Community Development Banking News
CDFI Banking: Industry, Policy, and Beyond.
Programmer Patrick McConlogue stirred controversy last summer by staging a social experiment in which he offered to teach a homeless man, Leo Grand, to code. McConlogue believed the skill would enable Grand to escape homelessness. Grand eventually released an app called Trees For Cars which generated 15,000 downloads and a $10,000 profit. But Grand is unbanked and that money now sits unused in McConlogue's bank account. McConlogue has encouraged Grand to open an account to make the transfer, but Grand refuses. Mitchell Netburn, president and CEO of Project Renewal, says it's not uncommon for homeless people to be paranoid about banking. "They don't always understand how banks work. Who has access to them. Who can track them."
Preston Pinkett III has been appointed chairman of City National Bancshares Corp. Mr. Pinkett succeeds Eugene Giscombe, who been appointed chairman emeritus. Mr. Giscombe will remain on the board as a director. “We are very pleased with this transition," said City National Director Alfonso Carney. "Mr. Giscombe provided a level of leadership and guidance that helped the bank grow and expand into new markets. We believe now is the perfect time for Mr. Pinkett to add the role of chairman to his responsibilities of CEO. As a proven business leader, Mr. Pinkett set in motion the changes needed for City National to succeed in this new climate of community banking.”
New lending from Bank2 has allowed the Housing Authority of the Cherokee Nation to finance an ambitious affordable housing project. The project makes use of HUD's Section 184 Indian Home Loan Guarantee Program, which will provide a 100% guarantee on the loans. The Housing Authority of Cherokee Nation has closed on six loans with Bank2 so far, which will replenish the housing authority's revolving construction fund as more homes are built. “We are very excited to be working with the Cherokee Nation on their initiative to build homes for their citizens throughout the tribe’s jurisdiction,” said Ross Alan Hill, Bank2 president and CEO. “We believe this initiative will set a precedent for all of Indian Country.”
The Consumer Financial Protection Bureau has issued a report highlighting illegal actions by payday lenders, debt collection companies and consumer reporting agencies. CFPB examiners found instances of payday lenders deceiving consumers and illegally harassing borrowers to collect debts. The report also criticized debt collection agencies often used by those lenders, claiming the agencies misled consumers about litigation, made excessive calls to consumers and failed to investigate credit report disputes. CFPB examiners found that certain consumer reporting agencies were not handling consumer credit report dispute documents properly.
Panelists offer perspectives on the legacy of the bank bailout. Lee Sachs, former counselor to the Secretary of the Treasury, argues that the bailout was a success; higher capital requirements and new regulations have led to a substantially safer financial system. Other panelists critique that view, arguing that Treasury missed an opportunity to force the big banks to downsize to smaller, safer institutions. Several panelists argue that the bailout failed altogether in its primary mission of preventing another financial crisis by focusing too narrowly on banks while failing to reform mortgage refinancing or the mechanisms that spread financial contagion.
An FDIC report has found that rural community banks located in depopulating areas are coping with a shrinking pool of customers better than expected. Rural counties that experienced outflows lost 14.8 percent of their population on average. But community banks in those areas actually fared better, on average, than banks in metro areas. Unusually strong performance in the agricultural sector beginning in 2006 resulted in community banks in depopulating rural areas posting higher asset growth rates than community banks elsewhere from 2006 through 2012. Asset growth was accompanied by strong deposit growth as farmers placed their high earnings into their local institutions.
A recent spate of lawsuits accuse 10 banks and a credit union of helping online payday lenders break usury laws by processing debt collection transactions. Payday lenders depend on those transfers, which are more reliable than debit and check transactions. The financial institutions are accused of violating federal anti-racketeering laws, federal banking regulations and industry standards and rules established by NACHA. The plaintiffs argue that the banks should have known that their customers were acting illegally and thus were helping them break the law. Targeted financial institutions include large and small banks alike, from BMO Harris Bank to the North American Banking Co. in Roseville, Minn.
The CDFI Fund is holding an application webinar on the 2014 CDFI Bond Guarantee Program application today at 2:30 PM. The webinar will touch on a variety of topics, including the application review process, application evaluation criteria, bond proceed use restrictions, program costs and reporting requirements. In addition, CDFI Fund staff will discuss the upcoming outreach sessions being held across the country for the CDFI Bond Guarantee Program, as well as the qualified issuers that have already been approved for the FY 2014 round of the program. Advance registration is not required to participate in the webinar. After the webinar, the presentation will be made available on the CDFI Fund's website.
Debra McGee, a senior vice president and director of minority business development for BankPlus, discusses her career and the bank's work in Mississippi: "When we decided to build a BankPlus branch near Jackson State [University], some individuals thought we were crazy. Of course, BankPlus had a special vision to serve this community... We invested more than $3 million in this venture. We are proud of what we created in Jackson and making a difference in the community and our state... One of the services or products I helped create is CreditPlus, a program to help consumers get on the right track to financial freedom."
At a summit on small business credit innovations held at the Federal Reserve Bank of New York earlier this month, executives from high-cost alternative lenders responded to criticism of their business loan pricing. Asked whether their average loan's 54% APR was fair, Andrea Gellert of alternative lender OnDeck responded that, “APRs somewhat distort the true economic costs and the cost-return relationship on the loan. If I buy that inventory for a dollar and sell that inventory for $2 in a six-month period, that’s a 200 percent return. So my 54 percent cost makes absolute sense.” Industry executives argue their loans should be judged by customer satisfaction, pointing out that their high renewal rates show the loans are serving borrowers.