If you live in the South, you may be living in a banking desert, according to a new report from the Consumer Financial Protection Bureau (CFPB). Simply put, there aren't enough banks and credit unions in much of the area to support residents' financial needs.
“The rural South faces distinct challenges when it comes to fair access to banking,” said CFPB Director Rohit Chopra. “Understanding regional differences across the country will help us determine where financial marketplaces can work better for all.”
Financially, the South has several factors working against it. For one, it's more rural than the rest of the country. Of the roughly 48 million people in the South, about 23% live in a rural county, compared to about 14% nationwide.
In addition, the Southern states include nearly half (48%) of the nation’s persistent poverty counties. More than a third of residents in the region are people of color, and 70% of the United States’ rural Black population resides in these states.
Significantly, the South is short on banks. It has fewer bank branches per person than other areas of the country (3.6 branches per 10,000 people, compared to 5 branches per 10,000 people nationally). A lack of local access to banking options can make it harder to get competitive interest rates on mortgages, credit cards, or small business loans.
Even where there are banking options in rural areas, the report finds there may be limited access to banking services like ATMs and lending services even when branches are present.
Highlights of the study
Key findings in today’s reports include:
- Southern consumers often have more difficulties accessing credit and face higher interest rates. While Southern rural consumers apply for mortgages at the same rate as consumers nationwide (19 per 1,000 residents), they are much more likely to have their applications denied (27% of mortgage applications are denied in the rural South compared to 11% nationally). Additionally, rural Southerners who obtain credit tend to pay higher interest rates on average, 3.51% compared to 3.13% nationally.
- Initial analyses show credit scores alone do not explain these lower levels of lending. Both race and rural residency appear to play a role in access to credit. People of color are more likely to be denied credit, compared to similarly-situated white borrowers, and rural Southerners are denied at higher rates than their non-rural counterparts. These trends hold true among applicants with both low and high credit scores.
- Unbanked rates in the region remain high despite gains. Two states in the region, Mississippi and Louisiana, have the highest unbanked rates in the country, at 11.1% and 8.1% respectively. The highest unbanked rates in the region are in rural communities and communities of color; for example, in Mississippi and Georgia, the rural unbanked rate is almost double the unbanked rate in metro areas.
- Consumers face challenges in auto lending. 16% of rural Southerners have an auto loan delinquency, compared to 10% in other rural areas. In rural Southern PPCs, 20% of consumers are delinquent on an auto loan. Rural Southerners remain highly dependent on personal vehicles for transportation due to longer commutes and a lack of alternative transit infrastructure and may therefore be particularly impacted by difficulty obtaining an auto loan.
Today’s reports build on CFPB’s prior work to explore regional trends in consumer finances, particularly in rural areas.