We gathered top leaders from financial institutions and community groups to discuss the scope of the problem and current approaches to improving access to credit. Our Senior Vice President Geoff Smith presented the findings of our credit score report and used the availability of refinance lending as an example of diminished access to credit in communities of color. The below chart demonstrates that in predominantly white communities, refinance lending doubled from 2008 to 2009; however, it dropped precipitously in communities of color.
access to banking services
The proposal, HR 6334, requires regulators to consider public comments in their ongoing community reinvestment evaluations. The codification of the public's response and the repercussions of those responses increase the likelihood that the public’s needs are being met by financial institutions.
“The Community Reinvestment Act has created jobs, supported responsible homeownership, and expanded opportunities for saving by investing trillions of dollars in low- and moderate-income communities,” said Rand. “Nonetheless, the rapidly-changing and complex financial landscape of today bears little resemblance to the world of 1977, when the original CRA was passed.
In “Bridging the Gap: Credit Scores and Economic Opportunity in Illinois Communities of Color,” our researchers found that Illinois communities of color had high concentrations of individuals with very low, “non-prime” credit scores.
• Statewide, 20.3 percent of people had credit scores below 620, a common boundary for consideration for prime credit. In contrast, 54.2 percent of the population in highly African-American neighborhoods had scores below 620 and only 16.5 percent of the population in predominantly white neighborhoods credit scores below 620.
Bank branches play an important role in providing access to retail banking services, such as basic checking and savings accounts. Regulators measure how banks are doing in providing access to retail banking services on the CRA service test.
Among the many remaining barriers are public policies that make it difficult for people with disabilities to work and acquire the earnings necessary to build assets.
These are the kind of sobering statistics that experts presented to more than 100 representatives from community, research, financial, regulatory, and government groups at “Beyond Foreclosures: The Impact of the Financial Crisis on the Wealth Gap and Economic Opportunity.” Indeed, a staggering number of consumers lack sufficient access to banking services that would help them build wealth, do not have opportunities to build a positive credit history, and must resort to the costly and stigmatizing process of bankruptcy.