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June 18, 2019

The Richmond Fed Probes Consumer Credit Access, Health and Debt Trends in the District of Columbia

Consumers in the District of Columbia’s low-income communities are up to four times more likely to have subprime credit than consumers in higher-income communities, and their credit health is worsening. What is behind this trend? The Federal Reserve Bank of Richmond’s D.C. Consumer Credit Report provides insights into the factors driving differences in community growth and income in Washington, D.C. The Bank’s Regional and Community Analysis team analyzes different indicators of access, health and utilization in the credit economy, as well as debt and payment history from 2007 to 2017. The report builds off of the groundwork laid by the Community Development team’s outreach work in 2015 and 2016. “Examining the financial health of a community’s residents provides the Bank with a better understanding of the individual and collective barriers to economic inclusion,” said Sam Storey, senior research analyst.

Key findings in the report include:

High Debt Levels and Economic Instability Persist in Low-Income Communities

  • Over the short term, the Great Recession pushed some residents in most income groups out of the credit economy.
  • Consumers in high-growth areas have sizeable populations of subprime borrowers that should not be overlooked.
  • Mortgage borrowers in low- and moderate-income communities experienced the hardships of the mortgage crisis more acutely than other consumers, though they have mostly recovered.

Low-income Communities in the District of Columbia Have Unique Credit Problems

  • Fewer low-income consumers have easy access to credit, both compared with 2007 and with consumers in other areas of D.C.
  • The portion of consumers in low-income communities that have reached 75 percent of their credit limit is the highest since 2008 — 36 percent — and continues to rise.
  • Auto debt is higher in low-income communities than in any other part of the city and may be a drag on consumers’ credit health.

Expanded Access to Financial Literacy Education and Greater Access to Economic Opportunities Could Help 

  • Research has shown that greater financial literacy often leads to lower debt loads and improved credit health for consumers.
  • Programs such as BankOn D.C. have made important strides in bridging divides in financial literacy and inclusion, but significant inequities remain.
  • Expanding opportunities and training for higher-paying jobs for workers at all skill levels may lead to improvements in credit health imbalances.

Taken together, the increasing share of consumers in low-income communities that have high credit utilization and subprime credit indicates that income growth continues to fall behind spending and debt repayment patterns. “Even as the District of Columbia has experienced rapid increases in resident wealth over the past decade, thousands are struggling to stay afloat,” said Storey. “Understanding that the geographic distribution of credit access, health and debt trends align with other economic indicators could help identify strategies for targeted outreach in the future.”


As part of our nation’s central bank, the Richmond Fed is one of 12 regional Reserve Banks working together with the Board of Governors to support a healthy economy and deliver on our mission to foster economic stability and strength. We connect with community and business leaders across the Fifth Federal Reserve District — including the Carolinas, District of Columbia, Maryland, Virginia, and most of West Virginia — to monitor economic conditions, address issues facing our communities, and share this information with monetary and financial policymakers. We also work with banks to ensure they are operating safely and soundly, supply financial institutions with currency that’s fit for distribution, and provide a safe and efficient way to transfer funds through our nation’s payments system.

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