Waters’ proposed legislation would benefit underbanked communities

One thing we’ve all learned over the past two years is that the coronavirus pandemic impacted every corner of the entire world. In the United States, we know that COVID-19 took an enormous toll on our health and safety, while crushing local economies and devastating already underserved communities. At a time when leadership and guidance from financial institutions was critical, a number of banks across the country turned their backs on Main Street America and began closing their doors in communities already suffering from financial and other disparities.

A recent report from the National Community Reinvestment Coalition found that while families and Main Street small businesses were desperate for financial support and counsel, America’s banks took advantage of the crisis to accelerate the pace of their already planned branch closures, escalating the formation rate of banking deserts. Since March 2020, banks have closed more than 4,000 branches across the country. At 201 closures per month, they doubled their closure rate, which — for the past 10 years — averaged around 99 per month. The NCRC also says that over the past five years, one-third of these closures were concentrated in low- to middle-income and minority neighborhoods.

In stark contrast, during the same period credit unions increased their presence in these communities by 2.4%. Furthermore, data from the National Credit Union Administration shows that credit union branches remained at the same levels throughout the first year of the pandemic, and that more than 730 credit unions continued plans to add branches to their networks. Public data shows that from 2012 to 2021, the presence of megabanks in rural and underserved areas across the country, where branch availability is crucial to ending inequalities in access to financial services, is down 10.8%.

A recent Consumer Financial Protection Bureau report reaffirms the detriment bank branch closures have on consumers in rural communities. According to the report, continued bank consolidations and closures are hurting those who lack access to banking in rural areas and who are dependent on physical bank branches or “have less access to the internet and online banking options and are more likely to live in banking deserts.” The CFPB recognizes that credit unions are doing their part to expand financial equity while banks continue to abandon these communities in need.

Citing a mass movement toward online and mobile banking options as one of the many justifications for their brick-and-mortar closures, megabanks have failed to acknowledge and address the widening pockets of underbanked areas. The result of these closures continues to undermine consumer financial equity and stunt small business growth.

According to research from the American Economic Association, the rise of bank closures has led to a persistent decline in local small-business lending, rippling negative effects into local communities within a six-mile vicinity. The decline in local credit also leads to a 2-percentage-point reduction in employment growth rates.

Unlike megabanks, credit unions understand the impact of having physical locations to close the financial inequality gap and offer in-person support. This is why the National Association of Federally-Insured Credit Unions supports Financial Services Committee Chairwoman Maxine Waters’ recently introduced legislation, the Expanding Financial Access for Underserved Communities Act, which will continue to support credit unions and their long-established efforts to eliminate financial disparities in underserved communities across our country.

It should come as no surprise that more than 50 state bankers associations recently sent a joint letter in opposition to this legislation, falsely claiming that all credit unions already have the authority to enter underserved communities. The banking industry’s opposition directly undermines the bill’s goal to expand financial opportunities for consumers in low- to moderate-income communities and create more access to small-business lending.

While banking trades hide behind a message-based facade of support for programs that build on financial equity, they can’t hide their hypocrisy. While their members are closing branches in rural and underserved areas at a record pace, they are fighting the ability of credit unions to enter those communities and ensure that people still have access to safe, affordable financial services.

Meanwhile, NAFCU has continued to work with industry stakeholders and other members of Congress to bolster support for small businesses and forgotten communities across the country. Even before the pandemic, credit unions that were certified as community development financial institutions and minority depository institutions were working to meet the needs of underserved communities to help small businesses gain access to capital.

As we emerge from the pandemic and as Americans get back on their feet, we will have the men and women leading our 5,400 credit unions to thank for their leadership and foundational belief that every single American should have equal opportunities for financial freedom.