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Card-Based Remittances: A Closer Look at Supply and Demand

February 1, 2007

Analyzes the supply and demand for card-based transfers among Latin American and Caribbean immigrants sending remittances. Outlines card features and fee structures, and examines usage by country of origin, legal status, location, and card type.

Reinvestment Alert 24: CRA, Financial Modernization and the Policy Implications of Insurance Company

October 14, 2003

Since the passage of the Gramm Leach Bliley Financial Modernization Act of 1999 (GLBA), insurance companies, banks, mortgage companies, and securities firms have been allowed to merge with and acquire one another for the first time since the Great Depression. Prior to that date, some insurance companies chartered savings banks as subsidiaries of the insurance company. Community groups have been especially interested in the implications of these changes for underserved populations, particularly for lower-income and minority families. This Alert discusses the community development implications of these changes. It also gives an overview of how insurance companies that have opened bank charters are performing in relation to the Community Reinvestment Act (CRA) and fair lending.BackgroundInsurance company banks and other banks sell their products in different ways. These differences have a significant impact on the application of CRA to the two types of institutions. Insurance company banks utilize the same platforms and people that the parent companies use to sell insurance. Insurance policies are sold directly through agents, telemarketing campaigns, the mail, or, increasingly, the Internet, and so are their banking products. In consequence, banks that are subsidiaries of insurance companies often have only one office or branch, which is the company's headquarters. CRA says that regulated financial institutions have a continuing and affirmative obligation to help meet the credit needs of the local communities, including low- and moderate-income neighborhoods. For the purpose of CRA examinations, local communities are aggregated into assessment areas that consist of one or more Metropolitan Statistical Areas (MSAs). CRA regulations stipulate that those MSAs may not reflect illegal discrimination or arbitrarily exclude low- or moderate-income census tracts. CRA regulations also outline that the assessment area should, inter alia, include the census tracts in which the bank has its main office, its branches, and its deposit taking ATMS, as well as the surrounding geographies in which the bank has originated or purchased a substantial portion of its loans. CRA activists have long argued that as banking practices have changed, these regulations should be appropriately interpreted to recognize those changes. In particular, the assessment areas of insurance company banks should include the areas where agents in fact do banking business and not just where the only branch, the headquarters, is located.

Reinvestment Alert 21: Impacts of CDFIs in Illinois: A Case for an Improved Illinois Fund for Invest

May 13, 2003

Illinois is home to an active and established community development financial institution (CDFI)industry with a successful track record of providing financial services in economically disadvantagedmarkets and underserved communities. CDFIs stimulate the local economy by creating jobs, building housing, and leveraging private resources for reinvestment. CDFIs include nonprofit loan funds, credit unions, community banks, small business lenders, and venture capital funds. Although diverse in corporate structure, CDFIs share the common mission of providing affordable financing options that broaden access to capital. CDFIs offer services with rates, terms, and products tailored to meet their clients' needs. While the young industry is very successful, CDFIs need new sources of capital in order to expand. In January 2003, Illinois became the fourth state in the nation to enact a law creating a comprehensive state-based program—the Illinois Fund for Investment and Development—(IFID) to support the CDFI industry. However, IFID is currently unfunded. This Alert serves to advocate for funding for IFID in order to assist the vital CDFI industry in Illinois. CDFIs offer a range of customized and innovative financing options to businesses, individuals, nonprofits, and religious institutions facing barriers in obtaining access to traditional sources of capital. Examples of innovative financial products include venture capital funds providing start-up capital in the form of equity investments to entrepreneurs desiring to create new businesses; community banks offering individuals and businesses affordable checking and savings accounts or providing commercial loans; loan funds providing financing for affordable housing development and community institutions; and small or micro business lenders providing financing for the creation or expansion of businesses. In addition to financial services, CDFIs provide extensive training and targeted technical assistance to help clients meet their financial goals. Technical assistance services offered by CDFIs include business counseling, strategic planning, financial management, homebuyer training, asset management, and training seminars. The mission of the new public-private partnership known as IFID is to enhance the capacity of Illinois' CDFI industry through the following mechanisms:· Creating new CDFIs throughout Illinois· Expanding CDFI services and markets· Attracting more public-private partnerships in community economic development

Reinvestment Alert 20: CRA and CDFIs Revisitied:The Importance of Bank Investments for the Community

April 15, 2003

Community development financial institutions (CDFIs) are banks, loan funds, venture capital funds,credit unions, and microenterprise entities that have a primary mission of serving lower-incomecommunities and people. According to the CDFI Fund of the United States Treasury, there arecurrently 71 community development (CD) banks, 333 loan funds, 119 CD credit unions, 20 CDventure capital funds, and 59 microenterprise programs in operation in the United States. There are also 11 CDFI intermediaries and 22 multi-bank community development corporations that are certified as CDFIs. An increasing number of these institutions combine several of these distinct types of financial organizations. Collectively they provide housing, business and consumer loans, investments, and retail banking services to people who are either not served or are underserved by traditional financial institutions, thus helping them enter the financial mainstream. They may help a young couple buy a first house, enable a small business owner to expand her business, provide a low-cost banking account to an unbanked person, or help finance a shopping center or other major development in a neighborhood that desperately needs an economic catalyst to overcome years of disinvestment. CDFIs are started in a variety of ways and with different sources of funding. However, they rely heavily on investments from regular banks and thrift institutions for loans and investments. These loans and investments are made partly because of certain financial institutions' responsibilities under the Community Reinvestment Act (CRA). That Act provides that regulated banks and thrifts have an affirmative obligation to help meet the credit needs of their communities, including lower-income neighborhoods. The federal bank regulators are currently considering changes to the regulations that implement the CRA. One change, reducing the current tripartite exam structure for large banks to two exams and eliminating the "investment test," would have a devastating impact on bank and thrift investments in CDFIs. Using a new data source, this alert describes just how important the investments of regulated financial institutions are to CDFIs and, hence, why the investment test should be preserved.

Evaluating Your Financial Literacy Program: A Practical Guide

October 8, 2002

Because it's the best way to know if what you're doing is working! It is frustrating if you put a lot of time and energy into a project, only to realize that you have failed to meet your goals. Financial literacy is a vital skill for all of us. As we are becoming more responsible for our own financial well-being, it is important for us to understand the basics of the financial world as well as some of the more complex concepts so that we might avoid scams, stay out of debt, build assets, and maintain our independence. Students of financial literacy programs should walk away from their courses with an increased awareness and comprehension of financial concepts. The ultimate goal is for people to be able to utilize this knowledge to change their financial behavior for the better. To evaluate your financial literacy program, first ask: What are the goals of the program? Who are you trying to reach? What level of financial literacy does your target audience currently possess? What additional skills would you like participants to gain from your program? Is this a one-time workshop or will you be engaging students in a long-term process? Once you answer these questions, youwill be able to utilize this evaluation packet to figure out how well your program is working.

Reinvestment Alert 17: CRA Sunshine Rules and You: How Nonprofits Can Avoid Being Left in the Dark

May 9, 2001

"Sunshine" is the shorthand name for a new provision in federal law that requires nonprofits and others to disclose and report to federal regulators on certain agreements, contracts, or grants that they have with banks. This Alert outlines the basic things that nonprofits need to know in order to comply with the rules. It discusses what types of agreements are covered under "Sunshine;" what constitutes a "Community Reinvestment Act (CRA) Communication" for the purposes of "Sunshine;" and how to disclose and produce annual reports for "Sunshine" agreements. While "Sunshine" is, in the view of many community advocates and bankers, an unnecessary provision that arbitrarily imposes reporting requirements on private transactions, compliance should not be too burdensome. Organizations can generally comply with the law using financial documents that they already have on hand. Woodstock Institute is taking the stance that it is easier for groups that are not sure if "Sunshine" applies to them to assume it does rather than spend time trying to figure out whether or not they are covered. In 1999, Congress passed the Gramm-Leach-Bliley Financial Modernization Act (or "GLBA") and President Clinton signed it into law. GLBA broke down the barriers that have existed since the Depression between banks, insurance companies, securities firms, and mortgage companies. These firms can now legally merge, acquire one another, and own one another for the first time in almost 70 years. Community groups, nonprofits, and other advocates for low-income communities fought to expand the Community Reinvestment Act (CRA) to those companies that banks could mergewith/acquire under the new law. CRA encourages banks and savings and loans to serve all communities, including low and moderate-income areas, where they take deposits and in which they are chartered. However, these advocates were unsuccessful, and GLBA does not extend CRA to mortgage companies, insurance agencies and securities firms. As GLBA was being debated, certain legislators who do not support CRA argued that community groups and nonprofits were unfairly extracting money from banks using CRA pressure. "Sunshine" came out of this notion that nonprofits should be more accountable to communities about how they use their funds. Though many argued against "Sunshine," including nonprofits, financial institutions, legislators, and others, the provision passed and is now part of GLBA. It is important to note that the CRA has not been changed in any way by this provision. Also, those who opposed "Sunshine" were very successful in encouraging reasonable reporting requirements. However, there remains substantial confusion over the regulation. This document should help clarify "Sunshine" rules for nonprofits.

Tools for Survival: An Analysis of Financial Literacy Programs For Lower-Income Families

January 11, 2000

The document provides an overview of why financial literacy is important and how low financial literacy can negatively impact a family. It describes the various financial literacy efforts offered and details how these programs could be accessed by persons with a low-income. The report includes nine recommendations on how more people could obtain financial literacy training.