Policy goals: End the Dual Financial System

expand access to basic financial products and services

The less money you have, the more you pay to use it.”

Mehrsa Baradaran, University of California at Irvine

In 2017, nearly half of Black and Latine households were either unbanked or underbanked. The Oppression Economy thrives on the exclusion of people of color from accessing mainstream financial products and services (e.g., checking and savings accounts, affordable credit, and insurance). Without access to basic mainstream financial products, we are relegated to the fringes of the economy where predators within the Oppression Economy seek to exploit us to steal our hard-earned income and wealth.

In the Oppression Economy, commercial banks are allowed to anoint themselves as gatekeepers to the basic financial products people need to navigate the economy. To do this, they rely on credit reporting agencies such as Experian, TransUnion, Equifax, and ChexSystems, to determine a consumer’s “worthiness” to purchase one of their products. These firms use sensitive consumer data such as credit scores to determine whether a bank can earn profits from a particular account. The problem is that the data are often inaccurate and the systems they use (e.g., credit scores) are racially biased. People of color consistently have lower credit scores than White consumers, which can be attributed to the types of “bad” debt (payday loans, medical debt, unpaid student loan debt, unpaid utilities, and court fines and fees) disproportionately held by people of color.

The physical absence of banks in neighborhoods of color is another key feature of this dual financial system. These “banking deserts” are largely located in rural areas in the South, Southwest, Great Plains, and Northwest regions of the United States, and largely affect Black, Latine, and Indigenous people in these rural communities. People of color must be guaranteed access to basic financial products and services! Help us identify the right policies that will put us on that path. Here are some ideas we have identified so far:

policies for consideration:
  • Reform the Community Reinvestment Act to ensure that people of color have access to financial products and services.
  • Enact Postal Banking, in which the 31,000 post offices across the United States would offer basic banking services (check cashing, checking and savings accounts, and possibly small-dollar loans) to underserved communities.
  • Bolster the Consumer Financial Protection Bureau oversight of credit reporting agencies to control for implicit bias, including ending algorithmic bias in financial markets as part of the Bureau’s oversight.