Retirement Savings for Low-Income Workers

Trump Administration ends low-income retirement savings plan, By Paul Davidson, July 28, 2017, USA Today: “The Trump Administration said Friday it’s shutting down an Obama-era program aimed at encouraging low- and moderate-income households to save for retirement because the scant participation didn’t justify the cost…”

Financial Stress Among Native Americans

Study shows high levels of financial distress among Native Americans, By David Erickson, May 2, 2017, Missoulian: “The use of high-cost borrowing methods such as payday loans and a lack of retirement and college savings plans may be keeping many in Montana’s Native American population in an endless cycle of poverty. There are more than 62,000 Native Americans in Montana, making up 6.6 percent of the state’s population, and a new national study has found that they are more likely to have high levels of financial distress compared to other demographic groups…”

Retirement Savings for Low-Income Workers – California

Congress targets a California law that aims to give low-income workers retirement security, By Evan Halper, February 9, 2017, Los Angeles Times: ” An ambitious California law intended to help create retirement security for low-income workers is in the crosshairs of the Trump-era Congress, which is moving to block the state and others from launching programs to automatically enroll millions of people in IRA-type savings plans…”

Mobile Banking

  • Dial M for money: Can mobile banking lift people out of poverty?, By Nurith Aizenman, December 9, 2016, National Public Radio: “If you live in Kenya there’s a jingle you hear on television and radio a lot.   ‘Things are now modern!’ they sing. ‘Things are now developed.’ It’s an ad for a type of banking service called M-PESA that’s run entirely through your mobile phone. You set up an account with the phone company. You can send and receive funds by text. Or, if you need to make a cash deposit or withdrawal, you do it through a vast network of agents — small-time vendors in kiosks and shops, for example, that the company has set up…”
  • Here’s why mobile money is dramatically reducing poverty in Kenya, By Robert Gebelhoff, December 22, 2016, Washington Post: “For Tavneet Suri, an economics professor at MIT who grew up in Kenya, much has changed in her home country over the past decade. What used to be an economy relatively closed off to the rest of the world is now a one where the vast majority of people are paying bills and sharing money with one another through cellphones…”

Underbanked Households

The millions of Americans without bank accounts, By Gillian B. White, October 20, 2016, The Atlantic: “The number of American families without a bank account dropped to about 9 million in 2015, the lowest rate on record since the Federal Deposit Insurance Corporation started gathering data in 2009. Still, around 24 million households are considered underbanked, meaning that they have checking accounts but still rely on alternative services—such as pawn shops, check-cashing operations, and payday or auto-title loans—for their credit and cash needs. And that number, a new report finds, hasn’t improved much at all in the past few years, which means that tens of millions of Americans still struggle without access to basic financial services…”

Unbanked Households

More Americans come into the banking system, By Mitchell Hartman, September 9, 2016, Marketplace: “‘Unbanked’ is the term used by financial regulators and consumer advocates to describe people who live, work, pay bills and borrow for emergencies, entirely outside the traditional banking system. Being ‘unbanked’ can limit peoples’ access to affordable credit, and leave them vulnerable to predatory lending…”

Predatory Lending

Payday loans’ potentially predatory replacement, By Gillian B. White, August 12, 2016, The Atlantic: “Dangerous, high-cost lending isn’t going away anytime soon.  While some have heralded the Consumer Financial Protection Bureau’s long-awaited payday-lending regulations as significant progress toward the end of predatory lending practices, other, similar products have, as predicted, started to take their place…”

Payday Lending

Payday loans’ debt spiral to be curtailed, By Stacy Cowley, June 2, 2016, New York Times: “The payday loan industry, which is vilified for charging exorbitant interest rates on short-term loans that many Americans depend on, could soon be gutted by a set of rules that federal regulators plan to unveil on Thursday. People who borrow money against their paychecks are generally supposed to pay it back within two weeks, with substantial fees piled on: A customer who borrows $500 would typically owe around $575, at an annual percentage rate of 391 percent. But most borrowers routinely roll the loan over into a new one, becoming less likely to ever emerge from the debt…”

Payday Lending

  • 1,000% loans? Millions of borrowers face crushing costs, By Alain Sherter April 25, 2016, CBS News: “Last Christmas Eve, Virginia resident Patricia Mitchell borrowed $800 to help get through the holidays. Within three months, she owed her lender, Allied Cash Advance, $1,800. On the other side of the country, Marvin Ginn, executive director of Native Community Finance, a small lender in Laguna, New Mexico, reports that some customers come to him seeking help refinancing loans from nearby payday lenders that carry annual percentage rates of more than 1,000 percent…”
  • Payday lending: Will anything better replace it?, By Bethany McLean, May 2016, The Atlantic: “Fringe financial services is the label sometimes applied to payday lending and its close cousins, like installment lending and auto-title lending—services that provide quick cash to credit-strapped borrowers. It’s a euphemism, sure, but one that seems to aptly convey the dubiousness of the activity and the location of the customer outside the mainstream of American life.  And yet the fringe has gotten awfully large…”

Payday Lending

  • Payday loan users can also get hit by bank fees, watchdog finds, By Becky Yerak, April 20, 2016, Chicago Tribune: “High interest rates might not be the only problem for borrowers who take out payday loans online, a consumer watchdog says.  Borrowers who don’t keep enough cash in their checking accounts to pay off those short-term loans can also get hit with repeated overdraft or insufficient-funds fees from their banks, according to a report by the Consumer Financial Protection Bureau…”
  • Bank fees are a hidden cost of payday loans, By Stacy Cowley, April 20, 2016, New York Times: “Payday loans are well-known for their high interest rates and fees, but for many borrowers, they have a second, less obvious cost: the bank fees incurred when automatic loan repayments fall short.  Bank overdraft and insufficient-fund fees often add hundreds of dollars to the cost of a loan, according to a study released Wednesday by the Consumer Financial Protection Bureau, which is preparing to propose new rules for the payday loan industry.  The agency said it analyzed 18 months of transaction data from nearly 20,000 accounts showing payments to Internet-based payday lenders…”

Home Loan Discrimination

‘Redlining’ home loan discrimination re-emerges as a concern for regulators, By Rachel L. Swarns, October 30, 2015, New York Times: “The green welcome sign hangs in the front door of the downtown branch ofHudson City Savings Bank, New Jersey’s largest savings bank. But for years, federal regulators said, its executives did what they could to keep certain customers out.  They steered clear of black and Hispanic neighborhoods as they opened branches across New York and Connecticut, federal officials said. They focused on marketing mortgages in predominantly white sections of suburban New Jersey and Long Island, not here or in Bridgeport, Conn.  The results were stark. In 2014, Hudson approved 1,886 mortgages in the market that includes New Jersey and sections of New York and Connecticut, federal mortgage data show. Only 25 of those loans went to black borrowers…”

Financial Services and the Poor

It’s expensive to be poor, September 5, 2015, The Economist: “When Ken Martin, a hat-seller, pays his monthly child-support bill, he uses a money order rather than writing a cheque. Money orders, he says, carry no risk of going overdrawn, which would incur a $40 bank fee. They cost $7 at the bank. At the post office they are only $1.25 but getting there is inconvenient. Despite this, while he was recently homeless, Mr Martin preferred to sleep on the streets with hundreds of dollars in cash—the result of missing closing time at the post office—rather than risk incurring the overdraft fee. The hefty charge, he says, would kill me.’  Life is expensive for America’s poor, with financial services the primary culprit, something that also afflicts migrants sending money home…”

Education Savings Accounts

This innovative idea is helping low-income families save for college, By Jillian Berman, September 2, 2015, MarketWatch: “When he was a first-grader, Emily Gardner’s 8-year-old son Elijah Peters told her he wasn’t interested in college. He dreamed of becoming a handyman like his father instead. She signed him up for a college savings plan anyway. Now she’s glad she did. After a field trip to Manchester University in North Manchester, Ind., where Elijah held a pig’s heart and used Mentos to create an explosion in a bottle of Diet Coke, he began depositing his birthday and Christmas money into the account and asking his grandparents to help him save even more. ‘Just to hear that from a child who said ‘I’m not going to college,’ it is fantastic,’ said Gardner, 31, of Wabash, Ind., where she is director of the city’s downtown economic and community development program…”

Lead Poisoning Settlements

How companies make millions off lead-poisoned, poor blacks, By Terrence McCoy, August 25, 2015, Washington Post: “The letter arrived in April, a mishmash of strange numbers and words. This at first did not alarm Rose. Most letters are that way for her — frustrating puzzles she can’t solve. Rose, who can scarcely read or write, calls herself a ‘lead kid.’ Her childhood home, where lead paint chips blanketed her bedsheets like snowflakes, ‘affected me really bad,’ she says. ‘In everything I do.’  She says she can’t work a professional job. She can’t live alone. And, she says, she surely couldn’t understand this letter. So on that April day, the 20-year-old says, she asked her mom to give it a look. Her mother glanced at the words, then back at her daughter. ‘What does this mean all of your payments were sold to a third party?’ her mother recalls saying…”

Experimental Poverty Programs

The anti-poverty experiment, By Jason Zweig, June 5, 2015, Wall Street Journal: “The U.S. and other wealthy nations have spent trillions of dollars over the past half-century trying to lift the world’s poorest people out of penury, with largely disappointing results. In 1966, shortly after President Lyndon B. Johnson declared war on poverty, 14.7% of Americans were poor, under the official definition of the U.S. Census Bureau. In 2013, 14.5% of Americans were poor.  World-wide, in 1981, 2.6 billion people subsisted on less than $2 a day; in 2011, 2.2 billion did. Most of that progress came in China, while poverty has barely budged in large swaths of sub-Saharan Africa, South Asia and Latin America. Is it time for a new approach? Many experts who study poverty think so. They see great promise in a new generation of experimental programs focusing not on large-scale social support and development but on helping the poor and indebted to save more, live better and scramble up in their own way…”

Welfare Reform – Kansas

$25 ATM limit for Kansas welfare recipients may violate federal law, By Lindsay Wise and Dion Lefler, May 16, 2015, Wichita Eagle: “A first-of-its-kind provision that prevents welfare recipients in Kansas from withdrawing more than $25 a day from an ATM might violate federal law – and could jeopardize the state’s federal funding if not amended. The Social Security Act requires states to ensure that recipients of Temporary Assistance for Needy Families, or TANF, ‘have adequate access to their cash assistance’ and can withdraw money ‘with minimal fees or charges.’  At stake is about $102 million in TANF block grant money that Kansas receives every year from the federal government.  The ATM limit was added as an amendment to a welfare overhaul bill signed in April by Gov. Sam Brownback…”

Payday Lending

Feds aim to protect low-income users of ‘payday’ loans, By Josh Boak (AP), March 29, 2015, Detroit News: “Each month, more than 200,000 needy U.S. households take out what’s advertised as a brief loan.  Many have run out of money between paychecks. So they obtain a ‘payday’ loan to tide them over. Problem is, such loans can often bury them in fees and debts. Their bank accounts can be closed, their cars repossessed.  The Consumer Financial Protection Bureau proposed rules Thursday to protect Americans from stumbling into what it calls a ‘debt trap.’ At the heart of the plan is a requirement that payday lenders verify borrowers’ incomes before approving a loan.  The government is seeking to set standards for a multibillion-dollar industry that has historically been regulated only at the state level…”

Tax Refund Anticipation Checks

More cash-strapped Americans turn to tax refund advances, By Hope Yen (AP), March 22, 2015, ABC News: “Cash-strapped Americans anxious for tax refunds are increasingly turning to payment advances, prepaid cards or other costly services when getting tax preparation help, according to new federal data raising concerns among regulators about whether consumers are fully informed about the fees.  Regulators are looking to increase oversight of preparers amid the rise in ‘refund anticipation checks,’ a type of cash advance especially popular among low-income families who receive the Earned Income Tax Credit, the government’s $65 billion cash benefit program. The advances are being marketed as a way to get fast refunds or defer payment of tax preparation costs…”

Financial Opportunity Centers

Boston centers help low-income residents with budgeting, By Katie Johnson, March 20, 2015, Boston Globe: “Making money isn’t the problem for Adalziza Campbell. Managing it is.  Campbell works two jobs, as a hairdresser and a certified nursing assistant, but still can’t get ahead. She got turned down for a bank loan to buy a house and had to borrow from her dwindling savings account to pay her bills.  ‘I’m making money,’ she said. ‘Why don’t I have it?’  Like many people, Campbell, 35, of Charlestown, had never created a budget or tried to improve her credit score. But she has started learning these skills at the new Roxbury Center for Financial Empowerment in Dudley Square, one of two such sites to open in October as part of the city’s new Office of Financial Empowerment…”

Credit Repair Companies

The industry that charges low-income Americans to fix credit errors they can fix themselves for free, By Chico Harlan, February 6, 2015, Washington Post: “By the time she made it to the American Bill Pay Web site, with its testimonials and its guarantee to solve credit woes, Kimberly Cox couldn’t afford another problem. She was squeaking by on $720 per month in disability checks. Her credit score was a measly 530. She lived with her son, Logan, who moonlighted on weekends as a bullrider at amateur rodeos in western Arkansas. Neither had health insurance, and one rodeo night, a 2,000-pound bull bucked hard, knocking Logan to the ground. There was a knee surgery, a long hospital stay, a $40,000 medical debt. And then a seeming helping hand. ‘REGISTER NOW,’ the American Bill Pay site said, and it offered an enticing possibility: that Cox, for a fee, could ease her debts and improve her credit score with just a few easy steps. Cox borrowed $900 from her mother-in-law to pay for the service…”