Community Reinvestment

CRA Could Bridge The Digital Divide In Poor Communities

Franklin Savings Embraces First-in-the-Nation Plan For Financial Literacy

Norman Bell

March 4, 2020

McLaughlin speaking at an event

Ulrike Smith is always looking for ways her bank can make a difference in its community. It’s a key part of her job as the Community Reinvestment Act officer at Franklin Savings Bank, a small, 150-year-old institution with a handful of branches in and around Franklin, N.H.

In her rounds of attending banking conferences and seminars, she was intrigued by the idea that federal regulators were clearing the way for making financial literacy programs a part of a bank’s CRA portfolio.

Financial literacy education and by extension economic opportunity are issues in Franklin, the smallest of New Hampshire’s 13 cities. Its location amid three rivers once provided water power for its mills. But those days are long gone and prosperity has been elusive.

Smith convinced her bank to run a low-risk pilot program around financial literacy education and, in quick order, has found herself hailed as a “trailblazer” in reimaging the Community Reinvestment Act and launching a billion-dollar assault on the digital divide that studies show is retarding economic growth in communities like Franklin across the nation.

The journey began with a modest plan to have two well-used bank computers refurbished and fitted with educational software, then donated to Franklin High School students. Smith was able to build partnerships all the way down the line.

National IT firm Sage Sustainable Electronics agreed to clean and refurbish the desktop computers, which had grown from two to four units. Sage installed Windows 10, Microsoft Office, antivirus software, a collection of financial literacy programs from Rosen Digital in New York City and EBSCO’s LearningExpress program.

EBSCO, based in Ipswich, Mass., hailed the effort as a breakthrough.

“The launch of this bank-supported use of our LearningExpress collection represents a watershed moment for us and our banking partners,” said Greg DiDonato, the firm’s vice president of sales. “The collection is a perfect fit for banks using CRA funds for ‘economic inclusion,’ which is all about helping low income learners of all ages transition into living-wage careers.”


Lack Of Internet

Then Smith’s plan hit a wall.

What if the students receiving the computers couldn’t access the internet at home?

The statistics on internet access are daunting. While 73 percent of high school students report they need internet access to complete their homework assignments, 15 percent of households with school-aged children do not have broadband access. That number rises to 35 percent in households with annual income below $30,000.  The number is 38 percent for Hispanic families and 41 percent for African American families.

The local internet provider didn’t want to take part in Smith’s program. The bank wasn’t up for making what could be an open-ended cash donation to paying for service.  And making internet access a prerequisite to awarding the refurbished computers seemed counterintuitive.

So Smith began researching alternatives. And that brought her into the wheelhouse of the National Collaborative for Digital Equity and its founder, Dr. Robert McLaughlin. The non-profit collaborative is based in New Hampshire.

Smith is quick to credit McLaughlin’s presentation at a 2018 conference for starting her thinking about attacking financial literacy through refurbished computers. She worked with him to take that effort to fruition. Now she’s partnering with the collaborative to find the fix for internet access, a larger task that could require a statewide broadband initiative.


A Three-Decade Goal

Closing the digital divide – broadly defined as the economic, educational and social inequalities between those who have computers and online access and those who do not – has been McLaughlin’s goal for more than 30 years. Using the CRA as a tool has been on his radar almost as long.

He came close in San Antonio in 2013 when he got the Dallas Federal Reserve Bank to support using CRA funds for economic inclusion efforts. But the pilot plan collapsed amid local political issues.

Now, teaming with Smith whom he calls a “trailblazer,” McLaughlin thinks the Franklin National Savings bank computer program will become the first approved CRA project attacking financial literacy. Federal examiners will be conducting a CRA review in the fourth quarter.

But McLaughlin thinks the time is right to reach higher.

He sets the national CRA pool at about $100 billion and says he doesn’t want to undermine worthy programs like affordable housing. But if regulators open the door, just one percent of that pool – $1 billion – would make a significant difference in bridging the digital divide.

Any broadband access solution needs to be on a grander scale than the footprint of Franklin Savings Bank. And since that footprint is the basis for the bank’s CRA responsibility, that seemingly takes the bank out as a player.

But the winds of change are blowing, led by the federal Office of the Controller of the Currency, one of three main players in monitoring CRA compliance across the industry. 

OCC Deputy Comptroller Barry Wides has been touring the country speaking on behalf of a proposed overhaul of CRA rules and making the case that bridging the digital divide is an appropriate use.

The 1977 act was last updated in 1995 and has only fuzzy guidelines on what kind of activities meet the standard for supporting low-income communities.


Specificity Needed

The American Bankers Association is on board with adding some specificity allowing efforts to strengthen economic inclusion. Krista Shonk, the ABA’s vice president for regulatory compliance, introduced Wides at a summit in Washington, D.C., on digital equity and economic inclusion in May. 

The final rules aren’t expected until next year but every indication is financial literacy and broadband inclusion will be permitted activities as well as some allowance for smaller banks joining consortiums to craft larger solutions – from anywhere -- that benefit the bank’s footprint.

In presentations, both Wides and McLaughlin point to the success of a Capital One program that is providing training in tech support skills in Virginia and Maryland. Some solutions like that require scale, they said. And small banks shouldn’t be precluded from thinking big, even if it means straying from their bank’s footprint.

Back in Franklin, Smith and McLaughlin feel the wind at their backs as they prepare for a statewide summit (Oct. 28-29) on economic inclusion and digital equity. McLaughlin will frame the discussion with his opening remarks as a lead-in to a panel featuring Smith. The two will lead a breakout session on digital equity later in the program. Wides also is on the program, delivering a keynote entitled “Improving Digital Inclusion with the Community Reinvestment Act.”

They see the broadband issues clearly and have researched a range of solutions, from embracing inexpensive ‘hot spot’ systems to a full-on alternative to commercial providers.

Whatever concepts emerge from the summit likely will shape the outlook for Franklin and the rest of New Hampshire. It likely also will serve as a model for financial institutions and communities across the nation.

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