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King County Council adopts new banking law
The King County Council wants financial institutions interested in a banking contract with King County to act in a socially responsible manner toward their customers, rather than having the sole duty of earning a profit for their shareholders.
The Council gave its unanimous support to legislation sponsored by Transportation, Economy and Environment Committee Chair Rod Dembowski and Council Vice Chair Joe McDermott which aims to ensure that King County’s primary financial institutions meet their obligations of serving the credit and financial needs of all communities last week.
“Socially responsible banking” means the institutions must demonstrate their commitment to providing lending, investing and community banking services, such as access to loans, check cashing, and the ability to make deposits, to traditionally underserved and disadvantaged communities.
To do this, the ordinance adds a new component to the minimum requirements and formula used by King County to select a bank for the County’s financial services.
“I have made a commitment to the people of King County, that I will use every tool, deploy every proven strategy -- as well as try new ones -- and leverage all resources of this powerful government to combat poverty in King County, and this ordinance will be a powerful new tool in this fight,” said Councilmember Rod Dembowski, who represents north Kirkland, Bothell and Kenmore. “This proposal reflects the idea that banks aren’t accountable solely to their shareholders, but also have an obligation to provide fair and equal service to all members of the communities that they do business in, regardless of race, ethnicity, income or other characteristics.”
Under the adopted legislation, banks responding to the County’s Request for Proposal for financial services must hold a rating of “outstanding” under the Federal Community Reinvestment Act, which encourages financial institutions such as banks and credit unions to better meet the financial needs of the communities in which they operate.
“This ordinance is a unique way to encourage financial institutions to meet the banking needs of all of our community—not just those with more cash,” said Councilmember McDermott, the chair of the Council’s Budget Committee. “This is a step forward in our work to ensure that all residents of King County have equal access to opportunity.”
The institution must also submit a Community Reinvestment Plan, which specifically addresses the bank’s activities within the County in regards to the institution’s investment in King County communities, their lending practices with specific emphasis on loans made to small business and low income individuals, and the level of service they provide to meet the needs of low income and minority populations. Their rating under the CRA uses an existing federal system that evaluates a bank’s performance in meeting the credit needs of its community.
“Communities in King County are struggling due to diminished access to capital,” said Marcy Bowers, Executive Director, of the Statewide Poverty Action Network. “Hard economic times have pushed many of us deeply into debt, plunging us into a world filled with payday lenders, relentless collection agents, aggressive lawyers and companies that profit mightily if they can get people to pay up. By requiring banks to adhere to a community reinvestment plan that is tailored to the needs of our residents, King County is doing the early spade work to build a foundation for change.”
“My family is in danger of losing our home. We are not alone in feeling the effects of the Recession,” said High Point resident Joelle Craft. “I applaud King County for recognizing the continued struggles of some of its residents and for pushing the banks to mitigate the problems they are largely responsible for causing.”