A number of ‘banking deserts’ have emerged in the rural South, experts have warned – after companies slashed a record number of branches last year.
A report by the Consumer Financial Protection Bureau (CFPB) found that there are only 3.5 bank branches per 10,000 people in the South – compared to 5 per 10,000 across the US.
The lack of competition means Southern households suffer lower interest rates on mortgages, credit cards and small business loans and have limited access to ATMs.
And it has led to a surge in ‘unbanked households’ – those who have not registered with any financial institution at all – in the region.
In Mississippi, 11.1 percent of the population is “unbanked” while in Louisiana this figure is 8.1 percent. The two states have the highest rates of unbanked populations in the US, according to the ‘Consumer Finance in the Rural South’ report.
A report by the Consumer Financial Protection Bureau (CFPB) found that there are only 3.5 bank branches per 10,000 people in the South – compared to 5 across the US.
The main barriers to access include: not being able to meet minimum balance requirements, distrust of banks, high fees and struggling to meet identification requirements.
It comes after Dailymail.com exclusively revealed that American banks had closed nearly 10,000 branches since 2019 – leaving the community without access to basic financial services.
A ‘banking desert’ is defined as an area where residents live more than 10 miles away from a bank or credit union.
The crisis is especially exacerbated in the South which has a higher proportion of rural areas meaning banks are less likely to open branches there due to low footfall.
Of the 48 million people in the South, about 23 percent live in rural areas – compared to only 14 percent nationally.
CFPB Director Rohit Chopra said: ‘The Rural South faces different challenges when it comes to equitable access to banking.
‘Understanding regional differences across the country will help us determine where financial markets can work better for all.’
The report found that an average of 27 percent of rural South residents were denied mortgage applications – compared to 11 percent nationally.
This is despite the fact that residents in these areas apply for mortgages at the same rate as households across the country – 19 per 1,000 residents.
In Mississippi, 11.1 percent of the population are ‘unbanked’ – making it one of the highest rates in the country
In Louisiana 8.1 percent of households remain ‘unbanked’. The reasons households gave for not registering with financial services included: distrust of banks and high fees
The fate of non-white residents is even worse, with black rural borrowers making up just 9 percent of home loans between 2018 and 2021 — even though they represent 24 percent of the region’s rural population.
What’s more, residents of the rural South who obtain credit pay an average of 3.51 percent in interest – compared to 3.13 percent nationally.
Research notes that this unequal disparity hits those who can afford it least – as residents of southern states are more likely to have lower incomes and higher subprime and subprime credit rates.
Experts have long sounded the alarm over reduced access to American bank branches.
Data from S&P Global Market Intelligence shows 9,536 brick-and-mortar branches at both legacy and large banks have closed since 2019.
In 2022, Truist Bank led the pack with the most branch closures, closing 422 outlets nationwide, while Bank of America slashed 322, according to data.
According to the National Community Reinvestment Coalition, a third of the locations closed from 2017 to 2021 occurred in areas that are mostly low-income and majority minorities.
It comes after Dailymail.com exclusively revealed that American banks had closed nearly 10,000 branches since 2019.
In 2022, Truist Bank led the group with the most branch closures, closing 422 outlets nationwide
Banks are increasingly turning to digital services – a development that has been greatly accelerated by the Covid-19 pandemic.
Tensions around the transmission of the virus deter households from exchanging cash and encourage them to use digital payment apps such as the Venmo Cash App and Block Inc.
A study by the Federal Reserve showed a 12.4 percent jump in digital transactions in the first quarter of 2020 alone.
But some customers may be reluctant to use internet banking, or have limited access to the service, making them more dependent on physical outlets.
The closures weren’t limited to small banks in rural communities – they also occurred to large heritage banks in densely populated areas.
Source: | This article originally belonged to Dailymail.co.uk