A series of “banking deserts” are springing up in the rural South, experts have warned, after companies cut branches in record numbers last year.
A report from the Consumer Financial Protection Bureau (CFPB) found that there are just 3.5 bank branches per 10,000 people in the South, compared to 5 per 10,000 in the rest of the world. USA
The lack of competition means that households in the South suffer from lower interest rates on mortgages, credit cards and small business loans and have limited access to ATMs.
And it has led to an increase in ‘unbanked households’, those who are 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 one of the highest unbanked rates in the US, according to the ‘Consumer Finances in Rural Areas of the Southern Region’ report.
A report from the Consumer Financial Protection Bureau (CFPB) found that there are just 3.5 bank branches per 10,000 people in the South, compared to 5 in the rest of the US.
The main access barriers include: not being able to meet minimum balance requirements, distrust of banks, high fees and difficulties in meeting identification requirements.
It comes after Dailymail.com exclusively revealed that US banks have closed nearly 10,000 branches since 2019, leaving communities without access to basic financial services.
A ‘bank wilderness’ is defined as an area where residents live more than 10 miles from a bank or credit union.
The crisis is particularly exacerbated in the south, which has a higher proportion of rural areas, meaning banks are less inclined to keep branches open there due to low footfall.
Of the 48 million residents in the South, about 23 percent live in a rural county, compared to just 14 percent nationwide.
CFPB Director Rohit Chopra said: ‘The rural south faces distinct challenges when it comes to fair access to banking.
“Understanding regional differences across the country will help us determine where financial markets may work best for everyone.”
The report found that 27 percent of rural residents in the South had their mortgage applications denied on average, compared to 11 percent nationally.
This is despite the fact that citizens of these areas apply for mortgages at the same rate as homes nationwide: 19 per 1,000 residents.
In Mississippi, 11.1 percent of the population is unbanked, making it one of the highest rates in the country.
In Louisiana, 8.1 percent of households remain “unbanked.” Reasons given by households for not subscribing to a financial service included: distrust of banks and high fees
Non-white residents fare even worse, with black rural borrowers accounting for just 9 percent of home loans between 2018 and 2021, despite making up 24 percent of the region’s rural population.
Additionally, rural southerners who obtain credit pay an average interest rate of 3.51 percent, compared to 3.13 percent nationally.
The research notes that these unfair discrepancies affect those who can least afford it, as residents of southern states are more likely to have lower incomes and higher rates of subprime and deep subprime credit scores.
Experts have long sounded the alarm about declining access to America’s bank branches.
Data from S&P Global Market Intelligence shows that 9,536 physical branches at small and large legacy banks have closed their doors since 2019.
In 2022, Truist Bank led the pack with the most branch closures, closing 422 outlets across the country, while Bank of America cut 322, according to the data.
According to the National Community Reinvestment Coalition, one-third of the locations closed between 2017 and 2021 occurred in areas that were predominantly low-income and majority-minority.
It comes after Dailymail.com exclusively revealed that US banks have closed nearly 10,000 branches since 2019.
In 2022, Truist Bank led the pack with the most branch closures, closing 422 outlets across the country.
Banks are increasingly turning to digital services, a development greatly accelerated by the Covid-19 pandemic.
Nerves around the transmission of the virus discouraged households from exchanging cash and encouraged them to use digital payment apps like Venmo and Block Inc’s Cash App.
A Federal Reserve study showed a 12.4% increase 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 these services, making them more dependent on physical outlets.
Closures are not limited to small banks in rural communities, but are also taking place at large legacy banks in densely populated areas.