How Reverse Redlining Leads To A Racist Financial System

(lively music) – [Ann] In the wake of
the Great Depression, there were a lot of federal
programs to subsidize and enable families to purchase homes, but as part of the access to that program, certain neighborhoods
literally had red lines drawn around those, and those tended to be
predominantly African American and Latino neighborhoods. (folk music) We all know about the
east-west divide in Austin that’s a longstanding part of our history and has played into a lot of
the racial economic dynamics that we see. (light music) And so what we’ve found
is that those families didn’t have access to
the kinds of resources that would enable them to
access affordable home mortgages and buy homes and build assets. And so we see that
pervasive system building up to the system that we have today where we see tremendous wealth gaps. (apprehensive music) What we find is that we
really have a bifurcator divided financial service system. We have the mainstream
banks and the credit unions, and then you have the finance companies, the payday lenders, the buy here pay here auto dealers. Once a family gets trapped into that alternative financial sector, it’s very difficult to move into the prime or the mainstream
financial system. If you want to buy a car,
you have to pay 20% interest, not 1.5% interest. If you need access to emergency money, it’s at 500% interest for a payday loan. If you want to buy a house, people end up in these very
creative owner financed or other kinds of loans
that in some circumstances can be helpful, but in
too many circumstances, end up having abusive components and people end up losing
a lot of the equity that they invested in those resources and so they’re trapped in a system that almost keeps our poor families and struggling families poor. – 52% of Austinites do
not have at least $2000 worth of savings to sustain
them for three months at the poverty level. – [Voiceover] Yvette Ruiz
is with JPMorgan Chase, who funded a study on the
racial wealth divide in Austin. It was conducted by the nonprofit
out of Washington, D.C., Prosperity Now and Austin
Community Foundation. – In terms of how we’re doing
with the racial wealth divide in comparison to other cities, I would say we’re definitely
in the top percentage of highly unequal cities. We’re not talking about wealthy, we’re talking about wealth. We’re talking about access to capital, to help families be comfortable so that when their child gets
sick or if they get sick, they don’t go bankrupt. Vulnerable communities,
vulnerable families, don’t go to predatory
lenders because they want to buy a flat screen TV. They go because there’s
a gap in their finances. – If you look at where finance
companies and payday lenders are located compared as to
banks and credit unions, there are pretty clear patterns of where those businesses are
located and they tend to be highly correlated to
the high concentrations of Latino and African American families and lower income families. – We have a really wonderful partnership with the collaborative organizations. One of them is based here in Austin, BCL of Texas. BCL stands for Business
Community Lending of Texas and they have identified a
small dollar loan alternative. – So the community loan center is an employee-based loan program. It’s where we offer a small
dollar loan amount of $1000 and we provide a lower interest rate. Our renewal period is a 12 month period and it’s going through payroll deductions or electronic bank transfers
in their bank account where they’re able to
pay it back regularly and pay it back over
the course of 12 months versus having to come up
with $1000 in two weeks. We know that the consumer
loan program that we offer would be a great component
to really help combat the predatory lending that’s
going on right now in Austin. – Austin was the second
city in Texas to adopt the unified payday and auto
title lending ordinance. They put some basic framework
of protection into place and what we’ve seen is it’s
been pretty meaningful. From the peak of fees charged in Austin, families have saved more
than 20 million dollars. – This report kind of
paints a very clear picture of a lived experience. Austin is doing great from an economic development perspective, but this report also
shows that a rising tide does not raise all boats. This prosperity that we
have come into is not equal and that is a new story that’s unique to the country because not everyone is
seeing this prosperity the way Austin is seeing it. (gentle music)

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