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The place you do banking could make an enormous distinction in racial justice

An analysis showed that more than 40% of the CDFI's loans and investments are made in majority and minority communities.

LeoPatrizi

Consumers can campaign for racial justice – and it's as easy as opening an account at a community bank or credit union that supports underserved communities.

Netflix recently announced that it would transfer $ 100 million of its cash holdings to financial institutions that support black communities in the United States.

There are now more than 1,000 Community Development Financial Institutions (CDFIs) in the United States. These institutions specialize in under-served communities and more than a third of their banks are run by minorities. An analysis showed that more than 40% of the CDFI's loans and investments are made in majority and minority communities.

"With all the racist problems right now, it's the perfect time to open an account with a community development bank or credit union," said John Holdsclaw, chief executive officer of the Coalition of Community Development Financial Institutions.

NerdWallet's personal finance website has a list of CDFIs by state.

"These institutions provide equity in these black and brown, low-income communities. They were created to provide loans at fair prices and a place to build assets. It's not about profit, it's about access," said Holdsclaw .

A story of oversight

Color communities have been underserved by banks in the past: 14% of black households and 10% of Hispanics had no bank accounts in 2019, according to the Federal Reserve. For comparison: only 3% of white households are without bank details.

Perversely, the lack of access to a bank can cost consumers more. This is because they often turn to alternative financial services to meet daily banking needs, including cashing checks at retailers or using payday loans.

Both options are rich in fees. Check cashing services, according to NerdWallet, can bring consumers 1% to 10% of the value of a check. In the meantime, payday loan providers can charge a fee of between $ 10 and $ 30 for $ 100 each, according to the Consumer Financial Protection Bureau.

Similarly, black and Hispanic business owners suffered from the coronavirus pandemic – and they missed the federal lifeline that could have kept their businesses going.

Sheneya Wilson, CPA and founder of Fola Financial in New York

Prince Loove

In the midst of the public health crisis, the number of working black entrepreneurs has dropped by more than 40%, according to recent studies by the Stanford Institute for Economic Policy and Research.

However, a survey found that only one in ten Black or Latinx small business owners received the support they had requested under the government stimulus package. The Center for Responsible Lending also found that many black entrepreneurs were excluded from the Paycheck Protection Program, the small business loan designed to keep employees on the payroll throughout the pandemic. Application deadline is August 8th.

Unbanked and underbanked were particularly disadvantaged.

"They didn't run all the banks when they introduced the PPP," said Sheneya Wilson, CPA and founder of Fola Financial in New York. "The ones you had to have an account with before COVID-19."

Provision of lifelines for companies

At Hope Credit Union, a CDFI with almost 30 locations in the south, the PPP numbers are much better. More than half of the paycheck protection loans granted there during the pandemic went to color business owners.

"We are bringing people into the banking system in one of the most under-banked regions in the nation," said Bill Bynum, CEO of Hope Credit Union. "We help them access a range of tools, from loan products to down payment support for first-time buyers."

The credit cooperative also helps formerly imprisoned people to access savings accounts and small loans by taking into account factors such as rent or cell phone payment records for people with low or uneasy credit ratings. African Americans are arrested five times more often than whites, according to NAACP.

You can live anywhere in the US and open a savings account with Hope Credit Union, Bynum said.

Bill Bynum, CEO of Hope Credit Union

Source: Bill Bynum

The Lower East Side Federal Credit Union, Anther CDFI, supports immigrants by offering their savings and loan products to members who have an individual tax identification number instead of a social security number.

"All of our products and services are designed to benefit our color members and provide financial services to vulnerable communities where many people are either not or only under one bank," said Maureen Genna, general manager of Lower East Side People & # 39; s Federal Credit Union. (To become a member, you must live or work in certain neighborhoods of New York City, or live anywhere in the city and earn less than $ 50,000.)

Overall, according to an analysis by the Credit Union National Association, more than 17% of the members of the credit union are black, compared to around 13% of bank customers. At YourMoneyFurther.com you can find a credit union in your area.

Lower East Side Federal Credit Union

Source: Lower East Side Credit Union

OneUnited Bank, a black-owned CDFI, offers second-chance checking for people who may have difficulty opening accounts elsewhere due to incomplete banking history. Anyone can join the bank, which has offices in Los Angeles, Boston, and Miami.

The bank has also provided lifelines to small businesses through PPP loans.

"The first PPP loan we processed was an Uber driver," said Kevin Cohee, CEO of OneUnited. "The reason we did this was to point out that it is the smallest of us – the one where you could lose money – that needs the most help."

Finally, Ponce Bank, a CDFI headquartered in Bronx, New York, helped clients build loans. The bank recently partnered with Grain Technology to provide individuals with a line of credit using their existing debit card.

"These are revolving credit lines for those with little or no credit," said Frank Perez, Ponce Bank's executive vice president and CFO. "This is reported to the credit agencies. Now we are helping people who are under-served."

The bank also recently acquired Mortgage World Bankers in Queens, New York, which means that it will soon be able to offer its customers 30-year mortgages.

"With this acquisition, it's another tool in our war chest to help low-income communities get the mortgage they're looking for," said Perez.

What you need to know before swapping

Before you transfer your money from one institution to another, you should compare the fees between the two, said Graciela Aponte-Diaz, head of federal campaigns at the Center for Responsible Lending.

"There are now many checking accounts with monthly fees," she said. "You want to be aware of this before you switch."

You should also ensure that your bank is supported by the Federal Deposit Insurance Corporation, which insures your savings up to $ 250,000 per depositor per bank. The credit unions are now insured with the National Credit Union Administration, also up to $ 250,000 per individual account.

Credit unions and CDFIs can also offer competitive car loan and mortgage rates, said Aponte-Diaz.

"See who offers you the best interest rate," she said. "If the credit union and the big bank offer the same thing, the decision for the credit union means that the interest you repay will be used for their earnings rather than for a big bank."

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