Nancy Martira, Communications Manager
The Consumer Financial Protection Bureau is accepting public comment on a proposal to roll-back existing consumer protections on small-dollar loans. We know this industry is notoriously predatory and now the CFPB wants to make it easier to trap Americans in high-cost debt that they can't afford to pay back. We will be submitting our comment before the May 15th deadline. Please read our letter below. If you would like to have your name or organization added to our letter, please send us a message. You may submit your own comment on this proposal here.
Jill Geltmaker, Vice President
Editor's Note: Did you catch our VP Jill Geltmaker on KQRE13 this morning? Here's more information about some of the tips and tools Jill mentions in this segment.
If you are an American who is receiving a tax refund, chances are you’re already planning how to spend that money. In one study, 27% of Americans who planned to receive a tax refund said they would use that money to pay down high-interest debt, which is a great use of the money. We also know that a significant number of Americans will use their refund to finally receive medical treatment that they’ve been putting off due to cost. Only 16% of Americans polled in the GoBankingRates survey of 1,000 people planned to put that money into a savings account. There are many good reasons why you should be part of that savvy 16%!
According to a study by the Urban Institute,families with even a small amount of non retirement savings are less likely to be evicted, miss a housing or utility payment, or receive public benefits when income disruptions occur. Saving just $250 can help protect you from unplanned expenses and give you peace of mind. The Federal Reserve Bank’s latest report states that 40% of U.S. Households cannot cover a $400 emergency expense. If you don’t have a plan to cover household emergencies, opening a designated savings account - separate from retirement or college savings - is a great place to start.
Once you’ve created a savings account, here are some strategies to build up funds. Did you know that you can split a direct deposit into a checking and savings account? If your employer offers direct deposit of your paycheck, the easiest way to save money painlessly is to automatically have a set amount of your pay go directly into your savings. Are you the kind of person who thrives on challenges and games? SaverLife is a web-based program that incentivizes you to keep adding to your savings account. Just sign up and link your existing bank account to SaverLife, and you'll automatically be entered to win prizes every week that you meet a savings goal that you set. Plus, you'll receive helpful nudges to save as well as badges and certificates to celebrate your successes. SaverLife is not a bank or savings account. To participate in SaverLife, you need an online bank account with a bank or credit union based in the United States that you can connect to online. The program is free to join, thanks to the support of the national nonprofit organization EARN, which helps working families achieve prosperity through savings.
If you have a smartphone and you’re comfortable using apps, there are many ways to set up automatic savings habits. When you sign up for the Acorns app, you connect your Debit card to the app. When you make a purchase on the debit card, it automatically rounds up the difference and puts the spare change into an account managed by Acorns. For example, if you pay for a lunch that costs $9.30 on your Debit card, Acorns rounds the purchase up to $10 and deposits $0.70 into your Acorns account, which is then invested in funds of stocks and bonds. Digit is another way to save money painlessly - and it’s not based on using your Debit card. Digit connects directly to your checking account and monitors they balance everyday. When Digit thinks you won’t miss the money, it automatically transfers small amounts of cash to a Digit-managed savings account. While the money is not invested, you can set specific goals and earn a “Savings Bonus” on what you’ve saved each quarter. Each of these apps do have fees associated with them, which means that while you’re saving will be automatic, there will be a small cost. Please do your own due diligence and review all terms and conditions before signing up.
Saving even a small amount of money now means that when something unexpected happens, you’re less likely to run up expensive credit card debt or, even worse, resort to high-cost payday loans. In New Mexico we have so many wonderful small community banks and credit unions - if you’re feeling overwhelmed when it comes to savings, it’s always a great choice to walk into one of your friendly, local institutions and ask to speak with someone in Member Services about your options.
Dara Romero, Innovation & Technology Manager
The best education is lived experience. And honestly, I don’t have a financial background. Instead, I have over 20 years of experience working in corporate human resources, as a small business owner and a non-profit consultant working with marginalized populations. During this time, and across all roles, I helped low- to moderate income employees overcome financial obstacles due to life events while understanding the need for easy to implement and low cost (or no cost) solutions, all while navigating my own financial well-being roller-coaster. My role at Prosperity Works is to support small and mid-sized businesses understand the financial well-being of their employees and provide/promote ways that they can empower their employees to move positively along the spectrum. During Financial Health Week, I’d like to highlight some of the information I’ve shared thus far.
While the United States is experiencing record unemployment and a growing Gross Domestic Product, we continue to be inundated with headlines reminding us that Americans are overwhelmed by debt and struggling to save enough cash to cover basic household emergencies. 57% of U.S. consumers, or approximately 138 million adults, are financially unhealthy, according to the 2017 Market Size Study is presented by Center for Financial Services Innovation. Consumer Affairs reports that the latest TD Bank Love and Money Survey found that one-third of consumers admit to living paycheck-to-paycheck. This survey also found that financial stress has major consequences, beyond individual health and emotional well-being. Nearly 20% of all consumers (and 42% of Millennial consumers) have put off buying a home because they can’t make the finances work. The Federal Reserve reported that nearly half of all Americans couldn’t come up with $400 in an emergency. This litany of statistics was recently brought to life as people watched friends and neighbors affected by the five-week Federal Government shutdown struggle to pay bills and buy groceries.
Thanks to stagnant wages, increasing costs of living and general workplace instability, we have more and more full-time employed Americans who are falling short of basic middle class milestones. In the 21st Century, workers and employers are renegotiating their obligations to each other. The lack of resilience that results from living paycheck to paycheck has a ripple effect, reducing both workplace productivity and demand, and creating downward pressure on the overall economy. Employers who see the value in providing financial wellness benefits and creating a balanced work environment are the business leaders who will thrive during this transition.
We love to sharing tips and content with New Mexico businesses to start the conversation on how businesses of all sizes can help employees build financial well-being. Click on the document below to download some tips on how to maximize personal savings during Tax Time.
Michael Barrio, Director of Advocacy
Prosperity Works begins our campaign for change at the New Mexico State Capitol with the opening of legislative session on Tuesday, January 15, 2019. The 2019 session is looking to be fast-paced and intense, with a flurry of proposed legislation expected to hit the Roundhouse. With a new Democratic Governor, a host of eager newly-seated legislators and a revenue surplus we anticipate significant movement on education, healthcare and public safety-focused legislation. We’re looking forward to working with our new Governor and her administration to address the systemic issues that continue to undermine our progress as a state.
Prosperity Works' mission is to remove barriers and increase opportunity for all New Mexicans to build assets and financial stability for their families. These opportunities and barriers are often systemic - the result of policy decisions at the local, state and federal level. As such, legislative advocacy is the key to realizing financial equity and inclusion for every New Mexican.
If you would like to receive all of the latest news and calls to action from the Prosperity Works team during legislative session, please sign up for our advocacy newsletter here. Please note: if you are signed up to receive the PW Quarterly Newsletter, we also ask that you use the link above to subscribe to our advocacy list.
For your consideration and support, our legislative agenda for the 2019 Legislative Session follows:
HB 150 INSTALLMENT & SMALL LOAN CHANGES – Sponsors: Rep. Georgene Louis, Sen. Sander Rue, & Sen. Benny Shendo
Every New Mexican deserves access to fair loans at reasonable rates. In order to help hardworking New Mexicans make smart financial decisions, the public and our legislature need to know how the small lending industry operates in our state. Although New Mexico's first across-the-board interest rate cap has gone into effect, there are gaps in enforcement and loopholes that prevent New Mexican families from receiving the benefit of the law's protections. With a lower interest rate to contend with, lenders are using high fees and rollovers as profit generators that simply drain income from New Mexico consumers. HB 150 provides commonsense updates to address inconsistencies in NM small loan laws and introduces transparent data sharing practices that would eliminate loopholes, gaps, and confusion that circumvent the intended consumer protections.
This November, Prosperity Works set our most ambitious fundraising goal ever. On November 27th, #GivingTuesday 2018, we set out to raise $25,000 to put directly towards our programs and initiatives - all of which energizes and furthers our mission to power economic opportunity for all New Mexicans.
We are extremely proud - and giddily thrilled - to announce that with your help, we not only reached but exceeded our historic goal. The total we raised is impressive, but we're even more blown away by the number of individual donors who helped us reach this milestone. 90 different families and individuals from across New Mexico and across the country made a gift on this special day. We nearly doubled the number of people who supported Prosperity Works on #GivingTuesdsay 2017. That's 90 people who said, "Yes, I believe the best investment I can make is investing directly in hardworking New Mexicans." We promise to deliver a return on your investment.
We also couldn't have reached this goal without the grassroots financial support from local businesses and corporations who wanted to signal that they believe in the mission of Prosperity Works and they've got our back. That's what happened this year. In a BIG way.
Prosperity Works received a total of $10,000 in matching gifts for Giving Tuesday from sponsors such as BBVA Compass Bank, US Eagle Federal Credit Union, New York Life, New Mexico Mutual, Duran Central Pharmacy, Nexus Brewery and TLC Plumbing.
Giving Tuesday (#GivingTuesday) is an international day of giving created in 2012 and traditionally held every year on the Tuesday after Thanksgiving. Conceived as a response to Black Friday, Cyber Monday, and the consumerism of the holiday season, Giving Tuesday is a way to give back to your local communities.
Whether it's donations of time, money, food, clothing or other essential services, Giving Tuesday has become a reminder for us to pause for a moment of dedicated reflection -- and to connect with the causes, non-profits and charitable organizations that are closest to our hearts.
We've seen the exposure - and the recognition - of Giving Tuesday grow exponentially since it began, with participation by over 7,000 non profits and counting.
Here at Prosperity Works, Giving Tuesday is our largest fundraising event of the year. It's a vital revenue component in our ongoing work of advocating for financial equity and inclusion for all New Mexicans.
Equally important, Giving Tuesday has proven to be an invaluable way for us to connect (& reconnect!) with our Prosperity Works' friends, donors, prospects and influencers, as we continue the work and progress we've made with our matched-savings accounts like IDAs and CSAs, our Prosperity Kids program, as well as our ongoing fight against predatory lending in our state.
You'll be hearing about Giving Tuesday from us during the entire month of November, as we lead up to this important event on November 27th. And while we hope Prosperity Works remains front and center on your list for Giving Tuesday 2018, we also recognize that any and all giving on this important day makes a world of difference.
After all, we're all in this together. And to quote former Senator Paul Wellstone, "We all do better when all do better."
Join us on Giving Tuesday this year!
This Guest Column originally ran in the Albuquerque Journal on October 22, 2018.
Recently, U.S. Bank announced a small-dollar loan product known as Simple Loan. The announcement generated fanfare in New Mexico and beyond. The product is a three-month installment loan of up to $1,000. While the Simple Loan APR of 70 percent is concerning, the offering marks a positive change in the industry landscape: the return of banks to the short-term, high-interest loan market.
Unlike the 136 storefront lenders currently offering high-interest loans in Albuquerque, U.S. Bank is governed by federal law, and its products are not subject to N.M. state laws around interest rates and other consumer protections. Banks largely discontinued making payday and other high-cost loans in 2013. But last year the federal Office of the Comptroller of the Currency rescinded the previous guidance in an effort to give consumers alternative options to storefront lending.
We are pleased to see the financial industry working to address the issue of triple-digit, predatory, small-dollar loan products, but Simple Loan is a far cry from our goal of making fair loans accessible to all New Mexicans. In addition to a high interest rate and short-repayment term, the product is available only to current U.S. Bank account holders. More than one-third of all New Mexicans are unbanked or underbanked, meaning they have limited or no access to mainstream financial institutions. Our percentage of unbanked households is on par with Alabama and only slightly better than Georgia, Louisiana, Mississippi, and Oklahoma. Eleven percent of households in the Albuquerque metro area have no members with a bank account.
Yesterday, a delegation from Prosperity Works traveled to Chama, NM to testify before the Indian Affairs Committee about the storefront lending industry in New Mexico. HB 347, passed last session, went into effect in January 2018, capping the interest rate at 175% on all payday and title loans. However, the Financial Institutions Divisions, charged with enforcing the Small Loans Act, has yet to implement a new regulatory process. Without clear rules, lenders may be finding loopholes that allow them to skirt the 175% interest cap.
Since it is impossible to know how well the new law is protecting New Mexicans, Prosperity Works is also petitioning to see the data lenders are compelled to report to the FID about the loan products they are selling.
In addition to capping the interest rate, the new law also requires lenders to provide clear information about the costs of loans, allows borrowers to develop a credit history when they make payments on small-dollar loans, and sets minimum contract terms for small loans, including at least four payments and 120 days to pay off most loans. "The data and reporting transparency we seek is necessary to close loopholes that could render HB 347 ineffective, and to augment existing consumer protections in New Mexico," says Michael Barrio, Prosperity Works Director of Advocacy.
Following testimony from Prosperity Works and the New Mexico Center on Law and Poverty, the Indian Affairs Committee passed a resolution asking the FID to provide a full report as well as a presentation to the committee later this fall.
The passage of HB 347 was a necessary step to protect all New Mexicans, particularly Native American communities who have been aggressively targeted by this industry. Prosperity Works continues to fight for increased consumer protections while working to make sure the existing laws are effective as intended.
Read thefull press release at the New Mexico Center for Law and Poverty.
Prosperity Works is excited to welcome a new member to our staff. Dara Romero has joined the team as our new Technology & Innovation Manager. Dara comes to us with experience in corporate HR, non-profit consulting and even experience owning a retail business! When Dara isn't hard at work at Prosperity Works, she manages her own socially conscious fashion line! Welcome, Dara. We're so happy to have you aboard.