New effort focused on financial issues facing rural communities

The Consumer Financial Protection Bureau has launched a new initiative to focus on financial issues facing rural America. Our effort will initially focus on rural banking deserts, discriminatory and predatory agricultural credit, and manufactured housing.

There is no single rural America–from Appalachia and the Deep South to rural Alaska, rural places have a wide range of diverse people, economies, and ways of life. Rural people are deeply committed to the places they live, but face real challenges in accessing reliable services and good jobs, keeping up with household expenses, maintaining farming, and finding affordable housing.

It is well known that larger economic trends have uniquely affected rural communities over the past several decades. The number of jobs in rural areas have still not fully recovered from the shock of the 2008 financial crash and job growth in rural areas has been less than a third of the rate of job growth in urban areas. Rural wages are lower , and rural poverty rates are higher than in non-rural areas and the gap is growing . Increasing corporate consolidation across the economy has hit rural areas particularly hard, suppressing wages and leaving rural people with fewer employment options . In addition, the effects of the COVID-19 pandemic on rural populations have been severe, with significant negative impacts on unemployment and the economic outlook .

We have a responsibility to pay attention to the particular challenges rural communities face as they work to build and maintain their financial resiliency. Last month, Director Chopra invited over 50 people from organizations representing rural people across the country to tell their stories and share their concerns. What we heard is that larger economic trends are affecting the financial resilience of rural families and their experiences with consumer finance.

The issues surfaced include:

• 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.

We are concerned about these threats to rural household financial resiliency and committed to using our tools and authorities to ensure that rural communities, and the people who live in them, have opportunities to build wealth and thrive.

If these issues resonate with your experiences, or you have other challenges you are facing in your rural area, please share your story, and – as always – if you have a problem with an auto loan, credit card, collections, mortgages, debt collector, or another consumer financial product, you can submit a complaint.