Interview
"The banking system excludes Latinos because it only thinks about generating short-term income"
UnidosUS analyst Santiago Sueiro says that banks still discriminate Latinos and do not realize that their purchasing power is growing rapidly. The savings of Hispanics in Texas, Arizona and California.

The Latino community in the United States will soon have more than $2.5 trillion in purchasing power, according to UnidosUS calculations. In an exclusive conversation with LPO, Santiago Sueiro, an analyst at this Hispanic organization that defends civil rights, tells us about the difficulties for Hispanics regarding access to the financial system. Formerly, UnidosUS was called Consejo Nacional de la Raza (National Council of Race), and has been working with more than 300 community organizations for 50 years, challenging social and political barriers affecting Latinos. Together with Oportun, the largest personal loan company for Hispanics in the United States, they have analyzed the financial potential of Latinos in the United States.

Why are Latinos living on the financial edge and unable to save?

Latinos in the US are concentrated in low-income jobs. Many earn minimum wage and have jobs that offer no benefits, such as pensions, or options to save and accumulate wealth. In addition, many Latinos live in very poor communities where banks have closed their branches. Several studies show that many banks have recently been closing their branches in communities where people with low income live, specifically in communities where many Latinos and African Americans live.

"Las perspectivas para muchas familias latinas son terribles y la situación sin duda ocupará la mente de los votantes"

They have to use more expensive products with less regulation where there are not many options for Latinos. Our survey shows that nearly 20% of Latinos rely on loans that tend to have very high interest rates, such as loans from pawnshops or payday loans that can charge more than 100% interest rates. Many Latinos have no choice but to use these loans to cover their basic expenses.

Finally, we see evidence of discrimination in the banking sector. Two days ago a bank in New Jersey had to pay $13 million in a legal settlement for violating anti-discrimination laws: a bank avoided giving loans to African Americans and Latinos. One study found that banks nationally turn down home loan applications from African Americans and Latinos at a higher rate than white people, even if they have a similar salary, similar debt, and request a loan of similar value.

Nearly 20% of Latinos rely on loans that tend to have very high interest rates and can charge more than 100% interest rates. Many Latinos have no choice but to use these loans to cover their basic expenses.

Why do you think banks discriminate Latinos?

The reason why the banking system excludes Latinos has a lot to do with the economic calculation of the banks. Working with low-income Latinos requires investments that banks are unwilling to justify. For example, many Latinos need banks to offer services in English and Spanish, but this requires an investment in finding bilingual staff and translating their documents into Spanish. Banks can do business with Latinos in the long term, but many feel pressure to generate income in the short term, so they choose to work with wealthy people who speak English, and who need larger loans, which generates income for banks. We want to change that calculation and make sure that the perspective of the working class and Latinos is represented within the banks when making decisions.

"The banking system excludes Latinos because it only thinks about generating short-term income"

Do Latinos behave differently than other groups when choosing a bank or financial products?

I do not know if there is a big difference between groups. But within the Latino community there are differences in behavior. For example, in our survey we see that 79% of Latinos use traditional banks (such as PNC or Bank of America) compared to 22% who use cooperative banks (credit unions) and 19% who use digital banks (fintechs). We see that 85% of people with high salaries (more than $50,000 annually) prefer to use traditional banks compared to 70% of Latinos who earn a low salary (less than $29,000 annually).

What economic future do you predict for Hispanics in the country?

Soon the Latino community will have more than $2.5 trillion dollars in purchasing power. Latinos are one of the fastest growing groups in the US with more than 62 million people currently living in the country. This represents a large market with the possibility of generating new income for the banks.

Politicians, both Republican and Democrats, care about the Latino vote, but what measures do they know that will help their financial situations? What data have you found regarding the debt loans of Latinos and the states they live in?

The Democrats, for their part, have made an effort to invest in the Latino community and in the working class with programs such as Child Tax Credit (CTC), a program that was very successful in reducing poverty in the United States. Many Latinos benefited from that program and today there is less poverty at a nation level and in the Latino community because of the CTC. But that program has not been resumed and we do not see a future where the CTC continues.

El alivio a los prĂ©stamos estudiantiles de Biden borra la deuda de un tercio de los latinos 

On banking issues, Democrats have put a lot of effort into a policy called Overdraft Protection Act that would help lower the cost of using a bank account. This would help many Latinos open accounts and have a place to save their money. But this policy has no support in the Senate. Furthermore, the banking system needs major changes in order to benefit everyone, and changing the overdraft policy is not impressive enough to achieve that goal. Republicans, for their part, have been against nearly every investment we want to see in the Latino community, including the CTC and the Overdraft Protection Act.

Is there a difference between Democratic and Republican states?

Our survey focused on three states: Arizona, California and Texas. Arizona and Texas are typically dominated by Republicans, and California traditionally has a Democratic congress and governor. We see a big difference in the cost of opening a bank account and in savings and mortgage debt. In California, 50% of Latinos who do not have a bank account said they cannot open one because it is too expensive. By comparison, only 30% and 33% respectively in Arizona and Texas responded that they do not have an account because of its cost.

Latinos in Arizona and Texas have less savings than Latinos in California. However, in California 50% of Latinos who do not have a bank account say that opening one is too expensive.

In California, 34% of people with a mortgage owe $300,000 or more on their home loan. By comparison, 13% and 12% of Latinos in Arizona and Texas respectively owe more than $300,000 on their home loan.

In contrast, we have found that Latinos in Arizona and Texas have less savings that Latinos in California. 37% of Latinos in Arizona and 31% of Latinos in Texas do not have any kind of savings. By comparison, 26% of Latinos in California have no savings. Furthermore, 25% of Latinos in California have $500 or more in savings compared to 17% and 18% of Latinos in Arizona and Texas respectively.

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