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The Minneapolis Fed profiled Sunrise Banks' investments in local arts and culture in a recent article. Since 2002, Sunrise Banks has worked with Free Arts Minnesota, an organization that uses arts-based mentorship to help at-risk youth express themselves. Sunrise Banks CEO David Reiling advocates a multifaceted approach to community development: “Banks can make loans, which is more straightforward. But they can also provide contributions or offer volunteer time.” Sunrise provides Free Arts a line of credit and operating accounts. The has bank also contributed through its corporate giving program and employees volunteer at the organization’s largest fundraiser.
Assertions that virtual payments and currencies are on the verge of displacing greenbacks may be premature. More greenbacks are now in circulation than at any time in recent history. Since January 2006, the amount of United States currency in circulation rose about 64 percent, to $1.2 trillion. But at the same time, cash transactions are declining as consumers rely more on debit and credit cards, suggesting that demand for dollars may be driven by hoarders rather than spenders. Americans are also writing half as many checks as they did a decade ago. The number of bank branches, however, has remained relatively stable.
Alternative lenders such as OnDeck and CAN Capital still rely on old-fashioned loan brokers to find their borrowers despite their high-tech packaging. These loan brokers are independent agents who funnel cash-strapped business owners to be sold high-cost loans. They charge sky-high commissions, usually hidden from merchants, which can double the cost of the loan. Some worry the brokers steer costly loans to small businesses that can’t afford them. “It’s a direct parallel to what happened in the subprime mortgage space,” says Mark Pinsky, CEO of CDFI advocacy group Opportunity Finance Network.
The Delta Bridge Project, an initiative backed by Southern Bancorp which coordinates community and economic development efforts in three Arkansas and Mississippi counties, recently unveiled new tourist-friendly way-finding signs in Helena, Ark. The signs are part of Civil War Helena, a tourism promotion which highlights Helena’s numerous Civil War attractions. Southern Bancorp and its partners have invested heavily in Phillips County’s tourism industry in order to diversify the economy and create new economic opportunities in the region. “Civil War Helena is expected to attract over 60,000 annual visitors and create over 40 tourism-related jobs,” stated Cathy Cunningham, a consultant with Southern Bancorp.
Maria Contreras-Sweet, founder and chair of CDFI Bank ProAmérica Bank, has been confirmed by the Senate as the new head of the U.S. Small Business Administration. ProAmérica Bank, which she founded in 2006, serves small and mid-size Latino businesses in the Los Angeles area. Contreras-Sweet fills a role vacated by Karen Mills, who stepped down from the post in August. "Small Business will have a strong advocate in Administrator Contreras-Sweet, a leader with her finger on the pulse of small-business lending," Sen. Maria Cantwell, D-Wash., chairwoman of the Senate Committee on Small Business and Entrepreneurship, said.
When Carlos Schulte contributed $300 on Kickstarter to Oculus VR, a small but ambitious virtual reality gaming startup, he never expected it to sell out to Facebook for $2 billion. The $300 contribution bought him an early version of the company's gaming platform, but no equity in the company. The passionate online response against the Facebook purchase illustrates how the ethos of crowdfunding can clash with the corporate world. Some contributors fear the purchase will steer the company away from the gamer-friendly vision they had contributed to. Others argue that the sale is the most egregious example yet of crowdfunding's one-sidedness. Two venture capital firms which made early equity investments in the project received a 2,000% return. At that multiple, Mr. Schulte's contribution would have been worth $6000 today.
One PacificCoast Bank and Sunrise Banks were recognized by B Lab's B Corp Best for the World 2014 award in the midsize business category. One PacificCoast Bank's profile highlighted their innovative governance structure, well-compensated workers, commitment to mission-driven lending and commitment to offsetting green house gas emissions with certified carbon credits and energy efficiency programs. Sunrise Banks' profile featured their environmentally-conscious office practices and locations, employee benefits, community-focused ownership, volunteerism and support of local suppliers.
Increasing numbers of people are finding themselves so close to the financial brink that they must borrow against future wages just to cover the costs of everyday life. Over the past half century, the purchasing power of wages have fallen while access to credit has risen, causing credit to replace wages for an increasing number of purchases. Meanwhile, personal savings have fallen steadily from their 1970's peak. The effect of this dependence on credit is that the average American has very little financial leeway when something unpredictable happens or just needs to scrape together enough money to pay monthly expenses. Those expenses lead to 75% of payday borrowing.
The Consumer Financial Protection Bureau released a new report on payday lending at a public hearing in Nashville. The agency is nearing the release of new rules to govern the industry. Their report argues that "short term" loans are usually not short term at all, but more often renewed again and again as consumers dig themselves into deeper sinkholes of debt. Half of all loans, for example, come as part of sequences of 10 or more renewed loans — and in one out of five loans, borrowers end up paying more in fees than the initial amount they borrowed. It is not clear what form the upcoming CFPB regulations will take; the Dodd-Frank Act prohibits imposing usury caps, but the CFPB may eliminate lump-sum payday loans or require the loans be modified to incorporate more affordable installment plans.
Bronx-based Spring Bank seems like a perfect candidate for New York State's Banking Development District program, an initiative that encourages banks to put branches in low-income neighborhoods that have none. Spring Bank, recently certified as a CDFI, offers customers financial literacy courses and products like checking accounts with no fees or minimum balance requirements. But two years ago, when the bank expanded into Harlem, its application to participate went nowhere. The reason: the program was being revised and New York's Department of Financial Services was not considering new applications. This revision has been going on for the last four years, leaving the popular program in limbo.