Many rural community residents rely on their local banks despite being more likely to live in banking deserts, according to a Consumer Financial Protection Bureau report.
The Federal Reserve has noted that nearly nine-in-10 rural residents had visited a bank branch in 2019. “Rural banking customers tell the CFPB that given the unique qualities of rural economies, if they are reduced to a number and fed into a large bank’s algorithm, their credit needs will not be met,” the CFPB stated. “However, these same customers are the ones most likely to not live within 10 miles of a bank with in-person services.”
Rural communities are 10 times more likely than urban centers to be in banking deserts — more than 1,500 of the more than 2,100 existing and potential banking deserts are in rural areas. Fourteen percent of Americans live in rural counties, according to The U.S. Department of Agriculture’s Economic Research Service.
According to the report, released April 19, residents of rural areas face a number of other financial challenges, including being less likely to have a credit history and more likely to use non-bank credit.
As these trends continue, rural customers have fewer banking options because of the significant consolidation of FDIC-insured institutions — from a peak of more than 18,000 in 1986 to slightly more than 5,000 in 2020. Between 2012-17, 40 percent of rural counties lost bank branches.
This situation can be compounded by rural residents’ difficulties in accessing healthcare. Nearly one-in-five U.S. households have past-due medical bills, “which can unfairly, and adversely, affect credit reports and limit access to credit, housing, and employment,” according to the CFPB. This is especially notable in rural areas, where healthcare and insurance prices tend to be more expensive than in more populous areas.
The CFPB has launched an initiative intended to capture the challenges rural communities face and protect rural bank customers from financial criminals. “For decades, many government agencies have turned a blind eye to pressing problems facing families, farmers, and businesses in rural communities,” said CFPB Director Rohit Chopra. “The CFPB will be focusing on ways to ensure that rural communities can better access relationship banking services and achieve their economic potential.”