No TV crews or journalists were there last summer when a local credit union opened a new branch on North Main Street in Hartford's northeast neighborhood. But make no mistake, this was one of 2015's biggest wins for the Capital City, and one that has more potential to turn the tide for financially-strapped, north-end residents than any ballpark, hotel, or casino that may garner headlines on the front pages or generate buzz on social media.
The Hartford Municipal Employee's Federal Credit Union (and you thought Yard Goats was a tough name to swallow) moved in to a vacant building that had previously served as a branch for one of America's largest banks. Not that long ago there were four bank branches in the three densely populated north-end neighborhoods that now constitute the newly designated "Promise Zone" (the neighborhoods are Northeast, Clay Arsenal, and Upper Albany). In recent years three of the four branches have quietly closed their doors, leaving the 24,000 residents in the Promise Zone in what's now called a "banking desert" (not coincidentally three check-cashing stores have opened in the Promise Zone during roughly the same timeframe). And in the north end, where more than a third of residents don't have their own vehicles and a significant percentage don't have the technological capacity to engage in online banking, access to a local financial institution still matters.
The national Corporation for Enterprise Development (CFED) estimates that 21 percent of Hartford households have no accounts with any bank or credit union (statewide, only about 5 percent of residents are unbanked). In addition, CFED's analysis indicated that another 24 percent of Hartford households are "underbanked," meaning they have an account, but continue to rely on alternative financial services like check-cashing services, payday loans (illegal in Connecticut, but readily available online), rent-to-own contracts, and pawn shops. What's the cost of these services? Over the course of a typical north-end resident's working life, the fees for using a check-cashing service can add up to one whole year's worth of wages. Rent-to-own agreements charge interest at rates of 98 percent and higher. And online payday loans are available at rates in excess of 1,000 percent.
So with 45 percent of our households either unbanked or underbanked, how does Hartford compare to other cities in New England? Hartford Community Loan Fund looked at CFED data for New England's 30 largest cities. No city had a higher proportion of unbanked and underbanked households than Hartford (the closest in Connecticut was Bridgeport at 37 percent). In fact, of all U.S. cities over 100,000 residents, HCLF analysis found only a handful of municipalities whose residents were more disconnected from banks and credit unions — and the more affordable credit products generally offered by these institutions — than Hartford (for large cities, hard-hit Detroit topped the list at 49 percent).
To make matters worse, the past three years have seen the doors permanently closed at Hartford's two largest providers of financial literacy and credit counseling services, Co-Opportunity and HART — two organizations that frequently made connections between banks or credit unions and the city's low-wealth residents. So it's no surprise that not only are a significant number of our residents unbanked or underbanked, but about the same percentage citywide (45 percent) report credit scores below the 620 cutoff needed for access to just and affordable credit products (in the Promise Zone it's 55 percent with scores below 620; in Hartford's downtown, however, only 7 percent).
Research has shown that communities that develop and nurture a strong financial services infrastructure are more likely to develop financially stable and empowered households. What would such an infrastructure look like? Healthy and accessible banks and credit unions, robust and effective financial education and empowerment services, including homeownership counseling, and lower-cost providers of alternative products such as those offered by mission-oriented lenders like community development financial institutions. And to be effective, the services must be culturally relevant to the residents in the community.
Like several innovative and progressive mayors in other U.S. cities have already done, Hartford's new Mayor Luke Bronin should consider creating an Office of Financial Empowerment, which would bring together leaders from local banks, credit unions, and insurance companies, along with not-for-profits like the Village for Families and Children and Capital Community College, two organizations now trying to fill the void in financial education and capacity-building for Hartford residents. The objective should be to strategically focus our collective efforts on building the financial well-being of Hartford households, especially those in the city's most economically stressed neighborhoods. That would be a real homerun for Hartford.
Rex Fowler is a resident of Hartford's northeast neighborhood and executive director of Hartford Community Loan Fund, a community development financial institution. The Fund is the recent recipient of a $2 million award from the U.S. Dept. of Treasury, the majority of which it has committed to lend in the North Hartford Promise Zone.
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