of the Currency (OCC) awards banks and other depository institutions a 93 percent satisfactory or higher rating when it comes to the Community Reinvestment Act (CRA). Although OCC supervises about 20 percent of the nation’s banks, these institutions comprise approximately 70 percent of total bank assets.

This year CRA turned 41 years old, having been enacted in October 1977 by President Jimmy Carter. The law meant to end historical redlining practices that for succeeding generations denied credit to Black America and/or low-income communities. With a new federal assurance,

CRA was to hold banks, credit unions and other depository institutions accountable for local credit lock outs and other discriminatory practices.

Here’s a question to ponder: How can two federal financial regulators reach such different findings on the state of access to banking and credit for Black America?

It’s a question that deserves an answer. And fortunately, advocates at both the state and national levels are speaking up. November 15 is the deadline for public comment to OCC on how CRA’s regulatory framework should be reformed.

Of key concern to OCC is a proposal named “one ratio” that would reduce the current CRA evaluation into a mathematical formula. Among consumer advocates representing different areas of the country view this proposal as a way to water down current procedures that consider key criteria such as geographic availability, borrower profiles, different classifications of lending like mortgages, small businesses and more.

Cathy Hinko, executive director of Louisville’s Metropolitan Housing Coalition, filed comments with OCC, citing how Black neighborhoods are already underserved.

“To ease bank anxiety about unclear aspects of CRA, communications among the federal agencies, banks, and community groups could be improved,” wrote Hinko. “However, easing bank anxiety via the one ratio and diminishing the importance of branches, assessment areas, and public input will decrease lending and access to banking in the communities that need it the most.”

“The OCC asks whether CRA consideration should be broadened for additional activities and populations. Industry trade associations have been advocating for CRA consideration for projects that have broad benefits such as financing hospitals that are not necessarily located in low- and moderate-income neighborhoods,” said the Buffalo-based Belmont Housing Resources for Western New York. “However, the OCC must be reminded that the original purpose of CRA was to combat redlining in low- and moderate-income neighborhoods.”

In Dallas, Diane Ragsdale, founder of the South Dallas Fair Park Inner City Community Development Corporation (ICDC) and a former Dallas Deputy Mayor Pro Tempore, also commented to OCC, “CRA ratings must be reformed so the pass rate is no longer 93 percent …Lending and access to banking for people and communities of color must be considered on CRA exams. Mortgage company affiliates of banks must be included on CRA exams.”

William R. Tisdale, president and CEO of the Milwaukee Fair Housing Council, concurred.

“No bank that engages in illegal discrimination and/or harmful consumer activities should receive a positive CRA rating,” Tisdale said. “We must not slow the progress that has been made. We need to enhance CRA, not weaken it.”

Charlene Crowell is the communications deputy director with the Center for Responsible Lending. She can be reached at

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