UVA Researcher Looks at Banks' Effects on Neighborhoods

August 19, 2011
National Public Radio 
payday lending news

It is not surprising that banks are drawn to wealthy areas; but as it happens, they may also help make communities safer and better off. To find out more about that relationship, a University of Virginia researcher has been studying what transpires when banks move out of poor areas and why credit unions and banks can pay large neighborhood dividends. Greg Fairchild, director of the University of Virginia's Taylor Murphy Center, analyzed communities where banks have closed branches over the past few decades as a result of consolidation. "The areas outside of Northern Virginia, outside of Richmond, outside of general affluence were where the areas where bank branches were likely to decline," he determined. And when the banks vacated, he said, predators moved in. "These would be check cashers, payday lenders, automobile loan companies, title loan companies," he specified. Such businesses frequently charged very steep rates, up to 300 percent on loans, and predatory lenders were not the only ones who swooped in on bankless consumers. Moreover, the dearth of banking services made these workers vulnerable to violent crime -- robbery especially -- after paydays, Fairchild says. But when communities had banks, crime rates decreased, and that helped drive up property values.
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