Your Role in Ending Financial Apartheid in US Getting lowincome families out of debt and into mainst

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Your Role in Ending Financial Apartheid in US
--Getting low-income families out of debt and
into mainstream financial services

• Darryl Dahlheimer, Program Manager
• LSS Financial Counseling
• 888-577-2227
• www.lssmn.org/debt

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Financial Apartheid Forced into a second tier
of subprime financial services

BEING UNBANKED
PREDATORY DEBT SITUATIONS
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The Big Picture Two Americas

• More mansions built, yet less affordable housing
  available
• Top corporate CEO pay versus flat wages for half
  of workforce
• Record millionaires but 2/3 new jobs temp,
  PT, no benefits
• Stock market booming (13,000 new high) but only
  30 of US population has more than 5000 in the
  stock market

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CEO pay as multiple of average factory worker pay
in US
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Payday Lending Number of loans in MN
6
Payday lending in MN amount loaned
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Payday lending in MN geographic areas

• Cumulative Total
• Metro 16.8
• Suburban 58.4
• Rural 24.8

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Why Does Being Banked Matter?

• Builds prime credit relationship (eg-car loan)
• Safety federally insured and regulated, no need
  to carry cash, universal access of ATM/debit
  card/check
• Cost free checking vs m.o. and check-cashing
  fees
• Sign of creditworthy adult status (like drivers
  license)
• Depository setting promotes savings habit

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How does being unbanked relate to poverty?

• High-cost subprime svcs institutionalized
  dissaving
• Nearly 10 million households (9.5 of all
  households in US) do not own a bank account
• 83 of the unbanked earn under 25,000 per year
• Twenty-two percent of low-income families (over
  8.5 million families earning under 25K/yr) do not
  have a checking or savings account

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Why Does Prime Credit Matter?

• Poor credit pay more for asset purchases
• Credit score used for startling of things
• Subprime lending is linked with deceptive and
  predatory practices

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Credit scoring now used in wide array of
decisions affecting access and finances

• Rates on loans for cars, homes, private student
  loans
• Being chosen for an apartment rental by landlord
• Being chosen for a job or promotion by employer
• Need for, and size of, deposit on cell phones
• Access to credit cards and APR rate on cards
• Rates on car insurance and home insurance

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Lower Credit Score Costs You Money200,000
house purchased with 30 year fixed rate mortgage
(myfico.com calculator)

• FICO SCORE APR MO PAYMENT TOTAL
  INTEREST PAID
• 720-850 6.125 1215 237,480
• 700-719 6.250 1231 243,315
• 675-699 6.786 1302 268,715
• 620-674 7.932 1458 324,901
• 560-619 10.295 1799 447,603
• 500-559 10.772 1870 473,298

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What are subprime financial services

• Payday loans and title loans
• High-interest finance company loans
• Refund anticipation loans
• Check-cashing companies
• Pawn shops
• Rent-to-own
• High cost money transfers (wiring, debit)

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Two powerful allies to help put an end to growing
financial apartheid

• Get Checking program
• Skills taught to manage accounts successfully
• Access to mainstream credit unions and banks
• CCCS network of the NFCC
• Expert budgeting and coaching on debts/credit
• Debt Management Plans (DMP) to get debt paid

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Get Checking program details in MN

• Who is eligible to take Get Checking classes?
• Anyone can learn good account management skills
  in our classes. Consumers who have engaged in
  criminal fraud (eg- forgery) are not eligible to
  receive a certificate, but ordinary NSF problems
  are not a barrier. You must pre-register and pay
  fee.
• What makes Get Checking successful?
• Tips on money management and building good credit
  
• Understanding checking and savings products and
  policies to choose well
• Practice balancing a register and reconciling
  statements
• Participants must complete four steps to get a
  certificate
• Must attend whole class (two 3-hour evening
  sessions or one 4-hour Saturday session)
• Must pass the test at the end of the class
• Must bring Chexsystems report to class so
  instructor can screen for no fraud listed
• Must pay off any NSF debt listed as owing on the
  report

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Get Checking program details in MN

• Currently taught in three areas in MN
• Minneapolis/St Paul, Duluth/Superior, St Cloud
• GC outreach to 3-4 additional areas by fall 07
  with goal of serving whole state within 2 yrs
• GC outreach to spanish-language classes 08

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CCCS network of the NFCC

• National Foundation for Credit Counseling
• CCCS must be accredited by COA
• Counselors must pass 6 tests to become
  certified
• No financial incentives to employees for DMPs
• Low fees and true non-profit behavior
• Emphasis on financial education/prevention
• Housing counseling and foreclosure prevention
• www.nfcc.org [phone] to locate NFCC
  member agencies

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What is a reputable Debt Management Plan?

• You make one monthly payment to LSS, which we
  distribute to all creditors on the DMP. Payments
  on a DMP may be lower than your current required
  payment, and many creditors will reduce interest
  rates and stop late or over-limit fees and re-age
  accounts once on DMP.
• The budget counseling intake is free. If you
  decide a DMP is right for you, there is a 33 fee
  to start the program and a monthly fee based on
  the size of your DMP payment, up to a maximum of
  50 per month, Most clients find that the
  benefits of the DMP more than cover any costs of
  being on the plan.
• Will a DMP affect my credit rating?Creditors
  have their own policies on reporting
  participation in a DMP to credit bureaus. Fair,
  Isaac Company, who produce the FICO credit
  score that many lenders use, are on record that
  they will not deduct any points from your score
  for being on a DMP. DMP may improve your chances
  of getting credit in the future since you will
  have repaid your debts in full.
• How do I get started?Start with your free
  budget counseling, either in-person, by phone, or
  online. Our financial counselors can quote you a
  DMP based on your specific creditors and will be
  glad to answer any questions you have about the
  plan.

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Your role as a front-line worker

• Connector and system navigator to steer
  low-income families to safe places
• Financial literacy coach to empower people with
  honest, de-mystifying info
• Change agent to help shift values and act as
  counter-rhythm to consumerism

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Quick mental health test to give US culture

• The number one mental health problem in North
  America is_____________________________
• To solve their financial problems, most Americans
  need to work __________________________
• Reduced economic inequality will almost certainly
  lead to _______________________________
• Better sins that gluttony and greed are _________

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Quick mental health test for US culture

• The number one mental health problem in North
  America is .. CHRONIC TV WATCHING
• To solve their financial problems, most Americans
  need to work . LESS and adjust spending down
• Reduced economic inequality will almost certainly
  lead to . stronger social fabric and
  quality-of life
• Better sins that gluttony and greed are (I like
  envy)

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Signs of resistance to the infection of
hypermarketing, inequality, affluenza

• Culture Jam manifesto
• Buy Nothing Day (www.adbusters.org)
• The Compact (www.sfcompact.blogspot.com)
• Unplug the Christmas Machine book
• Kerula, India as measure of well-being that is
  more important than GDP fog

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Up and Out of Poverty

• One nation, indivisable
• You can do it, we can help collaboration
• Word-of-mouth promotion of trustworthy
• Uncooling of unhealthy norms