A recent study by S& P global reported that bank branch closures, which set a record in 2021, are at last beginning to slow down.
The study found that net branch closures fell to 312 in the second quarter of 2022. This was down from 950 in the previous three-month span. This is, of course, barely good news. If banks continue to close branches at the second quarter rate for the remainder of 2022, we are still looking at 1,800 or so bank closures this year.
This is extraordinary attrition. It must surely give pause to those who support the “Banks Step-In Myth”? This is the idea that if APR caps put established, licensed, non-bank lenders out-of-business in a state, banks and credit unions will pick up the slack.
We have said before that this is a pipedream. Regular failed attempts by banks and government enablers have clearly demonstrated this. Banks and credit unions cannot successfully balance their business models with the provision of safe and affordable credit for non-prime borrowers. In fact, banks are no more able to make small-dollar loans at the APR rates allowed in states like New Mexico, than traditional installment lenders.
But even those who choose to ignore this fact, surely must see that galloping bank closures militate against the possibility of banks taking the place of installment lenders operating from branches in the hearts of the communities they serve?
In fact, restrictions on the provision of non-bank credit, coupled with the closure of bank branches leave many with nowhere to turn for the financial services they need.
This is starkly evident in states like Illinois. It passed a law that decimated non-bank lending in the same year in which, according to news article in January of this year, it suffered:
“…. a net loss of 153 banks [in Illinois] last year. Only a few other states lost more bank branches, including California (loss of 269 banks), New York (loss of 221 banks) and Florida (loss of 192 banks).”
Data from Illinois are being collected and processed by the industry. These are expected to demonstrate that the hardship caused to individuals and families by this kind of law, demands its urgent repeal.
In an age where bank closures remain the order of the day, safe, affordable credit options must remain available for those who need them.