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Last week, I had the pleasure of attending the 2010 Assets Learning Conference that brought together over 1,000 participants for three days of plenaries, workshops and sessions exploring approaches to building an economy in which all Americans, including those of limited means, are provided opportunities to achieve household financial security through savings, investment, and entrepreneurship.
As I noted in my blog post reporting on the opening plenary, a major theme of the conference was the notion of “scale” – the need and opportunity to take policies, programs, and products that have been introduced and tested in modest ways up to now and expand them to serve a much greater number and range of individuals and families. In session after session, I learned about innovative practices that are already working at the local level or in pilot programs and that community organizations, government agencies, and financial institutions are gearing up to expand. Here are just four of the policies, programs and products from the asset building field that seem poised for a larger impact:
- The Bank On Initiative: According to a 2008 FDIC survey, one in four U.S. households is unbanked or underbanked, which means they do not have a checking or savings account, or rely on high-cost alternative financial services. In 2006, the city of San Francisco, in partnership with banks, credit unions and non-profit organizations, launched the Bank on San Francisco project to make it easier for the unbanked to get into mainstream banking by providing consumers with starter accounts and financial education. Building on the success of the San Francisco program and with the active involvement of the National League of Cities, the program has spread to over a dozen cities. The Administration has now proposed $50 million for a national Bank on USA initiative “to promote access to affordable and appropriate financial services and basic consumer credit products for households lacking such access.”
- $ave USA Initiative. For many low-income families, the Earned Income Tax Credit (EITC), which can be worth over $5,000 to a two-child household, provides an annual lump-sum payment that can not only be used to spend on ongoing and one-time expenditures, but that can also be saved and invested. In New York City, the Office of Financial Empowerment launched the $ave NYC Account Program to provide opportunities for families to invest part of their EITC refund in savings. $ave NYC is a matched savings program operated at tax time that provides low-income households 50 cents of public match for every $1 of savings up to $1,000. An evaluation of the program found that 61 percent of program participants deposited over $500 to their $ave NYC account, despite having average households earnings of roughly $15,000. These findings confirm the growing body of evidence showing that with the right incentives and program design, low-income families can and do save. In July, the federal government announced its financial support for the program in New York and three other cities, including Tulsa.
- Small Dollar Loan Program: Many low- and moderate-income families regularly depend on payday loans, which have APRs that can exceed 450 percent and tend to be extremely short-term, to try to make ends meet. Payday loans often lead to patterns of frequent, high-cost borrowing which perpetuate a cycle of debt and economic insecurity. In 2008, the FDIC launched the Small-Dollar Loan Pilot Program in partnership with 31 banks. All the banks committed to offering borrowers closed-end installment loans up to $2,500 with payment periods that extended beyond a single paycheck and APRs below 36 percent. Some banks coupled their loan product with financial education classes and resources. According to a study of the program, “most pilot bankers in the pilot indicated that small dollar loans were a useful business strategy for developing or retaining long-term relationships with consumers.” The FDIC intends to use the lessons from the pilot to work with the public, private, and non-profit sectors on strategies to expand the supply of lower-cost small-dollar loans.
- The Saver’s Credit. At the national policy level, the Obama Administration is promoting a broad set of tax policy changes that encourage and facilitate savings. One proposal that is strongly backed by CFED and a coalition of corporate and non-profit supporters would expand the Saver’s Credit, which currently is claimed by less than 6 million individuals. Under the Administration’s proposal, the Saver’s Credit would provide a flat 50 percent match on deposits into qualified retirement accounts up to $1,000 per year for joint filers, automatically deposit this match directly into a designated account, and extend this benefit to households earning less than $65,000. If enacted, up to 50 million Americans would be able to use the Saver’s Credit to build up a nest egg for retirement and other eligible uses.
These four examples are from an exhaustive list, but they are representative of a field in which a growing number of partnerships are bringing together government, non-profits, and the private sector to help build assets and strengthen financial security. The Oklahoma Asset Building Coalition is eager to be an active part of this work here in Oklahoma; whether or not you’ve been a part of the regional meetings that the Coalition is hosting around the state, we hope you’ll join our effort and help us ensure that Oklahoma contributes to bringing the assets movement to scale.
