On March 10, 2022, the Consumer Financial Protection Bureau (CFPB) reported a new initiative to focus on financial issues facing rural America. That effort will initially focus on rural banking deserts, discriminatory and predatory agricultural credit, and manufactured housing.
Last month, Director Chopra invited over 50 people from organizations representing rural people across the country to tell their stories and share their concerns. Following are their stories.
- Rural Banking Deserts: Stakeholders described how stark declines in the number of banks in rural areas have had a particularly negative impact on rural communities. The decline in banks, in turn, has led to non-bank alternatives that charge higher fees and interest rates, which results in more money leaving rural communities. Trends of bank consolidation have also resulted in the loss of local, on-the-ground knowledge of how rural communities operate. As a result, banking relationships and credit disappear, followed by small businesses and jobs.We also heard that race is a major factor in banking access in rural areas; the rural counties most deeply affected by bank closures are those with a greater proportion of African American residents  relative to other rural counties. Community institutions serving rural communities of color in the Deep South and Rio Grande Valley emphasized the essential role of Community Development Financial Institutions (CDFIs) in serving people that other banks won’t. They also highlighted the need for Community Reinvestment Act requirements to support serving rural banking deserts, particularly in persistent poverty counties, which are overwhelmingly rural.
- Discriminatory and Predatory Agricultural Credit: We heard from farmers who described the important role that agricultural credit (or the lack of such credit) plays in their overall financial stability. Stakeholders working closely with Black farmers described a long history of credit providers discriminating against Black farmers contributing to the decline of Black farmers and Black land loss. In 1920 there were nearly one million Black farmers , representing 14% of all farmers, and today there are fewer than 50,000 , representing about 1.5% of all farmers. Black farmers have lost more than 12 million acres of farmland  over the past century, mostly since the 1950s. We heard from people working on the ground with Black farmers that discrimination in lending to Black farmers continues to persist  and that many Black farmers still struggle to access the credit they need.We also heard from farmers that their obligations to banks can trap them in exploitative arrangements with dominant agriculture firms. We heard from a former chicken farmer who described how consolidated poultry integrators steer farmers to take out large loans of nearly a million dollars while chicken farmers only get paid on short-term 60-day contracts that provide inconsistent, unpredictable pay. Farmers described the downstream consumer finance impacts of trying to subsist and hold onto their families’ homes and farms under these arrangements by cobbling together off-farm income, taking out credit card debt, personal loans, and other forms of credit just to make ends meet.
- Manufactured Housing: We heard from people living in rural areas that quality, affordable housing is hard to come by in rural areas and there are too few rental properties available. People depend on manufactured housing – more than half of all manufactured homes are in rural areas – which is particularly important to older people on fixed incomes. Manufactured housing residents told us that manufactured home parks are increasingly being bought up by private equity firms that have, in some cases, dramatically increased rents and tacked on fees in short periods of time. According to the residents we heard from, some feel trapped in the arrangement because they’re still paying off their home-only loan and don’t want to lose the equity they’ve invested. Manufactured home owners told us about examples when their neighbors could no longer afford the increased lot rents and were forced to move and leave their house behind because it is usually cost-prohibitive to move a manufactured home. Stakeholders reported that sometimes the private equity firm that owns the lot both forces the eviction and takes possession of the manufactured home as abandoned property without paying the owner.
The CFPB is concerned about these threats to rural household financial resiliency and committed to using their tools and authorities to ensure that rural communities, and the people who live in them, have opportunities to build wealth and thrive. The impact on financial institutions remains to be seen.