Group wants to expand banking operations for low-income families | News from Delaware
By JEANNE KUANG, Delaware News Journal
WILMINGTON, Del. (AP) – More than three decades ago, a coalition of Wilmington activists took on big banks and won agreements that financial institutions would invest more in poor communities.
Since then, the Delaware Community Reinvestment Action Council has grown from a fair lending advocate to a finance coach, legal clinic, and, through its credit union, itself to a financial institution for low-income residents traditionally rejected or overlooked by banks.
Longtime Executive Director Rashmi Rangan envisions taking Stepping Stones Community Federal Credit Union a step further to provide a safety net for low-income families.
To do this, the nonprofit received a $ 10,000 grant through A Community Thrives, a philanthropic program run by the USA Today Network, parent company of Delaware Online / The News Journal. She is one of nearly 200 organizations across the country to receive grants this year for her work on community building projects, according to the Gannett Foundation.
Rangan eventually plans to use the money in a credit union program that will provide low-income members with a modest line of credit to cover short-term bills and expenses.
For families living from paycheck to paycheck, Rangan said, “It’s not that they don’t have the money – it’s that they don’t have the money when it is needed.”
One paycheck is often insufficient to cover rent and utilities due before the next payday, pushing low-income people into high-yield payday loans or creating onerous late fees and burdens on their creditworthiness. The cycle of financial instability, Rangan said, keeps long-term savings, traditional banking, and home ownership always out of reach.
“The way we have seen our customers pay every single invoice, but no invoice is always paid on time,” said Rangan. “They work so hard to get a leg up and it seems like they keep being pulled down.”
DCRAC was hoping for a $ 100,000 grant to start the program, but will instead raise the remaining funds to offer it next year.
In the meantime, the organization will be extending the $ 10,000 short-term loan to customers who need help with paying rent and utilities. If the loan program can start, after a year of programming, she hopes to investigate the impact on families having the peace of mind “knowing they’ll never pay a late fee”.
“Our suggestion was to find a solution to the families’ liquidity problems,” she said. “Our hypothesis is that if you knew bills were paid on time, whatever, as long as you focus on your personal financial goal or growth, you would have your savings, creditworthiness, and confidence in a year.”
Like many nonprofits that support low-income communities, DCRAC had to adapt in a hurry during the coronavirus pandemic to serve an ever-increasing number of customers in financial difficulty.
The credit union has nearly 1,000 members in Wilmington, and hundreds of Delaware residents take the nonprofit’s financial planning courses.
DCRAC staff spoke to customers on the phone while they filled out tax returns to receive their stimulus checks, declare unemployed, and apply for loans for the paycheck protection program. Stepping Stones began offering online services “overnight,” Rangan said.
Meanwhile, the nonprofit applied for a PPP loan itself to help them stay afloat in the face of declining revenues.
DCRAC was founded in 1987 in response to studies showing that black Delawareeans were seven and a half times more likely to be denied home loans than whites.
Pursuant to the requirements of the Community Reinvestment Act of 1977, the group took on bank merger challenges and won concessions from Delaware banks that made it easier for low-income applicants to obtain home loans. She also kept banks stuck to agreements that they would invest more in low-income areas.
The group has been teaching money management and providing free or low-cost legal services since those early years.
The credit union was launched in 2012 and initially only offered savings accounts for communities without a bank, which often relied on payday loans and check cashing. Two years ago, Stepping Stones introduced direct deposit, ATM access, and credit.
It’s “practically full service,” said Rangan. Going forward, it will offer the line of credit – and home loans.
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