A plan to bring banks to N.J.'s low-income neighborhoods | Opinion

By Star-Ledger Guest Columnist The Star-Ledger
April 16, 2015 at  6:46 PM

By Steven Fulop and Phyllis Salowe-Kaye
New Jersey is one of the wealthiest states in the nation and yet too many of our urban neighborhoods are banking deserts. Losing a neighborhood bank typically leaves residents without basic financial services, and that's especially hard on the elderly. Over 90 percent of the branches that have closed over the last several years in the United States are in neighborhoods below median household income levels.
When banks often called too big to fail close branches it leaves residents and small businesses in low-income areas vulnerable to predatory lenders and pricey check cashers. Nationwide more than 75 million Americans are unbanked or underbanked, meaning they rely on these expensive alternatives. In fact, the cost of having people excluded from the mainstream banking system is $103 billion annually, according to a recent report by United for a Fair Economy.
In Jersey City, we are changing that dynamic by using city assets to foster better banking opportunities for residents who have been ignored by most banks. And with New Jersey-based-Investors Bank, together we've formed a partnership to help underserved Jersey City residents. We think this approach can work as a model throughout New Jersey in neighborhoods that can be classified as banking deserts.
Our plan -- while innovative -- is actually quite simple to replicate.  But first a little history:
More than five years ago, a bank closed its branch at the HUB, a Jersey City retail center on Martin Luther King Ave. It was the only banking outlet in the neighborhood. Numerous efforts since then to bring in a new bank failed so on taking office, we tried something different.
We realized the city still had large accounts with that bank.  Why reward this business with city deposits when it was so indifferent to Jersey City residents? So we decided to put the city accounts to work for our residents and issued a public Statement of Interest for banks to partner with Jersey City. Investors stepped up as the only bank willing to open at full service branch at the HUB in exchange for the deposits -- a strategy known as linked deposits.
Now, residents in the HUB neighborhood will benefit from the community banking services Investors offers. Small business owners and potential home buyers will have a bank they can depend on in their neighborhood to pursue their dreams. Even more basic, residents will have a branch to open checking accounts rather than relying on check cashing operations that take advantage of those who don't have bank accounts. Why? Because the federal Community Reinvestment Act requires that banks reinvest in neighborhoods in which they take deposits. This is great example of complying with the law while bringing greatly needed services to the community.

Just as important, Investors will help residents with financial literacy programs to make them not just aware of services the bank offers but also how to be better banking consumers. At the same time, the city will also support additional financial literacy programs run by New Jersey Citizen Action to help neighborhood start-ups qualify for loans.
What's more, Investors offered Jersey City a better and less expansive banking relationship than we had with our previous bank.
This is a public-private partnership at its best. It's an approach other cities should follow to bring mainstream banking to underserved areas. All it takes is some creative thinking and a willing partner.
Think about it. Every city in New Jersey has tens of millions of dollars in bank deposits.  How many of the banks holding these deposits have shown a willingness to serve the underbanked and unbanked residents in the cities? Perhaps more would be willing if cities use the deposits to gain better relationships that benefit all city residents.
That's what has been accomplished in Jersey City. It is a plan other cities in New Jersey should follow.  

Steven Fulop is mayor of Jersey City and Phyllis Salowe-Kaye is executive director of New Jersey Citizen Action.

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