The Michigan Chronicle recently had the opportunity to sit down with Fifth Third Bank President Greg Carmichael to talk about the bank’s initiatives, philosophy, and programs that he believes fit well into the city’s continuing economic growth. The following is transcript of that conversation, edited for content.
Q: How do you view 5th Third Bank fitting in with the revitalization of the city?
A: First of all it’s amazing what’s happening in Detroit, and it’s exciting to see, and we’ve been fortunate to be a large part of that. And as we relocate our headquarters downtown, which we did about 18 months ago, and we made a large commitment – I did – across all of our 10 states of $30 billion over the next five years [across the 10 states]. And the focus of that $30 billion is on a couple things: one is mortgage assistance. Helping people be in a home. Which is one of the most important ways we can contribute to the revitalization of the communities. And that’s about $11 billion.
Second, $10 billion of that $11 billion is earmarked for small businesses. Once again, the staple of the community and health of the community is based on businesses in the community, and having resources for people who live in the community. Grocery stores, hardware stores, those type of things. So that’s extremely important.
So homeownership, mortgage assistance, small business support, and then the community development loans that we’re making also in the communities that really help t billionhe not for profits serve the community. So large investments in those areas that we’re very proud of.
And then philanthropically. The contributions that we’re making to United Way and so forth greatly contribute to the success of the community.
In addition to that, we do a significant amount of volunteering our employees. Last year there was over 100,000 hours over the past year that our employees volunteered. They may be repainting someone’s house, we’re packing lunches. We did more than 1 million lunches for underprivileged kids. We also have a requirement for our executives that they sit on local not for profit boards to help them be successful.
Of that $30 billion, about $2.8 billion goes to ‘east Michigan component’ which includes Detroit.. But expect that amount to be exceeded.
Q: Can you talk about the new Momentum app?
A: Fifth Third Bank introduced the Fifth Third Momentum app to help college graduates pay off student loans faster by automating frequent micropayments toward the balance on student loan accounts.
Fifth Third Bank customers with a Fifth Third debit card can link student loans held by over thirty different servicers to the app. Once the loan is connected, customers can choose to round their debit card purchases up to the next dollar or add one dollar to every purchase. Either way, the extra amount is applied to the balance on the designated loan on a weekly basis once a minimum of five dollars in round ups is achieved. They can download the app and set it up through their smart phone.
Customers who choose to round up using Fifth Third Momentum can, for example, apply 55 cents to their designated loan balance when purchasing lunch for $9.45 for a total of $10. The same customer who chooses the dollar pay-down would pay $10.45 for the same lunch, with $1 of that being applied toward the student loan. Student loan debt totaled $1.3 billion in 2016.
Fifth Third estimates that customers who round up $25 a month using the Fifth Third Momentum app could pay off a 20-year loan three years sooner and pay 8 percent less in total by avoiding interest that would have accumulated.*
Fifth Third Momentum is available to any Fifth Third debit card user. To get started, customers can download the Android or Apple app and enter the name of the institution servicing the student loan. The app gives tips to help locate the loan number. Customers then decide on their preferences — whether to round up purchases or contribute $1 for every debit-card transaction. Once $5 in payments is accumulated, the money is automatically sent to the student-loan account at the end of the week.
Q: This seems to be a change in the role of traditional banking with so much aggressive involvement in the community, compared to how banks are often viewed.
A: I don’t believe you can build a strong bank without building strong communities. Because we’re here to serve the community. That’s why we exist. It’s our responsibility to educate our consumers and help them be successful financially.
We have always invested in communities, we’ve just never been as vocal about it. So coming out of the [recession] crisis when banks weren’t viewed as the best corporate citizens, we take exception to that. We believe we’re great corporate citizens, and we want to demonstrate that. We demonstrate that with the commitments we make as a corporation.
Q: Are there outreach programs you have to familiarize people with the advantages of placing their money in banks versus the use of check cashing stores, etc.?
A: What we see is they’re coming in, paying too much money to cash a check, not having access to a debit card or an ATM service, but yet they don’t necessarily have the credit worthiness yet, or they can’t afford to pay things like overdraft fees.
We created program for that market which gives them checking and savings account, plus debit card. But they can’t overdraft that debit card. We won’t let them get in that situation.
Literally you reduce the cost of cashing that check by 2/3 if you’re coming in every week, which then lets them put more in their pocket.
This has gotten us at least 150,000 more customers coming in who previously had not been in the banking sector. This program is a starting point to get them into the system. Then it’s on toward financial literacy. We educated over 1.5 million people [across the 10 states] since we launched our financial literacy programs.
We also have E buses that travel into the community. Anyone can walk into the E bus and we will sit down and we’ll do education, we’ll help them understand their challenge, give them alternatives and provide them advice. The idea is to take banking services direct into the community, and it’s advertised in advance that they will be there. The length of the E bus visit varies.
Q: Distressed communities such as Detroit face huge burdles when it comes to credit worthiness and other things needed to establish a stable economic profile. How do your programs work to deal with this issue?
A: We have programs with more flexibility, but the important thing is we give people loans that they can pay back. We have to find a win-win space here. We want to lend, but we want to make sure that what we’re doing foe them is going to help them be successful, and not put them in a more challenging situation from a credit perspective. A lot of what we’re doing also is understanding their business model. We help them think through their business model, think about how it’s going to be successful, and then we can underwrite it.
Q: What are the things you teach people to educate them about how to get/stay out of financially troubling situations?
A: Job One is helping people understand what helps their credit report, and what hurts your credit report. We want to educate them on what good credit looks like. And then make sure the liabilities and responsibilities that they have if we extend credit to them. And then also make sure they understand how to work with us. Because the last thing we ever want to do – and this may be hard to believe for some people – is we don’t want your home back. We don’t want your business not to be successful. Just the opposite.
There’s a lot of costs associated with a bank taking over a piece of property. And it’s not that easy for a house that’s not occupied to be sold either. So we know that the best outcome – and the best outcome for the consumer – is to keep them in their home.