DALLAS — Banks expanded at a breathtaking pace over the past five years, adding more than 10,000 full-service branches, but barely 1 in 10 were in inner-city, minority neighborhoods, another sign that the financial spending spree skipped substantial parts of the country.
The discrepancy means millions of people who don’t live near a bank have had to hand over $2, $5 or $10 at a time — sometimes even more — in service fees to nonbank outlets to conduct basic transactions, such as cashing checks or paying bills, that most bank customers take for granted.
Nearly six branches were added every day, with bank offices racing to exclusive neighborhoods such as University Park in Dallas, Midtown West in Manhattan and Music Row in Nashville, Tenn., as well as the fast-growing exurban communities surrounding Sacramento, Calif.; Phoenix; and Cincinnati.
Meanwhile, bank growth either declined or remained stagnant across wide swaths of the nation’s inner cities.
Data from the Federal Deposit Insurance Corp. shows that the nation’s 99,000 banks generally followed the money. About two-thirds of all neighborhoods have a median household income higher than the national average; about two- thirds of the new branches were in those neighborhoods.
An Associated Press analysis found that branches weren’t added at a proportionate rate in minority neighborhoods. Bank officials say they are following customer growth because most people choose banks based on branch locations.
“When you don’t have banks going into poor communities, you’re going to wind up with places where there are a lot of predatory products,” said Kathleen Day, a spokeswoman for the Center for Responsible Lending, a Washington-based advocacy group. “It’s not always the case — payday lending seems to target black and Hispanic neighorhoods regardless of income level or bank location — but it’s a real problem.”
Even in a digital age when banking is done online, the 99,000 bank branches are important barometers of economic health for thousands of communities. People in neighborhoods without banks are more likely to spend more of their money for basic financial transactions.
Under the Community Reinvestment Act, banks are encouraged to offer services in poor and minority neighborhoods.
James Ballantine, a senior vice president with the American Bankers Association, said banks that don’t comply can be required to enter into agreements with regulators, be fined or even lose their charter.
Even so, small and large banks alike focused most of their efforts on wealthy and fast-growing neighborhoods as the housing boom reached its zenith. Banks now receiving billions in federal bailout loans led the charge, according to AP’s analysis. The largest banks added nearly 6,800 branches between 2004 and 2008.
Fewer than 900 of those branches wound up in minority neighborhoods.
