This week, the Ferguson Commission released an analysis of the socio-economic environment following the shooting of Michael Brown that included recommendations for financially strengthening lower-income areas. The Commission, appointed by Governor Jay Nixon (D), proposed improved access to traditional banking while discouraging services provided by payday lenders and other industries that work predominantly with poorer populations.
“In many areas, the number of alternative financial service providers (check cashers, title lenders and payday lenders) far exceeds the number of bank and credit union branches,” said the Commission.
The report also called for updates to the Community Reinvestment Act (CRA), the federal statute that requires banks to serve low-income customers in the geographic areas where banks do business. It proposed that CRA implementation be consolidated within one banking regulator and suggested that banks receive CRA credit when investing in Community Development Financial Institutions and Community Development Banks. Additionally, the Commission advised that bank mergers should be weighed carefully if they would result in branch closures in disadvantaged communities.
The report also asked the Consumer Financial Protection Bureau and Missouri Legislature to restrict payday lending and title loan companies’ activities in these areas while capping annual interest rates at 36%.
These proposals echo federal efforts initiated earlier this year to re-examine CRA implementation. Senator Elizabeth Warren (D-MA) and Representative Elijah Cummings (D-MD) asked the Government Accountability Office to study how the Fed, OCC, and FDIC may enhance CRA implementation. Additionally, Fed Chair Janet Yellen informed Congress in July that the Fed, OCC, and FDIC were in the process of drafting a new, joint CRA compliance memo.
Source: American Banker, “Ferguson Report Recommends Banking Reforms to Reduce Inequality” (September 15, 2015).
