Project REACh, Access to Credit for the Marginalized or Predatory Lending Lurking in the Shadows? JPMorgan & Wells Fargo will Decide

In JPMorgan Chase’s recent announcement, they said they would begin offering credit to individuals without credit scores. The announcement is part of the Trump initiated economic plan called Project REACh, and puts them in a unique situation targeting historically underserved consumers, who often don’t trust banks and financial institutions with due cause. Wells Fargo, along with a number of other banks, will be following suit with their own ‘no credit score’ lending programs.

Recently, banking regulations had been relaxing under Trump, fueling a growing trend of non-bank lenders (fintech companies that can still make loans but don’t need to pass the same stringent financial requirements that banks are subject to). These lenders often market themselves to minority communities comprised mainly of Black and Latino workers, and although they do provide a much needed service of providing credit and liquidity for all kinds of situations (emergencies, COVID-19-related costs, growing a small business, etc.), they are also known for charging high interest rates that leave this community of over 53 million Americans shackled with lifelong debt.

These unethical lenders, however, are not the only companies working with underserved minority communities. There are also plenty of ethical lenders that focus on a win-win relationship with their clients, helping them with any situation life brings, but providing clients with tools to learn and understand how debt works. These companies prioritize the value a long-term client can bring through transparency and empowering them to life-long financial wellbeing.

There are countless examples of how companies launched to “help the working and minority class” end up enriching the exact opposite of those people, including examples of government-sanctioned economic programs. An egregious example from 2016 is that of payday lending company executive and convicted racketeer, Scott Tucker. Through Tucker’s four companies, the largest of which is AMG Capital Management, Tucker was convicted of systematically evading state laws for more than 15 years in order to charge illegal interest rates as high as 1,000 percent on loans. A government program that also saw negative results was Opportunity Zones, albeit much less overtly fleecing; Opportunity Zones were supposed to bring needed investment into new communities, but instead oftentimes served the wealthy to build cheaply for their benefit and profits, alone.

This raises the need for JPMorgan, Wells Fargo and others to offer credit to customers without credit scores in a responsible and ethical manner, prioritizing their clients’ needs alongside any focus on increasing shareholder value. The same should be said for any lender embarking on this journey. This is a moment to step up and build trust with underserved and minority communities, not fall into the trap of greed as a “selfless” loan shark.