Cummings and Warren Host ‘Middle Class Prosperity Project’ Forum in Baltimore on Predatory Financial Services
Baltimore, Maryland (May 11, 2015)—Today, following the recent unrest in Baltimore and the death of Freddie Gray, Rep. Elijah E. Cummings, Ranking Member of the House Committee on Oversight and Government Reform, and Senator Elizabeth Warren convened the fifth in a series of congressional forums as part of their Middle Class Prosperity Project to examine the lack of economic access and opportunity in many communities, including Baltimore.
The forum, which took place in Baltimore, was also attended by Maryland Congressman John Sarbanes, and it examined how mainstream financial service providers are not fully meeting the needs of many families in middle class—and those who aspire to it—for basic banking services like check cashing services and small dollar loans.
According to the FDIC, in 2013 one out of every thirteen households in the United States was “unbanked”—meaning they did not have a bank account—and one in five households was “underbanked”—meaning they had at least one bank account, but also used “alternative” financial service providers, such as liquor stores and pawn shops.
“Freddie Gray’s death has drawn the nation’s eyes to Baltimore,” said Cummings. “Of course, his death has brought renewed attention to the challenges we face with police-community relations and criminal justice reform. But it has also highlighted the deep and systemic economic challenges that Mr. Gray faced during his lifetime and that many other residents of this city and cities around this nation face every single day. My hope is that the eyes of the nation do not turn away before they see the full scope of these challenges and the urgent need to address them.”
"Predatory lending practices like payday lending target those who already live on the margins of our financial system and strip wealth from middle class families, especially from communities of color,” said Warren. “This isn’t a business model – it’s a trap designed to ensnare families that can’t build enough of a financial cushion to weather ups and downs. And it’s a trap that makes sure they never will build that cushion."
“Too many communities in our country lack access to basic financial tools, leaving millions of Americans unable to save and invest,” said Sarbanes. “The path to economic opportunity begins with creating well-paying jobs, but it continues with building wealth. If we want to create a more equal and just society, we need to improve the financial security of all Americans.”
The lack of basic banking services is more pronounced in Baltimore and among minorities. The FDIC found that 25% of residents in the Baltimore-Towson metro area are underbanked and over 5% are unbanked, and among the African-American population nationwide, 41% are underbanked and 13% are unbanked. Consumer groups at today’s forum explained that “alternative” financial service providers sometimes employ predatory practices to trap consumers in a cycle of high fees and debt, further victimizing vulnerable communities.
At the forum, Cummings highlighted two maps compiled by the National Community Reinvestment Coalition (NCRC). The first map, which includes all of Baltimore City, shows many more bank branches clustered in the high income areas, while the low and moderate income areas have fewer banks. According to the NCRC, Baltimore has 124 bank branches, but 166 “alternative” financial services locations. The second map, which shows a close-up of the neighborhood where Freddie Gray lived, shows only three bank branches in the entire area and more than 18 “alternative” providers.
Warren and Cummings also sent a letter to GAO today requesting an evaluation of the Community Reinvestment Act that would address actions bank regulators could take to increase access to basic banking services such as checking and savings accounts and small-dollar, non-mortgage consumer loans for low- and moderate-income Americans, and actions bank regulators could take to expand or strengthen such incentives.
Click here to watch today’s forum.