Last Wednesday the Federal Deposit Insurance Corporation released a study outlining the number of people who are unbanked and underbanked in the country. The St. Louis metropolitan area was found to have the highest percentage of unbanked blacks in the country and the largest disparity between unbanked blacks and whites.
Nine million American households are completely unbanked, and an additional 21 million households are underbanked, according to the FDIC. The study also found that those who are unbanked or underbanked are disproportionately found in minority and low-income communities.
Unbanked Americans often seek alternative financial services, such as payday lenders, check-cashing vendors, pawn shops and auto title loans that charge much higher interest rates than banks.
“People are trapped into debt and are often unable to get out of that trap,” said Mira Tanna, assistant director of the Metropolitan St. Louis Equal Housing Opportunity Council.
Possibly even more alarming is the disparity between unbanked whites and blacks in the St. Louis region. In St. Louis, a stunning 31 percent of black households are unbanked compared to 1.1 percent of unbanked white households.
According to the Metropolitan St. Louis Equal Housing Opportunity Council, at the center of the problem are banks that often do not properly serve areas that are predominantly minority or low-income.
“The report shows that banks in the St. Louis region have done a poor job reaching out to African Americans,” said Mira Tanna.
The council recently conducted a study that names three banks that are not doing enough in the area of community reinvestment. Enterprise Bank & Trust, Regions Bank and First Bank all have taken money from the federal TARP program but have not successfully allocated funds for minority interests, according to the report.
The council also found that in St. Louis-area ZIP codes with predominantly white residents (excluding the financial districts of Clayton and Downtown), there were an average of 7.88 banks, while in predominantly black ZIP codes there were an average of 2 banks.
Another bank singled out in the report was Midwest BankCentre, a large bank with a prominent presence in the St. Louis region.
“In the past five years the bank has given no African-American mortgage loans,” Tanna said.
Midwest BankCentre spokesman Steve Houston said the council’s claims stem from a complaint filed by the St. Louis Equal Housing and Community Reinvestment Alliance addressed to Midwest BankCentre Chairman Ronald T. Barnes.
In a statement addressing the filed complaint, Barnes said, “When the facts are presented to the Fed, they will show that Midwest BankCentre’s lending to minorities has actually steadily increased since 2004. In addition, there has been no meaningful difference in mortgage loan approval rates between its minority applicants and white applicants during that time.”
Many Americans who are unbanked or underbanked have mentioned obstacles such as the distance to the nearest bank and distrust of financial institutions.
The council suggests Choice Credit Union as a model for other banks to follow. Choice Credit Union’s clients and employees are from social service agencies who can help address many reservations that unbanked citizens may have about banks.
For more information, visit www.slehcra.org.
