The State of Finances, Debt in Rural Appalachia
WASHINGTON, DC – The Consumer Financial Protection Bureau (CFPB) has released a report which details the financial problems of rural Appalachia.
“The Appalachian region of our country faces challenges distinct from those in other parts of rural America,” CFPB Director Rohit Chopra said. “Rural America plays a central role in our nation’s food security and national security, so we must work to ensure the financial market can help families survive and thrive.”
According to the CFPB report, Consumer Finances in Rural Appalachia, more than 2 million Appalachians live in persistent poverty counties (PPCs), counties that have had poverty rates of 20% or more for the past 30 years. PPC consumers often face higher interest rates and fewer financial offers due to increased credit risk in the county.
The report’s findings include:
- Only 71% of rural Appalachians and 63% of rural Appalachians living in PPCs have an active credit card, compared to 80% of consumers nationally. Consumers who don’t have access to credit cards often have to turn to more expensive credit alternatives, such as payday loans and pawnbrokers.
- The median of student loan balances as a percentage of annual household income is 41% for rural Appalachia, compared to 32% nationally. Auto loan balances make up 31% of annual household income in rural Appalachia, compared to 21% nationally.
- Mortgage application denial rates in rural Appalachia (21%) were nearly double the rate of mortgage applications nationwide (11%). For rural Appalachian PPCs, refusal rates were 35%.
- Rural Appalachia suffered higher home loan interest rates for home purchases in 2021 compared to the country. The national average was 3.13%, while rural Appalachia had an average rate of 3.41%. Rural Appalachian CFCs had average rates of nearly 4% (3.86).
Comparing West Virginia with the rest of the nation, the report found that:
- The median for student loan balances as a percentage of annual household income in rural Appalachia in West Virginia was 39%, compared to 38% for the state as a whole and the national median of 32%.
- 23% of consumers in rural Appalachia in West Virginia had a mortgage, compared to an average of 25% for the state and 29% for the national average.
- 69% of consumers in rural Appalachia in West Virginia had a credit card, with a median balance of $999. In comparison, 72% of consumers in West Virginia had a credit card with a median balance of $1,021, while the national average was 80% with a credit card with a median balance of $1,207.
- 29% of rural consumers in Appalachia in West Virginia had medical debt collection, compared to 30% for the state as a whole and only 17% for the national average.
- 34% of rural consumers in Appalachia in West Virginia had a subprime or deep subprime credit profile, while the state as a whole had 33% of consumers with similar credit profiles. The national average for both categories was 25%.
The report also found that more rural Appalachia has medical debt in collections than the rest of the nation. And those with medical debt collections tend to have more than double delinquency rates for other credit products, such as unpaid credit card and student loan default