Yet again, the CT Asset Building Collaborative newsletter is a month late. But better late than never for #11. All of a sudden, after being unseasonably warm for weeks and weeks, winter is suddenly upon us. It's the perfect time to settle in somewhere comfortable and warm, and read on for interesting articles and news about asset building.
Peer Learning session on Oct 31 2018
Here’s another opportunity to learn from peers working in the field! We'll explore how to better integrate financial empowerment into social services, learning from the experiences of organizations such as Elm City Communities. Take the time in advance of the session to learn from Prosperity Now how such integration has been done around the country. Peer learning sessions are a great time to not only learn from experienced practitioners, but also to network with people doing similar work to yourself. For more information and to RSVP click here.
Waterbury Regional Meeting November 8, 2018
Periodically we organize regional meetings around the state – and now it’s Waterbury’s turn! The meeting will include panels on the Working Cities Challenge, Savings and Banking, and Financial Empowerment Centers. There will also be informal opportunities for networking as well as a speed networking activity. See here for a more detailed agenda, and to RSVP click here. Many thanks to the generous sponsorship from the United Way of Greater Waterbury.
Connecticut Economic Inclusion Forum 2018
The Federal Deposit Insurance Corporation (FDIC) held the 2018 Connecticut Economic Inclusion Forum on October 18th in New Haven, focusing on providing unbanked and underbanked populations with opportunities to actively participate in the financial mainstream. Presenters spoke about access of people with mental illness to financial services (yours truly – see paper here), BankOn New Haven, Bankwell and Domus' collaboration supporting youth with incarceration histories with their finances, and Liberty Bank's Money Smart for Small Business Program.
ALICE report on Financial Hardship
In August the United Way of Connecticut released its 2018 ALICE – short for Asset Limited, Income Constrained, and Employed – report. It explores the growing financial challenges faced by working and middle class families across the state as they struggle to make ends meet, as wages fail to keep up with the high cost of living. More and more people are relying on on-demand or project-to-project work with limited security, few or no benefits, fluctuating hours and unreliable wages, making it difficult to pay bills on time and make long-term financial plans. Close to 50% of CT households do not have enough money saved to cover expenses for three months in the case of an emergency such as an illness or the loss of a job.
News you can use and research that matters
FDIC un- and underbanked report
The FDIC's 2017 National Survey of Unbanked and Underbanked Households is out! You may be happy just to read the executive summary, but if you want to dive into the detail click here, and see here for specific CT information. The good news is that fewer people are unbanked than before, though this is due mainly to households becoming better off and so 'graduating' into mainstream banking services, rather than banks doing a better job of reaching poorer people. Also, as in the past, the survey finds that most people without a bank account DID have one in the past, pointing to the need to better understand why and how people fall out of the banking system. More people than ever are using mobile banking, unsurprisingly, though lower-income, less-educated, older and rural households still prefer to go to the bank in person. The 2017 survey asked more questions about credit than before; they found that 80% of unbanked households lacked access to mainstream credit, compared with only 14% of fully banked households.
EARN savers struggle with debt....
As well as helping people to save through the Saverlife Program (see here for information about how to sign up for the program here in Connecticut) EARN also does research. They found that one of the biggest predictors of successful savings behavior was whether the person had a good credit score, and whether they had debt under control. More than half of successful savers had good credit, compared to only 16% of those who didn’t’ save well. More than 2/3 of successful savers said they had no debt, or debt they could manage, compared to just 1/3 of those who didn’t save well.
...as do Financial Clinic customers.
The Financial Clinic, which works to build the financial security of poor people, including through financial counseling, also finds that debt is the biggest cause of financial instability among its clients. According to their data more than 1/3 of clients have debts in collections, just under 1/3 are struggling with credit card debt, and a small but growing number of clients are burdened by non-loan debt, such as unpaid child support, tax payments, or municipal fees, as well as rent and utility arrears. See this very important report by the Aspen Institute’s Epic program to learn more about how non-loan debt has become a significant contributor to financial insecurity for millions of households, and click here to learn about innovative ways of dealing with child support.
Overdrafts, the 'elephant in the room' when it comes to small dollar credit
Lest we forget, one of the main types of debt poor people have is that short-term, extremely costly debt that mostly gets paid off at the start of the month - overdraft debt. Corey Stone, formerly of CFPB and now on the BoD of our very own Connex Credit Union (and, before his CFPB days, an 'insider' with American Payment systems), is writing a fantastic series of blogs about overdrafts. Please read them, starting here. The links from one to the next aren't great so here are the next two, three (particularly shocking), four and five. Happy (or actually rather grim) reading, though blog five hints that the next post will have more positive news.
Access to ChexSystems reports
If you’re a member of the Credit Builders Alliance (CBA) you can now access ChexSystems reports through the partnership and begin to address barriers to banking access. CBA has long helped nonprofits report client loan data and pull credit reports, including both Experian and Transunion reports, as well as LexisNexis about non-traditional and alternative credit data, and Nova Credit for overseas credit data.
Fees can make all the difference
Professor Devin Fergus of the University of Missouri’s new book, ‘Land of the Fee’ exposes the rise of fees, particularly since the 1970s, which has contributed to the distribution of wealth from the poor and middle classes to wealthy corporations. He shows how more transparent costs, such as interest charges, have increasingly been replaced by more hidden fees. And guess what an unpaid fee is? Yes, that's right, it's a non-loan debt. Register here for a webinar with Professor Fergus organized by Prosperity Now.
Wealth recovery... or not?
Overall Americans’ wealth has recovered any losses due to the 2008 financial crisis. Good news, right? The problem is, as is so often the case, aggregate data hides the extent to which an overall pattern is shared across the population. It turns out that while the wealth of the top 10% recovered quickly, and has far surpassed 2007 levels, the wealth of the other 90% has not recovered, and that of the bottom 30% has actually declined. Obviously, this means inequality is growing. In 2007 the top 10% had 45 times as much wealth as the bottom 30%, by 2016 the top 10% had 72 times as much wealth as the bottom 30%; Connecticut has particularly high levels of wealth and income inequality, as explained in this series of extremely important CTMirror articles.
But financial health is getting better, thanks to the ACA (though beware the turn towards high-deductible plans)
Research from Michigan finds that the expansion of the Affordable Care Act through the Healthy Michigan Program resulted in improvements in several measures of financial health, including fewer unpaid bills, medical bills, over-limit credit card spending, delinquencies, as well as a drop in evictions, judgments, and bankruptcies. Clearly, access to affordable healthcare is good for people’s finances (in case you hadn’t worked that out already). This report from JP Morgan Chase has concerning findings that out-of-pocket health care expenses have increased substantially in the past three years, with low-income people particularly burdened. Could this be a warning that financial health may take a turn for the worse again if the ACA is further weakened resulting in more and more high-deductible plans?
Tax credits for low income families at risk
Some troubling implications of the new tax bill have got very little press; one is how it may effect tax credits for low-income families. This article by the founders of StreetCred explains how provisions in the bill will result in the value of the Earned Income Tax Credit (EITC) eroding over time, and will also exclude people who have been able to claim the Child Tax Credit (CTC) using an Individual Tax Identification Number rather than a Social Security Number. All of this is concerning for multiple reasons, among them the fact that both the EITC and CTC have clear documented health and other benefits for recipient families.
Financial Literacy for Youth
The Brookings Institution has come up with recommendations for school-based financial literacy programming, based on a nationwide review. They’ve also compared the different states – you can download the data here. Connecticut doesn’t do too badly but could definitely do better – Missouri and Utah are the leaders in this area, with rigorous personal financial literacy standards that are required to be implemented at various grade levels.
Sorry, cash only
I was surprised the other day when buying a cup of coffee in a Yale School of Medicine cafeteria that I could only pay by card – no cash allowed. But this is becoming the norm around the country, to the delight of credit card companies. Even though cash remains legal tender, the courts have repeatedly sided with businesses that want to deny their customers the right to pay with cash. There are obvious advantages to using plastic over cash, as most of us know, but there’s a real concern that the practice will make the gap between those with and those without access to good financial services grow ever wider.
Read these books....
... because they are really, really good. At the very least, read this review of them. Peter Edelman’s ‘Not a Crime to be Poor’, and Khiara Bridge’s 'The Poverty of Privacy Rights', discuss the cost of being poor, the criminalization of poverty, and how poor people are under increasing surveillance. I’ve probably included a link to this article before, but it’s worth reading twice, as is this one, showing how poorer people pay more just to do the normal things that everyone has to do in life, including how the great deals that many of us get on credit cards are essentially subsidized by the high rates paid by poor people.