Posted August 5, 2020
Call to action is based on findings of a new report that summarizes current banking relief and outlines needed future financial reforms
The San Francisco Office of Financial Empowerment (SFOFE) and the California Reinvestment Coalition (CRC) released a collaborative report today reviewing banking relief efforts for consumers and borrowers during COVID-19, and offering recommendations for reform. The report, titled “Pre-Existing Conditions: Assessing the Financial Services Response to Racism, Inequality, and COVID-19” details how banking relief as currently offered has been inconsistent, insufficiently transparent, and inadequate, and calls on banks and credit unions to work with local governments and consumer advocates and take bolder action to support account-holders, borrowers and their communities as a whole.
“COVID-19 has had a crushing impact on families and small businesses, particularly in our communities of color,” said San Francisco Treasurer José Cisneros, who co-chairs the city’s Economic Recovery Task Force. “Inequities in our financial system have long been hiding in plain sight. In the wake of COVID-19, financial institutions need to step up and transform how they prioritize, serve, and invest in low-income, communities of color.”
The global COVID-19 pandemic has created both a public health and an economic crisis, resulting in a severe threat to the financial stability and wellbeing of millions of Americans. Nearly 50 million Americans filed for unemployment through early July, with roughly one out of every five workers currently unemployed nationally; in California, the Department of Finance projected that unemployment will remain above 20% for the rest of the year. Yet bills keep coming and debts keep piling up. The outcome for Black, Indigenous, and People of Color (BIPOC) communities are even more bleak as they face the COVID-19 crisis on top of endemic racism that has consistently excluded them from the financial mainstream, including access to safe and affordable bank accounts, mortgages and credit.
“The pandemic has laid to bare the structural inequalities that have worked against communities of color for decades. Black and Latino communities have systematically been denied safe and affordable bank accounts, disproportionately foreclosed upon, and face redlining practices when trying to access small business loans,” said Paulina Gonzalez-Brito, Executive Director, California Reinvestment Coalition. “In fact, federal relief was a complete failure, leaving 98% of Black and 94% of Latino small businesses out of PPP loans. The time for bold action is now. Our policy recommendations will ensure that vulnerable communities are protected from predatory lending, make it easier for small business owners to get back on their feet, and invest in those who are hurting the most.”
Surveys of banking relief by CRC and the SFOFE show that while some relief is available to banking customers impacted by COVID-19, accessing this relief will likely be challenging for many, especially for those communities who have been systematically excluded and discriminated against. By and large, banks indicated in survey responses that customers are required to contact their financial institution to request help and that customers would likely need to attest or demonstrate that they have been financially harmed by COVID-19. These are potentially heavy burdens, especially for BIPOC that have been historically marginalized and systematically denied access to banking. Limited English Proficiency (LEP) clients and those with limited experience navigating the banking sector, or essential workers who do not have the luxury to navigate long hold times may not fare well in accessing relief; technological barriers (such as lack of scanner, fax, or even internet) also pose significant challenges. So, while it is important that relief is offered by financial institutions, it is critical to ensure that this relief is actually reaching hard hit households and communities.
The report includes:
- Background and context for current economic conditions, describing the financial insecurity that existed before the crisis and how the ongoing economic fallout will exacerbate these problems – especially for BIPOC who are at higher risk of distress due to a long history of discrimination and exclusion;
- Analysis and discussion of existing forms of banking relief, drawing from two recent surveys of banks and credit unions and other sources.
- A set of recommendations for banks and credit unions on COVID-19 relief dealing with consumer banking, housing and home lending, small business borrowing, and community reinvestment and corporate citizenship; and
- Policy responses and other next steps that must be taken to dismantle systems that lead to financial abuse and to reimagine how banks can best protect all consumers and safeguard the financial stability of all our communities, with a focus on BIPOC and communities most impacted by COVID and systemic racism.
The report is available online at: https://sfgov.org/ofe/Banking-Relief-Report
About the San Francisco Office of Financial Empowerment
The San Francisco Office of Financial Empowerment (SFOFE) is a unique private-public partnership housed within the Office of the Treasurer & Tax Collector that convenes, innovates and advocates to strengthen economic security and mobility of all San Franciscans. For more than a decade, under the leadership of Treasurer José Cisneros, the SFOFE has engaged partners inside and outside City Hall to equip San Franciscans with knowledge, skills and resources to strengthen their financial health and well-being. At the same time, the SFOFE has leveraged what has worked on the ground to model what is possible across the country.
About the California Reinvestment Coalition
The California Reinvestment Coalition (CRC) builds an inclusive and fair economy that meets the needs of communities of color and low-income communities by ensuring that banks and other corporations invest and conduct business in our communities in a just and equitable manner. CRC’s 300 organizational members include multi-service agencies, affordable housing developers, housing and financial capability counselors, tenants’ rights and legal aid organizations, small business technical assistance providers, Community Development Financial Institutions (CDFIs), small farm incubators, immigrant service organizations, and other community-serving organizations located throughout California. We envision a future in which people of color and low-income people live and participate fully and equally in financially healthy and stable communities without fear of displacement and have the tools necessary to build household and community wealth.