Title: Your Role in Ending Financial Apartheid in US Getting lowincome families out of debt and into mainst
1Your 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
2Financial Apartheid Forced into a second tier
of subprime financial services
BEING UNBANKED
PREDATORY DEBT SITUATIONS
3The 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
4CEO pay as multiple of average factory worker pay
in US
5Payday Lending Number of loans in MN
6Payday lending in MN amount loaned
7Payday lending in MN geographic areas
- Cumulative Total
- Metro 16.8
- Suburban 58.4
- Rural 24.8
8Why 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
9How 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
10Why 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
11Credit 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
12Lower 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
13What 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)
14Two 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
15Get 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
16Get 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
17CCCS 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 (800) 388-2227 to locate NFCC
member agencies
18What 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.
19Your 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
20Quick 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 _________
21Quick 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)
22Signs 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
23Up 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