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For people who need emergency money quickly, payday lenders have long been among the few available options. They are ubiquitous in the U.S., with an estimated 13,700 storefronts in 2018, many in low-income and Black communities. Although 18 states and Washington, D.C., have strong interest rate caps on payday lending, in others some lenders charge annual interest rates that surpass 600 percent. But in the wake of the COVID-19 pandemic and the inequalities it exposed and exacerbated, there is a renewed focus on the need to counter payday lenders by bringing better, fairer banking services—personal loans, but also mortgages and small business loans—to the primarily low-income people who have long had difficulty accessing them. The federal government as well as corporations and at least one bold name philanthropist are injecting money into Community Development Financial Institutions (CDFIs), financial service providers whose mission is to bring financial services to low-income communities and people within rural, urban, and Native communities—the places many traditional banks have largely excluded. The game-changing infusion amounts to billions of dollars’ worth of investment.
Southern Bancorp, a community development financial institution in Arkadelphia, Arkansas, is using an infusion of cash from Square to develop niche digital banking services for segments of its customer base. Square made a multimillion-dollar investment in Southern as part of a larger $100 million pledge to support minority and underserved communities, the bank announced this month. With this funding, Southern intends to create customized apps, each designed to address a specific situation for a well-defined underserved group. “We think the true growth opportunity for our bank is digital,” said Darrin Williams, Southern's CEO. “We’re very excited Square took note of the work we do. That capital will allow us to reach deeper into underserved markets.”
The California State Assembly recently voted to approve a plan to create a state-branded bank account that would be offered to all Californians regardless of income, wealth, race or ethnicity, or immigration status. Dubbed the “BankCal” program, the accounts would come with a debit card, no fees, no overdraft, no minimum balances, direct deposit and other perks. The program would contract with private banks and credit unions to actually hold the deposits and facilitate transactions, but the state would set the terms and serve as the public face for BankCal. Banking industry organizations oppose the bill. They argue the state shouldn’t get into the “very complex business of banking,” even though AB 1177 proposes that the state partner with existing private financial institutions — not exactly “getting into” banking in the purest sense.
Overdraft fees, initially marketed as a convenience, have proliferated in the past quarter-century. Rather than bouncing a check or other payment, these programs reassure customers that a bill won't go unpaid or an emergency purchase won't be denied — even though they can turn a $3 coffee into a $38 extravagance.
Since then, overdraft protections have become known as an aggressive way to siphon fees from consumers. Although customers must opt in to overdraft protections for debit or A.T.M. withdrawals, banks don't need their permission to charge fees for online payments or checks instead of letting them bounce. All told, overdraft fees are worth billions of dollars to banks each year. The charges were so lucrative to one midsize institution that its chief executive once named his boat after them. But the tide may be changing: An increasing number of banks are introducing services including grace periods and small short-term loans that provide less-punitive alternatives — if users qualify. Generally that means having a consistent deposit history, like regular paychecks, or other qualifications that may include a longstanding account. The biggest shift occurred this month when Ally Bank said it would eliminate its $25 overdraft fee altogether, giving customers six days to get in the black again before it potentially limits how they use their accounts.
Casey Christopher is a "CEO," but not the one you're familiar with. As "chief empowerment officer" at Manhattan-based Quontic Bank, she has a unique role in catalyzing innovation from the bottom up. As a community development financial institution, Quontic also has an express mission of reaching underserved market segments—for example, constructing credit products that work well for gig economy workers and immigrants whose finances may not fit standard underwriting models. This kind of financial empowerment translates into employee empowerment too—it calls on a whole team to feel ownership and empowered to introduce new ideas. That’s where Christopher comes in. Christopher leads empowerment through Quontic Bank’s core values: “say cheese” (smile and be positive); “try it on” (be adaptive and open to new ideas), “know the goal” and “progress, not perfection.”
Prior to the Covid-19 crisis and its disproportionate impact on communities of color, the median white household in America held nearly eight times the wealth of the median Black household in 2019, reports Brookings Institution. While President Biden and his administration have unveiled plans to help close this gap, which has only been exacerbated by the pandemic, many people have also called on corporate America and its leaders to take a stand in speaking out against racial inequality and economic injustice. Kevin Cohee of OneUnited Bank is among those interviewed.
Carver Bancorp, Inc., the holding company for Carver Federal Savings Bank, a certified Minority Depository Institution, and Bank of America Corporation announced today that they have closed a Senior Secured Social Impact Revolving Credit Facility with BlackRock's Alternative Solutions Group. BlackRock Alternative Solutions manages private market portfolios and invests across alternative asset classes, sectors and geographies on behalf of its clients. The transaction represents the first time that Carver has participated in a subscription line facility and is among the first-of-its-kind transactions where an MDI has joined as a co-lender. It is also the first subscription line transaction with an MDI lender for both BlackRock and Bank of America. The facility pairs Carver and Bank of America's lending and advisory capabilities with BlackRock's investment expertise, including in the areas of social impact and sustainable investing.
Columbus, Ohio-based Huntington Bancshares Inc. has committed $40 billion toward a plan designed to improve financial opportunities for clients and communities across its footprint, with a focus on affordable housing, small business loans and increased capital to historically disadvantaged and low- to moderate-income areas. After meeting with 400 community organizations, the bank identified racial and social equity, consumer and home lending, small business and community development lending and investing as key areas of need in its expanded 2021 community plan, according to a news release. The bank said it will also place special emphasis on environmental equity initiatives and will talk with leaders to develop programs addressing environmental health challenges faced by under-resourced communities.
Top regulators and leading Democrats at a June 15 conference emphasized their commitment to increasing financial services access for the underbanked and supporting minority depository institutions, or MDIs. Heads of the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency attended the conference hosted by Georgetown Law and the Black Economic Alliance, commemorating Juneteenth. Both leading regulators expressed a desire to stay committed to closing wealth gaps and addressing racial inequity through the banking system. Top Democrats in Congress also spoke at the conference about their own efforts to address inequality, including a renewed call for public banking. On a related note, the FDIC on June 15 approved a final policy statement to help promote minority-owned banks
The Climate Safe Lending Network in partnership with the Finance Innovation Lab are pleased to announce that applications for the Climate Safe Lending Fellowship are now open. The Climate Safe Lending Fellowship is a six-month leadership program for banking professionals who are advancing the climate agenda within their institutions. Right now, banks are faced with the enormous opportunity and urgent challenge of financing a just transition to a net-zero carbon future. This requires leadership from within to transform strategy, operations and culture in service of a climate safe world. The Climate Safe Lending Fellowship provides structured support for climate advocates inside banks to build their knowledge, confidence and skills to lead this transformation. The Fellowship program is for banking professionals committed to embedding climate action at the heart of their institutions - regardless of role, function or seniority - and whether working to accelerate climate action through their day job or side-of-desk. Selected Fellows will journey together in a pre-competitive, collaborative cohort between October 2021 - March 2022. They will leave the program more confident and grounded, and will have gained new insights and practical tools to accelerate organizational transformation. Fellows will also benefit from peer-coaching and tailored support, and will build a trusted network of stakeholders across and beyond banking.