How financial institutions can address Greater Rochester’s wealth gap

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The wealth gap between communities in the U.S. and here in Greater Rochester is no secret. According to ACT Rochester’s “Hard Facts Update,” which analyzes U.S. Census data, Black and Latino residents locally face greater challenges to building wealth and economic opportunity, earning roughly 50 percent less than white residents. Homeownership is considered a meaningful way to build equity and stability, but homeownership rates in Greater Rochester for Black and Latino populations are less than half that of white populations—32 percent and 35 percent, respectively, in the nine-county Greater Rochester region compared to 73 percent among white residents.

Marcelina Nobrega Courtney

This disparity seeps into other areas of financial services as well, hindering the ability to build wealth through other means. According to most recent reports, approximately 20 percent of Rochester residents are either unbanked or underbanked, and the Black and Latino communities are the most significantly impacted. Alternative financial services—including check cashers, prepaid cards and payday lending—often fill the gap for these residents, but they can come at a much higher price tag when compared to traditional financial services.

As a community of forward-thinking leaders and change makers, we need to examine and address the barriers that perpetuate this gap in economic prosperity and join together to implement tangible solutions that help all communities thrive financially. Steps taken over the last year by ESL offer an example of what financial institutions can do to address the wealth gap.

Physical access and proximity to financial services must be one of the solutions to address these inequities. Over time, many financial institutions have divested in physical branch presence within the city of Rochester, leaving residents with few options. In April 2021, ESL made a commitment to Rochester, announcing the construction of our first new branch within the city since 2010. Our intent is rooted in a commitment to the community and to ensuring city residents have access to financial products, services and education that meet their needs.

The new branch opening soon on Lake Avenue in the Edgerton neighborhood will be an accessible option for pedestrians and vehicles, and marks the first of three branches ESL plans to build in the city (the other two locations are still being determined). 

While the use of digital and mobile banking technologies continues to increase, many in our community still rely on access to brick-and-mortar branches to conduct their banking needs. Prior to the pandemic, ESL saw, on average, steady decreases in branch traffic each year for routine transactions, but at the same time saw an increased need for consultative services. Front-line staff should be equipped with the knowledge and resources to help customers learn how to become savvier borrowers and build credit, supporting further financial education. 

Having a financial institution in your neighborhood is only one piece of the puzzle. The next piece is fostering and nurturing relationships with neighborhood residents and businesses to learn about their needs and goals, and understand how they can best be supported. We are investigating how financial products, delivery and education play a significant role in developing solutions that help residents be financially healthy. In this partnership between product and delivery channels, financial institutions should examine current offerings and refine or add criteria and products, like free and/or low-cost accounts, reduced fees, secured cards to establish, build and/or repair credit, and first-time homebuyer grants that help individuals set roots financially. 

Over the summer, ESL made a commitment to further bridge this divide and address the inequitable homeownership opportunities experienced by Black and Latino communities that have existed for generations. 

In August, we launched the ESL First-Time Homebuyer Grant for eligible Black and Latino residents in Greater Rochester, offering $10 in grant dollars for every $1 saved over a minimum six-month savings period, up to $10,500, toward a down payment and closing costs. The purpose of the grant is to advance racial and ethnic equity in the region through one of the most important wealth-building tools—homeownership—and support eligible buyers in diverse neighborhoods who have historically experienced lower levels of homeownership due to systemic inequities.

Closing costs and down payments are two significant expenses that every buyer encounters in the home buying process and that often serve as impediments to purchasing a home. By lessening the upfront financial cost burden and providing home buying educational support throughout the full lifecycle of the buying journey, our goal is to make the homebuying process more accessible and attainable for those negatively impacted by these inequities. 

Additionally, on Nov. 1 we took action to significantly reduce our overdraft fees—decreasing them from $25 to $5. This action will return approximately $13 million in revenue to our members through 2023. In a market where overdraft fees among local financial institutions range from $20 to $40, it is clear that those who pay these fees are the ones who can least afford them. Change is needed, especially when the average national overdraft fee among banks and credit unions is $33.58 (this consistently increases each year) and 8 percent of consumers who overdraw their checking accounts more than 10 times a year pay 74 percent of all overdraft fees.

Finally, to complement actions that impact our business practices, we commit to philanthropic activities that help build a healthier, more resilient, more equitable Greater Rochester. With the objectives behind these efforts rooted in expanding educational and professional opportunities, investing in neighborhoods and strengthening nonprofit organizations, the reinvestment in our community through philanthropic funds is meant to ensure organizations can properly support those who depend on their services.

Since the creation of our Community Impact initiative in 2018, ESL has reinvested more than $60 million in grants to nonprofits throughout Greater Rochester, with more than $22 million reinvested in 2021. These grants support organizations that build equity in housing (ULREDC’s L2P Project, Flower City Habitat for Humanity, City Roots Community Land Trust), education (ROC the Future and PathStone Foundation’s Anti-Racism Curriculum), and employment/income (RMAPI and United Way’s Project Uplift).

With these actions, there are two crucial points I leave you with:

  1. Institutions must be in this for the long-term. This will be an extensive journey and we are committed to staying on the path to progress for our community. There is much more we can and plan to do, but listening and learning along the way will be critical to ensure we’re taking the appropriate actions.
  2. No one organization can do this alone. It will take collective action from financial institutions throughout the community to close the racial and ethnic wealth gap we currently have in Greater Rochester.

In the ongoing quest for equity and accessibility, if we start with awareness of the issue and make a commitment to collaborate, we can start removing the barriers that contribute to economic inequality. Through our collective actions, financial institutions can build a foundation for success that helps the greater community thrive and prosper.

Marcelina Nobrega Courtney is senior vice president/director, retail banking, at ESL Federal Credit Union. 

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