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A bank for people who don’t trust banks


Jonathan Marullo figures he closed all his bank accounts about 17 years ago. He said he wanted out of what he called the “nonsense charade” of banking regulations, believing the system would collapse, like it did during the Great Depression, and which it eventually would again during the Great Recession.

“The numbers don’t add up,” Marullo said. “I don’t trust banks, and I don’t trust bankers with my money.”

Marullo, who was homeless for a decade, instead relies on alternative financial services like Chester’s Check Cashing. Chester’s operates four locations in Rochester, specifically in lower-income neighborhoods on West and North Clinton avenues and West Broad and North Goodman streets. Chester’s advertises taking a 2.11 percent fee on any check cashed.

“I sign the check over and they take a percentage cut,” Marullo said. “I just look at it as a cost of doing business.”

Marullo isn’t alone. Many people don't use the mainstream banking system, often because they don't trust it or because they face barriers to accessing it.

In his recent State of the State address, Governor Andrew Cuomo announced a plan for the state to invest $25 million over five years to expand access to banking and credit services in low-income communities. He said that money will go to the state’s Community Development Financial Institutions (CDFI) Fund, which provides funding for banks that specifically cater to low-income lending. Cuomo dubbed the initiative the Excelsior Banking Network.

“Too often our most vulnerable New Yorkers are subject to predatory businesses, and they get shut out of the banking system that enables upward mobility,” Cuomo said.

The governor expects that the state’s contribution will leverage a total $300 million in investment in underserved communities, in the form of loans and credit offered by CDFIs. But for that investment to materialize, the state will have to convince people who live outside of the mainstream financial system that they should use banks.

Who isn’t banking?

In his address, Cuomo said that 25 percent of New York households either don’t have bank accounts or seldom use one.

That figure is a bit misleading.

The governor took it from a 2017 Federal Deposit and Insurance Corporation (FDIC) survey that found 8.7 percent of New Yorkers were “unbanked” and 17.2 percent were “underbanked.”

An “unbanked” person is one who doesn’t have a bank account and doesn’t use traditional banking services at all, like Marullo. An “underbanked” person is one who has a bank account and uses traditional banking products, but also uses alternative services such as pawn shop loans or non-bank money orders.

Rochester fared better than the state average, at 4.9 percent unbanked and 14.6 percent underbanked.

On a national scale, the number of unbanked households is trending downward, from just over 9 million in 2013 to about 7.7 million in 2017. At the same time, the holdouts appear more dug in against banking than ever before. In 2013, for instance, 40 percent of unbanked respondents had no plans to open a bank account, compared to 59 percent in 2017.

“I’d look to hold out as long as I possibly can,” Marullo said. “The only thing that I could see making me open an account is getting an inheritance.”

But the majority of people who opt out of the banking system are people who have been historically marginalized.

According to a 2019 Federal Reserve report, 14 percent of African-American households and 11 percent of Latino households weren’t using banks or any banking products in 2018, compared to 4 percent of white households.

Likewise, 14 percent of households with incomes under $40,000 were unbanked, compared to 2 percent of households with incomes between $40,000 and $100,000, and 1 percent of households with incomes over $100,000.

“It’s partly the legacy of red-lining that’s been happening since Reconstruction,” said Barbara van Kerkhove, researcher and policy analyst at the Empire Justice Center. “But I also think there’s a lot of racism that’s still happening in our community and the way things are structured.”

There remain obvious racial disparities in lending.

For example, the report found, banks denied lines of credit to black people earning under $40,000 a year at nearly twice the rate of white people in the same income category (59 percent to 31 percent).

While loan applications for white people earning more than $100,000 annually were denied 8 percent of the time, they were denied 21 percent and 17 percent of the time for blacks and Latinos, respectively.

“The culture of this country is we don’t see it as a structural issue, we see it as an individual, that that person is lacking, that they couldn’t do the work,” van Kerkhove said.

But factors like language can also be an issue, said Melissa Marquez, the CEO of Genesee Co-op Federal Credit Union, one of four CDFIs in Rochester that would have access to the new Excelsior Banking Network seed funding.

Marquez said the credit union has 12 employees, half of whom speak Spanish. Others on staff, she said, speak Nepalese, Swahili, and Somali.

“That’s one of the things that can exclude people from banking, it’s hard to trust someone with your money if you don’t speak the same language,” Marquez said.

Filling the gaps

Turning away from banks, either because of exclusion or distrust, can be costly. Loan rates serve as a good example.

“A normal used car loan, you can probably get 12-13 percent for an older used car, but these (subprime lenders) are getting rates five to 10 points higher,” van Kerkhove said.

Under New York’s usury laws, a borrower and lender can agree to loans that carry interest rates as high as 24.99 percent. Charging interest above 25 percent is a felony.

A big part of what Genesee Co-op does is help people burdened with loans with interest rates pushing the 24.99 percent limit lower their rates.

“We see a lot of people who have gotten auto loans at 18 or above, right up to that 24.99 percent limit,” Marquez said. “In general we help people refinance those rates down to between 7 and 12 percent.”

While she notes that there will always be people who avoid the banking system for a variety of reasons, Marquez sees the Excelsior initiative as “exciting,” offering an opportunity to expand on services to low-income communities.

Genesee Co-op is a smaller financial institution, with about 3,590 members and total of just over $23.3 million in assets, according to the National Credit Union Administration. But that, Marquez said, doesn’t paint the whole picture of the bank’s impact.

“Look at this way,” she said. “Our little $23 million credit union had more mortgage loans, in terms of sheer number, in 2017 than JP Morgan Chase did here in Rochester.

“That’s because JP Morgan is not making loans to the people we’re serving.”

Gino Fanelli is a CITY staff writer. He can be reached at