Banks Should Build Wealth for The Community, Not Themselves

We believe that banks should honor the wishes of their depositors and use their dollars to build a better world for them. Banks should help people minimize their costs and maximize their savings, rather than extracting money from the community to enrich bank shareholders and executives.

Our Context

As recent years have shown, our current financial system is not acting in the public interest. Left to their own devices and in search of maximizing their own profit, banks have robbed people, and communities of color in particular, of their biggest assets – their homes1. They’ve charged our lowest income residents large, multiple overdraft fees, while claiming to offer “free checking.”2 They’ve also funded payday lenders that have left vulnerable individuals trapped in costly and damaging debt traps.3

We ask – What if banks changed all of this?
What if banks focused on serving the community and the environment on which we all depend, instead of themselves?
We are going to change the banking system for good through a new and infectious bank model.

Our Approach

Our approach to banking products and services includes several elements:

Pass cost savings
to clients

Charge what you must for economic viability*, not what you can for capital market dominance. Tell everyone that’s what you’re doing, and ask them what their bank is doing. Use technology and green practices to minimize our costs, then pass those cost savings to our clients, too. *Our measure of financial sustainability is 6-9% return on equity — not more!

Offer fair and
transparent pricing

Charge reasonable prices for each item, rather than charging no monthly fee and then overcharging for hidden or common items that make account more expensive. For example, we do our best to minimize overdraft fees by processing your daily debits from small to large, and trying to contact you to fix the overdraft before charging you.   In the event that we do charge overdraft fees, our Overdraft / NSF Charge is $10 with a maximum of $60 per day, and we offer clients the option of signing up for Overdraft Protection, which transfers the amount from another account for a $2 fee. We don’t maximize fees in any setting.

Provide alternatives
to high cost products

Develop products that help people save money and/or get out of debt. Many high priced banking products are ripe for disruption. They are charging too much, which is not market competitive and innovative alternatives will undercut them. Learn more about some of the products we’re piloting and providing below.


Our Impact

deposits-depositors-2017ye

Our 2016 depositor base included over 3600 individuals, nonprofits, businesses, and foundations with over $300 million in deposits. While the majority of depositors are in our local branch communities, mission-driven people from across the country, and even the globe, have placed deposits with us to join the movement to change the banking system for good.

Reducing the Cost of Banking

Rather than providing the false promise of “free checking,” Beneficial State offers checking that is fairly priced, based on our own costs. When we have cost savings we pass them on to customers. For example, we discount our pricing when people sign up for Direct Deposit, eStatements, or Online bill pay. We also discount our pricing for service men and women, seniors, and students.***

Individual Development Accounts (IDAs): Helping People Save

Beneficial State Bank offers Individual Development Accounts (IDAs) in partnership with two community organizations. IDAs are special-purpose savings accounts that are matched by federal, state and/or charitable organizations to help low-income individuals save more. We believe that IDAs and similar incentivized savings programs are some of the most important ways for low-income individuals to build assets and for our country’s extraordinary wealth gap to decrease. We support IDA accounts on behalf of our clients Lao Family Community Development in Oakland and CASA of Oregon, the largest manager of IDAs in the country.

idas

Through 2014, we have served 99 IDA clients, helping to build a collective savings of over $140,000  Our clients are using these savings to pay for tuition, cars, homes, and other critical uses to help build financial prosperity.

Pre-Prime Auto Lending

Beneficial State Bank merged with Pan American Bank in August 2016 and welcomed in a team of experts in pre-prime consumer lending. We are an alternative for people who have low or no credit scores and who are typically targeted by predatory lending practices. While it is challenging to compete with lenders who put their own and the car dealer’s profit above fair and transparent service to the customer, we don’t compromise our mission to always prioritize people and planet as well as profit. Our loan terms, interest rates, car dealer agreements, and collections process are built to set the customer up for success in an industry rife with predatory practices. Whether it’s in our multi-factor algorithm that determines approvals based on a range of characteristics, not only a borrower’s credit score, or in how we’ve build a network of dealerships that have committed to a unique set of fair practices, we are constantly striving toward improvements to help borrowers and lower costs.

auto-loan-2017ye-04

Community-Driven Auto Lending

We launched two innovative pilot programs in February 2017 for traditionally underserved individuals that provide fair and transparent access to auto financing. The First Time Buyers program serves individuals who have no credit history and the AB-60 Program serves individuals who hold AB-60 issued driver’s licenses, which can be obtained without proof of legal residence.


REFERENCES
  1. Banks Intentionally Selling Unaffordable Mortgages
    “Racial Predatory Loans Fueled U.S. Housing Crisis,” Reuters.com referring to  article from American Sociological Review
    “A Financial Crisis Manual: Causes, Consequences, and Lessons of the Financial Crisis ,” Ben Beachy, Tufts University.
    “Foreclosures by Race and Ethnicity: “The Demographics of a Crisis,” Center for Responsible Lending
    “The Untold Costs of Subprime Lending: Examining the Links Among Higher-Priced Lending, Foreclosures, and Race in California”, Carolina Reid and Elizabeth Laderman, Federal Reserve of San Francisco
  2. Banks’ involvement in Predatory Payday Lending
    “Utilities and Payday Lenders: Convenient Payments, Killer Loans,” National Consumer Law Center
    Payday Lending Abuses and Predatory Practices,” Center for Responsible Lending
    “Profiting from Poverty,” National People’s Action
    Payday Loan Industry Admits ‘Very Few’ Borrowers Repay Their Loans
  3. False promise of free checking and the cost of overdraft fees
    “Free Checking is Not Free,” California Reinvestment Coalition
    “Free Checking Costs More,” Wall Street Journal
    “Banks Face Hit From CFPB on $30 Billion in Overdraft Fees,” Bloomberg.com
    CFPB Finds Small Debit Purchases Lead to Expensive Overdraft Charges,” Consumer Financial Protection Bureau