Red flags arise when looking at a banking institution’s practices- here are important questions you should be asking.
Sometimes when doing research on banks, we run into red flags. Even halfway through writing an article, we sometimes see things in our normal research that indicate to us that maybe we shouldn’t recommend, at least without more in-depth research. We ran into a lot of these in the past week, which is why we haven’t posted any new bank features- four articles were started, then four institutions were vetoed. Even while we can’t recommend any new Better Banking Options, we can inform you about some indicators which should encourage you to reach out to a bank or credit union, to inquire about their banking practices before you move your money to them. Here are some questions you can ask when conducting your own research into a banking option near you.
Does a significant percentage of their lending go to small business and/or low- and moderate-income housing lending? This is important, as these are the two kinds of lending that most directly contribute to community development. We get this data through banklocal.info and NCIF.org (NCIF calls low-income housing DLI-HMDA, check out their site to learn more). If we see that these numbers look low, or that they don’t match other sources- namely the NCUA and the FDIC- we try can try reaching out to loan officers at the bank to inquire about how much of their lending goes to small business and housing.
Does their board and upper management have any diversity? We tend to be dubious of banks whose boards or are comprised entirely of older white men, especially if it’s a bank that works in communities with a majority of black, Asian-American and/or Laninx people. Generally, a Better Banking Option’s management and ownership should reflect the community they work in- if they don’t, you might want to inquire into the bank’s diversity practices or just talk to the upper management about their relationships with people in the communities they work in.
Are you able to find feedback on the bank that tells you about how the bank deals with their customers? While individual reviews on Google and Facebook are unreliable, if there are a few or more people complaining of the same issue- if it’s an issue which concerns you- you might want to get in touch with someone at the bank to ask about it. Even though they’re almost certainly going to try to make their institution look positive, the way they answer the question can tell you a lot about the integrity of a bank or credit union.
Are they transparent, or is it easy to find information on their lending and banking practices? If you can find a lot of information about what kind of products they offer and their lending on their website, it’s always a good indicator that accessibility is a priority for them. Don’t count out smaller institutions though, as there are plenty of smaller banks which would be happy to provide information if asked but don’t have the resources to maintain a great website. Generally speaking, any Better Banking Options should be open to talking with a prospective customer about how their deposits are being used in their lending portfolio. The data is publicly available, and while some institutions may not take the time to answer such inquiries, if we continue to ask, they have to start realizing that these are the things which influence people to move their money.