RSSSouthern consumers face disproportionately higher interest rates and more challenges in accessing credit, according to two Consumer Financial Protection Bureau reports.
Twenty-seven percent of mortgage applications are denied in the rural South compared to 11 percent nationally, according to one report, “Banking and Credit Access in the Southern Region of the U.S.”
“Initial analyses show credit scores alone do not explain these lower levels of lending,” the CFPB stated. “Both race and rural residency appear to play a role in access to credit. People of color are more likely to be denied credit, compared to similarly-situated white borrowers, and rural Southerners are denied at higher rates than their non-rural counterparts.”
Rural southerners who obtained credit reportedly paid 3.51 percent average interest rates, compared to 3.13 percent nationally. Disparities were also found in auto lending: Sixteen percent of rural Southerners have an auto loan delinquency, compared to 10 percent in other rural areas, according to the report.
Roughly 23 percent of Southerners live in rural counties, compared with 14 percent nationwide. Nearly half of the country’s persistent poverty counties are in the South, and 70 percent of the United States’ rural Black population lives in those states. The South has 3.6 branches per 10,000 people, compared to five branches per 10,000 people nationwide.
Mississippi and Louisiana were the states with the highest unbanked rates, at 11.1 percent and 8.1 percent, respectively. Sixty-one percent of mortgage loans in the region are made by lenders other than banks and credit unions. Fifty-five percent are from “a few high-volume non-depository lenders,” according to the CFPB.
“Rural Southerners continue to face significant financial challenges, as they are more likely to have lower incomes and higher rates of subprime or deep subprime credit scores than other regions in the country,” the CFPB stated.
