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University of Wisconsin–Madison
Poverty-related issues in the news, from the Institute for Research on Poverty

Tag: Financial services

Home Loan Discrimination

Redlining was banned 50 years ago. It’s still hurting minorities today., By Tracy Jan, March 28, 2018, Washington Post: “Racial discrimination in mortgage lending in the 1930s shaped the demographic and wealth patterns of American communities today, a new study shows, with 3 out of 4 neighborhoods ‘redlined’ on government maps 80 years ago continuing to struggle economically. The study by the National Community Reinvestment Coalition, released Wednesday, shows that the vast majority of neighborhoods marked ‘hazardous’ in red ink on maps drawn by the federal Home Owners’ Loan Corp. from 1935 to 1939 are today much more likely than other areas to comprise lower-income, minority residents…”

Retirement Security

Think income inequality is bad? Retirement inequality may be worse., By Mike Maciag, March 2018, Governing: “For years, salon owner Luke Huffstutter, of Portland, Ore., wanted to offer his employees a way to save for retirement. Costs  were too steep for the small company, though, and few employees took the initiative to set up 401(k) plans on their own. But last summer, Oregon launched a retirement savings program that automatically enrolls employees in Roth IRAs, the first such state-sponsored program in the nation. Huffstutter signed up, and most of his 38 employees are now enrolled…”

Payday Lending – Colorado

Payday loans have average interest rates of 129% in Colorado. A ballot measure proposes capping them., By Brian Eason, February 21, 2018, Denver Post: “With a growing body of research showing that a prior round of reforms did not eliminate abuses in the payday-lending business in Colorado, reform supporters are now looking to ask voters to limit interest rates on the short-term loans…”

Payday Lending

  • Under Trump appointee, consumer protection agency seen helping payday lenders, By Chris Arnold, January 24, 2018, National Public Radio: “Payday lenders appear to have a powerful friend in Washington. Former Republican Rep. Mick Mulvaney is the interim head of the Consumer Financial Protection Bureau. He was appointed by President Trump amid an ongoing a power struggle for control of the bureau. Watchdog groups are up in arms because, under Mulvaney, the CFPB has put on hold a rule that would restrict payday lenders and their high-interest-rate loans. The agency has also dropped a lawsuit against online lenders charging 900 percent interest rates…”
  • Federal payday lending rule could face repeal amid new battle, By Kevin McCoy, January 22, 2018, USA Today: “Consumer advocates and business groups are battling over the possibility the Trump administration will eliminate a rule aimed at ensuring borrowers who take out high-interest loans between paychecks can afford to pay them back. Consumer groups say the so-called payday lending rule finalized last year by the U.S. Consumer Financial Protection Bureau should be fully implemented as soon as possible…”

Payday Lending – Ohio

Curbs on payday loans a tough sell to Ohio lawmakers, By Jim Siegel, October 17, 2017, Columbus Dispatch: “When Ohio lawmakers pass a law that doesn’t come close to working as planned, they often fix it. Not so much with payday lending regulations approved nine years ago. Short-term lenders in Ohio today are charging the highest rates in the nation, according to The Pew Charitable Trusts. A Republican lawmaker who wants to change that says he’s getting pushback from GOP colleagues who control the legislature…”

Payday Lending

Payday lending faces tough new restrictions by consumer agency, By Stacy Cowley, October 5, 2017, New York Times: “A federal agency on Thursday imposed tough new restrictions on so-called payday lending, dealing a potentially crushing blow to an industry that churns out billions of dollars a year in high-interest loans to working-class and poor Americans.  The rules announced by the agency, the Consumer Financial Protection Bureau, are likely to sharply curtail the use of payday loans, which critics say prey on the vulnerable through their huge fees…”

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…”