Rural south faces “distinct challenges” in offering fair access to banking, reports assert

The rural southern U.S. “faces distinct challenges when it comes to fair access to banking,” the director of the federal consumer financial protection agency said Wednesday, especially as the region includes many areas of “banking deserts.”

Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra made his comments in conjunction with the release of two reports from the bureau focusing on banking access and consumer finance in southern states.

CFPB said the first report, “Consumer Finances in Rural Areas of the Southern Region,” compares consumer financial experiences and outcomes in rural communities in Southern states with other regions. A second report, “Banking and Credit Access in the Southern Region of the U.S.,” the agency said, dives deeper into banking access and credit access, particularly mortgage lending, in both rural and non-rural areas in the region.

Chopra indicated that the reports will help the bureau working with financial markets. “Understanding regional differences across the country will help us determine where financial marketplaces can work better for all,” he said in a statement.

The bureau said key indicators from the reports include:

  • Of the nearly 48 million people in the Southern region, about 23% live in a rural county, compared to 14% nationwide.
  • Southern states include nearly half (48%) of the nation’s persistent poverty counties (PPCs). 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.
  • 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.
  • The Southern region 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). Such a lack of local access to banking, the CFPB contended, 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,” the agency said.

Key findings of the reports, the agency said, include:

  • Southern rural consumers often have more difficulties accessing credit and face higher interest rates with more applications denied (27% of mortgage applications are denied in the rural South compared to 11% nationally).
  • Credit scores alone do not explain the lower rate 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,” the bureau asserted. “These trends hold true among applicants with both low and high credit scores.”
  • Unbanked rates remain high. Mississippi and Louisiana have the highest unbanked rates in the country, at 11.1% and 8.1% respectively, the bureau said. 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, CFPB said.
  • Car loan delinquencies are higher in rural Southern areas: 16% of rural Southerners have an auto loan delinquency, compared to 10% in other rural areas. In rural Southern PPCs,

CFPB Releases Reports on Banking Access and Consumer Finance in Southern States