A report to examine the conditions surrounding last year's unrest in Ferguson, Mo., is calling for officials to strengthen poor minority communities' access to banking services and restrict the prevalence of predatory lending to reduce crime and poverty.
The Sept. 14 report by the 16-member Ferguson Commission says that, in addition to reducing unemployment and costs of child and medical care, state and federal governments should address the lack of traditional banking services in low- and moderate-income communities like Ferguson to arrest the cycle of poverty that leads to crime and social unrest.
The commission's research showed that communities with access to those traditional financial services are able to build wealth, but too frequently the only resources that can meet those needs are lightly regulated predatory lenders.
"It has been shown that very poor families can save and accumulate assets when well-structured products, programs, and policies are accessible," the report said. "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."
The commission specifically called for revisions to the Community Reinvestment Act, the federal anti-redlining law that requires banks to offer loans and other financial services to low- and moderate-income borrowers in the areas where they operate.
The commission said that CRA compliance should be consolidated under one agency, rather than diffused among various banking regulators, and said that banks should get appropriate CRA credit for investing in Community Development Financial Institutions and Community Development Banks in underserved communities. Mergers of banks should also be considered very closely in cases where they result in the closure of branches in underserved communities, and regulators should design a "community investment benchmark" to better rank and compare banks’ CRA compliance.
Regulators can also better enforce the existing provisions of the CRA, the report said, specifically related to fair housing laws and allowing new banks to apply for Federal Deposit Insurance Corp. coverage.
The report also called on the Consumer Financial Protection Bureau and Missouri Legislature to set more stringent limits on the activities of alternative financial service providers like payday lenders and title loan companies. The report said that repayment terms, collection and underwriting standards should be changed to put them more in line with traditional lending practices, and said that annual percentage rates of interest should be capped at 36%.
The Ferguson Commission was created last November by Gov. Jay Nixon (D) to survey the social and economic conditions surrounding the weeks of civil unrest that followed the death of Michael Brown, an unarmed black teenager who was shot and killed by a white police officer. The incident — as well as similar fatal encounters in Cleveland, Baltimore, New York and elsewhere — has sparked a heated national debate about the relationship between police forces and minority communities in which they operate.
But it has also raised questions about how the state, local and federal governments can address the underlying social and economic conditions that breed strained relationships between police and minority communities.
Sen. Elizabeth Warren, D-Mass., and Rep. Elijah Cummings, D-Md., called on the Government Accountability Office to examine ways in which the Federal Reserve, Office of the Comptroller of the Currency and FDIC can improve its CRA implementation to improve access to banking services. And Fed Chair Janet Yellen said in July that the Fed, OCC and FDIC are now working on an updated interagency CRA compliance memo "to consider providing those services that people in those communities need."