- Posted by LiSA
- On March 27, 2015
- 0 Comments
- Credit Repair, financial education, financial literacy, LiSA Initiative, National Financial Educators Council, predatory lending
This is the fourth article in a six-part series examining America’s growing Financial Literacy crisis and ways to combat it. The series’ goal is to drive awareness of the problem; encourage dialogue among diverse communities, corporate entities, and constituencies; and lead to the creation of educational opportunities and programs that can help people achieve a better financial future.
Financial Literacy Is Key to Helping People Avoid Predatory Lending Trap
“Our aim is not only to relieve the symptom of poverty, but to cure it and, above all, to prevent it. No single piece of legislation, however, is going to suffice.”
With those words, President Lyndon Johnson declared an “unconditional war” on poverty in America during his 1964 State of the Union Address.1 While the War on Poverty resulted in landmark legislation and governmental programs still in use today, more than 50 years later the problem still exists.
Poverty continues its stranglehold on the country’s urban neighborhoods, mountain communities, and rural small towns. The Great Recession allowed this parasitic vine to encroach into one place it hadn’t previously – the suburbs.
The economic recovery that followed created a new employment dynamic marked with fewer jobs that offered lower salaries. In its wake is the emergence of a new class – the working poor – families and individuals who are barely getting by paycheck to paycheck earned by working multiple, minimum-wage jobs, and yet finding themselves still living at or near the poverty line.
The U.S. Census Bureau took a hard look at Americans living in poverty during the darkest years of the Great Recession. One of the most startling statistics to emerge from the survey was that “nearly one-third of all Americans were in poverty at some point between the years of 2009 and 2011.”2
If the Great Recession was bad for middle-class suburbia, it has been far worse for those living in the areas first identified by President Johnson’s speech. Banks, grocery and retail stores, car dealerships, and other traditional services have been abandoning these areas in droves for years. What has come behind to fill the void in these underserved communities may be as insidious as poverty itself.
Across the country, popping up in urban strip shopping centers, on small town main streets, and along the blocks leading in and out of military bases are the same four or five businesses – a payday check cashing operation, a liquor store, a title loan lender, a rent-to-own store and a pawnshop.
Successful businessman and noted empowerment leader John Hope Bryant refers to this block of businesses as “Misery Row.”3 It’s an apt description for a collection of stores that tend to bring financial pain to the people who use their services.
These wolves in sheep’s clothing prey on underserved communities whose citizens who have nowhere else to turn for the basic financial services that most of us take for granted – cashing a check, getting a loan, and establishing credit.
They lure people into their stores with fun TV ads that promise inclusivity (no one will be turned away; everyone qualifies) and quick action (come in, sign a form and leave with your money). Their well-trained associates know the right amount of and way to apply pressure to get people to sign on the dotted line.
That’s when the trouble begins. The loans often feature soaring fees, balloon payments, and interest rates that can reach the triple digits. These short-term loans can quickly lead to a long-term cycle of debt from which it’s nearly impossible to break free.
According to John Hope Bryant, there is a way to help people get off the predatory lending merry-go-round and bring much-needed banking and retail services back to the communities. The key is to help people raise their credit scores to 700 or higher.3
Bryant is a strong proponent of government watchdog groups, such as the Consumer Financial Protection Bureau. But, as he explains, they are not at the kitchen table with a family when they make decisions about a home mortgage or auto loan. “I have found that effective consumer protection must be matched with a full partner called consumer empowerment for all,” Bryant wrote in his blog.3
Consumer empowerment, according to Bryant, starts with financial literacy and grows into “financial dignity.” LiSA Initiative agrees. Gaining a solid financial education can transform a person’s life. Once the knowledge has been obtained, it can never be taken away. It only continues to grow.
Helping all people gain access to a basic financial education is one of the reasons LiSA has joined forces with the National Financial Educators Council (NFEC). The goal of this dynamic partnership is to bring financial education resources, workshops, and awareness promotions to communities across the nation. Set to begin this year, the program will combine the NFEC’s established financial education curriculum with the LiSA Initiative’s financial literacy coursework to create the LiSA Literacy Project.
Access to financial education is one way that Bryant’s organization, Hope 700 Credit Score Communities Initiative, uses to help people increase their credit scores by 100 points or more. “And this is why I keep saying that financial literacy is the new civil rights issue for this generation. Because when you inject the power of financial literacy in the life and mind space of an individual, everything changes. … When you know better, you tend to do better,” Bryant wrote.3
Bryant asked his readers to imagine extending the opportunity financial literacy provides from the individual to a community. It’s not difficult to envision when people and the urban neighborhoods, mountain communities, small towns, and the suburbs where they live begin “to do better,” the landscape now dotted with payday lenders and liquor stores begins to give way to credit unions and grocery stores.
It is not unlike the world President Johnson believed possible in 1964. In that same speech, when he spoke to the nation, the President said, “Unfortunately, many Americans live on the outskirts of hope — … Our task is to help replace their despair with opportunity.”4 Financial literacy is the opportunity that helps people achieve a better, more hope-filled financial future.
1 Dylan Matthews. “Everything You Need to Know about the War on Poverty.” The Washington Post > Wonkblog. Jan. 8, 2014. http://wapo.st/1hwbEgG
2 United States Census Bureau > Poverty Thresholds by Size of Family and Number of Children. http://1.usa.gov/1NlEuvB
3 John Hope Bryant. “Solving Poverty: Fighting Blight and Poverty with Credit Scores.” Huffingtonpost.com > IMPACT What’s Working > The Blog. 07/17/2013 5:12 a.m. EDT. http://huff.to/1EIR2Zk
4 “Primary Resources: State of the Union Address, 1964.” PBS > American Experience > LBJ > About the Film. http://to.pbs.org/1a0bEh5
UP NEXT: Apr. 3, 2015 – Insurance Connection