Community Development Banking News
CDFI Banking: Industry, Policy, and Beyond.
A number of Chicago-based banks, including ABC Bank and Urban Partnership Bank, are seeking ways to direct the unbanked away from predatory small dollar loans. "I think we have questions about the responsibility about some of the [small-dollar loan] products,” said Levoi Brown, chief banking officer with Urban Partnership Bank. “A lot of these people are already in debt. So what you are doing is continuing to feed that cycle.” ABC Bank offers Ready Cash, a small-dollar loan product for the unbanked. Reginald Little, loan officer at ABC, said the product offers a much better interest rate and repayment than other nonbank firms. Mr. Little picked up an application form from a local payday loan lender and pointed at the 403 percentage rate. “Don’t you think that’s a bit abusive?”
A new video documents the impact of Virginia Community Capital's Pathfinder Program on the Appalachian town of Glade Spring. The program started in 2010 when Virginia Community Capital convened a variety of national and regional stakeholders to discuss solutions for rural Virginia's economic hardships. With funding from the DHCD, the Pathfinder Program injected much-needed capital into the towns of Glade Spring and Onancock. Dirk Moore of the Glade Spring Planning Commission remarked on the progress:"When I think about the past, I remember boarded-up windows, people talking about a 'ghost town.' Today, the town features bustling shops, including a new outfitters, an artisan store featuring handmade products by local artisans and two restaurants.
Nacha, the bank industry group that sets the rules for the network that connects every U.S. bank and credit union, has announced a new effort to achieve same-day electronic transactions. Under Nacha's proposal, payments will eventually be processed twice each weekday. But the overhaul would fall short of the near real-time systems that have been built in the United Kingdom, Mexico, Sweden and other countries -- and will also lag behind numerous proprietary real-time payment systems in the United States. The organization plans to phase in same-day capabilities in three stages, which they hope will assuage concerns raised opponents who derailed a similar effort in 2012 and give banks more time to make costly upgrades to their computer systems.
Illinois attorney general Lisa Madigan has accused payday lender All Credit Lenders of misleading borrowers and skirting the state's usury laws. In a lawsuit against All Credit Lenders, Madigan contends the company deceived borrowers into buying a product pitched as a way to protect them from falling behind on payments in the event of a job loss. But those protections never materialize, the lawsuit said. In fact, the fee is designed to raise interest rates and circumvent the state’s usury cap of 36 percent. The lawsuit referred to the loans as "cash incinerators" with minimum payments that cover only the interest and the mandatory maintenance fee charged each month. “This is one of the more egregious products I have come across,” Madigan said.
ABC Bank hosted the one year anniversary party for Austin Weekly News' West Side Business Network, a group of 75 local entrepreneurs and community members. The evening included refreshments, networking and a presentation from the Oak Park Regional Housing Center on their Austin Ascending program, in which building owners are given grants to improve the appeal of their rentable units. Community organizers Austin Coming Together (ACT) also gave a guest presentation about their many programs and services that build capacity for collaborative action in four focused areas: early childhood, youth, workforce and the built environment.
A new report by the National Consumer Law Center dismisses claims by lending startups that their analysis of big data has allowed them to offer more affordable loans than payday lenders. The consumer advocates found that loans from startups offered effective annual interest rates of 134% to 749%, no better than traditional payday lenders. During loan underwriting, the startups examined variables including rent records, prior payday loan repayment and transactions with pawn shops. But red flags could also include social-media posts about a car breakdown, filling out an application in capital letters or even a user scrolling too quickly through the lender's website without reading materials. The FTC is set this week to discuss whether those algorithms are discriminatory or violate the privacy of borrowers.
Boston-based OneUnited Bank has introduced two new programs designed to help people achieve healthy credit. The bank's Waive Home Loan Program aims to make home financing more affordable by waiving many home loan fees. The program, set to run through the rest of this year, is open to everyone, including first-time homebuyers. OneUnited has also launched the Unity Vista Card, a program that focuses on lending in low- to moderate-income communities. The card features a low annual rate and will not have fees for purchases and deposits. Cardholders are automatically enrolled in OneUnited's "How to Rebuild Credit Program" which offers educational tips and strategies on how a borrower can rebuild and maintain a healthy credit score.
Virginia Community Capital has stepped in to secure financing for Virginia-based excavation business J.R. Caskey Grading & Excavation. The family-owned business had faced significant challenges throughout the recession. The firm suffered a setback when their long-term business lender decided to discontinue all construction financing. Virginia Community Capital has filled that void, providing credit on favorable terms and refinancing J.R. Caskey's existing loans. “VCC was sincere and promised to help us, which they have... VCC did everything possible to keep the ball rolling. VCC and their lending team have been responsive, reliable and determined,” said Ginger Caskey, President of J.R.Caskey.
Consumer advocates say the payday lending reforms instituted in various states have failed to adequately address the problems of borrowers. For example, under Florida’s payday reform law, borrowers are limited to one outstanding loan at a time, may not roll over a loan and must wait 24 hours after paying off a loan before taking out another. But lenders have found ways around each of these provisions. They have circumvented the rollover bans by allowing consumers to repay their existing loan and take out another the next day. It is also possible for customers to avoid the cooling-off period entirely by simply borrowing from a different lender. Suzanne Martindale, an attorney with Consumers Union, says meaningful reform will likely require greater national oversight from the Consumer Financial Protection Bureau.
Virginia Community Capital is providing new financing to IT consulting agency Omegus Prime under the bank's Asset-Based Lending program. The program is designed to assist small government subcontractors in securing their first government contracts and is bundled with technical assistance from a certified small business support entity, in this case the George Mason Enterprise Center. Rashad Rivera, who founded the company after working as an IT consultant on federal contracts for 15 years, hopes the assistance will allow his firm to go from subcontractor status to a prime contractor.