Dallas authorities are considering a proposal that would require certain banks in the city to make a demonstrable effort to increase loans and investments in “underserved communities,” as reported by The Dallas Morning News.
Financial institutions that currently are or want to be depositories for Dallas tax monies would be required to share loan data with city officials under the proposed “responsible banking” policy. They must also provide annual reports on “loan inequalities” and long-term plans for addressing them.
These banks would be required to prove that they are making attempts to invest in low- to moderate-income communities. For instance, they could partner with groups that aid those underserved communities to help struggling borrowers keep their homes.
Any bank that fails to provide complete reports to Dallas might face a five-year ban from serving as a depository for city funds. The city council could approve the new restrictions as early as May 25.
Councilmember Jaime Resendez teamed up with Councilmember Tennell Atkins on the proposal. Resendez acknowledged the City deposits millions of dollars that are to be reinvested back into the community, and the City has a right to know where banks invest and what loan trends are.
“It’ll give businesses an opportunity to grow and employ people and increase economic development in general throughout our city,” said Resendez.
The proposal assures these banks remain non-discriminatory in their lending and investments, as federal law requires. The proposal is also intended to aid in the removal of the long-term effects of redlining and other discriminatory housing practices.
WFAA reported that banks had denied mortgages and small business loans to some African-American and Latino residents in southern Dallas in 2020.
“Redlining has been around for a long time, and it’s going to keep moving forward unless we take a step as a city to change the way we do business holistically, and not just one sector here and one section there,” said Councilmember Carolyn King Arnold.
According to Elizabeth Reich, Dallas’ top financial officer, the new rule would be limited only to the city’s depository banks.
One of these banks is Bank of America, which holds assets for Dallas totaling over $200 million and makes payments on the City’s behalf. The city council agreed to pay Bank of America approximately $7.3 million in 2019 for deposit and lockbox services. The agreement expires in December 2024.
DeSoto already has similar responsible banking regulations, as do cities like Seattle, Philadelphia, Boston, Los Angeles, and Minneapolis.