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Upset about racial justice? Where you bank can make a difference



One analysis found that more than 40% of CDFI’s loans and investments are in majority minority communities.

LeoPatrizi

Consumers can drive for racial rights – and it’s as simple as opening an account in a community bank or credit union that supports underpaid communities.

Netflix recently announced it would transfer $ 1

00 million of its cash to financial institutions that support black communities in the United States

Meanwhile, there are over 1,000 financial institutions in the Community, or CDFIs throughout the United States. These institutions specialize in social areas and more than a third of their banks are led by minorities. One analysis found that more than 40% of CDFI’s loans and investments are in majority minority communities.

“With all the race issues going on, now is the perfect time for people to open an account in a community development bank or credit union,” said John Holdsclaw, chairman of the board of the Coalition of Community Development Financial Institutions.

Personal Finance Website NerdWallet has a list of CDFIs by state.

“These institutions provide equity in these black and brown low-income communities. They were created to offer low prices and a place to build assets. It’s not about profits, it’s about creating assets,” Holdsclaw said.

A story of being overlooked

Color communities have historically been under-served by banks: 14% of black households and 10% of Latin Americans had no bank accounts in 2019, according to the Federal Reserve. By comparison, only 3% of white households are unbanked.

Overall, not having access to a bank can cost consumers more. This is because they often turn to alternative financial services to handle everyday banking needs, including payout checks at retailers or by using payroll to payroll.

Both options are full of fees. According to cash account services, consumers can 1-10% of the value of the check, according to NerdWallet. At the same time, payday loan providers may pay a fee ranging from $ 10 to $ 30 for every $ 100 borrowed, according to the Consumer Financial Protection Bureau.

Similarly, black and Latin American entrepreneurs were affected by the coronavirus pandemic – and they missed the federal lifelines that could have kept their businesses afloat.

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 is less than 40%, according to new research from the Stanford Institute for Economic Policy and Research.

However, one study found that only 1 in 10 small business owners of black or Latin companies received the help they requested within the government’s stimulus package. The Center for Responsible Lending also noted that many black businesses were shut down by the Paycheck Protection Program, the small business loans designed to keep employees on wages throughout the pandemic. The deadline for applications is August 8.

The unbanked and underbanked had a particular disadvantage.

“The first time PPP rolled out, not all banks did them,” said Sheneya Wilson, CPA and founder of Fola Financial in New York. “Those who demanded that you have an account with them before COVID-19.”

Provide lifelines to businesses

At Hope Credit Union, a CDFI with close to 30 locations in the south, the PPP numbers are much better. More than half of the payday loans issued there during the pandemic have gone to the company’s owners of color.

“We get people in the banking system in a region that is one of the most underbanked in the country,” said Bill Bynum, CEO of Hope Credit Union. “We help them access a number of tools, from credit building products to payout assistance for first time home buyers.”

The credit union also helps previously incarcerated people gain access to savings accounts and small loans by taking into account factors such as rental or mobile phone payment records for those with little or troubled credit history. African Americans are imprisoned five times as much as whites, according to the NAACP.

You can live anywhere in the United States 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 People’s Federal Credit Union, anther CDFI, helps immigrants by offering their savings and lending products to members who have an individual taxpayer’s identification number instead of a social security number.

“All of our products and services are designed to benefit our members in color and to bring financial services to risky communities where many people are either under- or under-banked,” said Maureen Genna, executive director of the Lower East Side People’s Federal Credit Union. (To be a member, you have to live or work in some New York City neighborhoods or live anywhere in the city and earn less than $ 50,000.)

Overall, more than 17% of credit union members are black, compared to about 13% of bank customers, according to an analysis by The Credit Union National Association. At YourMoneyFeather.com you can find a credit union near where you live.

Lower East Side People’s Federal Credit Union

Source: Lower East Side Credit Union

OneUnited Bank, a black-owned CDFI, offers “second chance checks” for individuals 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 dealt with was an Uber driver,” said Kevin Cohee, CEO of OneUnited. “The reason we did it was to find that it is the smallest of us – the one you can lose money on – who needs the most help.”

Finally, Ponce Bank, a CDFI headquartered in Bronx, NY, has helped clients build credit. The bank recently paired with Grain Technology to give individuals a credit line with their existing debit cards.

“These are revolving lines of credit for those with little or no credit,” said Frank Perez, CEO and CFO of Ponce Bank. “This is reported to credit companies, so now we help people who are under-served.”

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

“With this acquisition, it’s another tool in our war chest to help low-income communities get the mortgage they are looking for,” Perez said.

What to know before you change

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

“There are many checking accounts now with monthly fees,” she said. “You want to be aware of them before you change.”

You should also make sure your bank is supported by the Federal Deposit Insurance Corporation, which insures your savings up to $ 250,000 per depositor per bank. Credit unions are meanwhile insured by the National Credit Union Administration, also up to $ 250,000 per individual account.

Credit unions and CDFI can also offer competitive rates on auto loans and mortgages, Aponte-Diaz said.

“See who’s offering you the best interest rate,” she said. “If the credit union and the big bank offer the same thing, the credit union will agree that the interest you pay back will go towards their income instead of a big bank.”

More from Personal Finance:
What the next relief bill might look like
Why the new PPP deadline may not help companies
Here’s how much Medicare can cost you in retirement


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