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Addressing Debt in Black/ African American Communities: Is Financial Coaching Enough?
April 30th, 2020
1:00 – 2:30 PM EST
Welcome
Tupa HovekaProgram Associate, Field EngagementProsperity Now
Housekeeping
• This webinar is being recorded and will be mailed to registrants and available online within one week
• All webinar attendees are muted to ensure sound quality
• Ask a question or share your thoughts anytime by typing into the text box of your GoToWebinar Control Panel
• If you experience any technical issues, email [email protected]
Getting the Most Out of Today’s Call
▪Join from a quiet space
▪Grab a coffee or snack and settle in
▪Engage! Send us your questions and comments as you listen
▪Reflect on ways to apply what you learn today to your own work
Prosperity
Now’s mission
is to ensure
everyone in our
country has a
clear path to
financial stability,
wealth and
prosperity.
Today’s Agenda
✓ High Level Overview & Framing
✓ Program Findings: Financial Coaching
✓ Partner Discussion
✓ Client Data Collection and National Survey
✓ Product & Service Reports: FinTech and Consolidation Loans for Debt Management
✓ Q&A
✓ Next Steps and Close
Today’s Speakers
Russchelle MartinCenter for Working Families
Program Coordinator, Urban
League of Broward County
Althea Saunders-
RanniarDirector of Financial
Services & Education,
Bon Secours Community
Works
Molly OrnatiAssistant Director,
Bedford Stuyvesant
Restoration Corporation
Today’s Speakers
Vanessa HillJobs & Training Division
Manager, Urban League of
Broward County
LaTonya HamiltonCommunity Financial
Services Specialist, Bon
Secours Community Works
Pilayne FranklinFinancial Counselor,
Bedford Stuyvesant
Restoration Corporation
Today’s Speakers
Spectra MyersAssociate Director,
Applied Research
Prosperity Now
Hiba HaroonAssociate Director,
Savings and Financial
Capability
Prosperity Now
Cat GoughnourAssociate Director, Racial
Wealth Equity; RWDI,
Prosperity Now
Today’s Speakers
Stephanie LandrySr. Research Manager,
Applied Research,
Prosperity Now
Ivan AvilaResearch Associate,
Applied Research
Prosperity Now
Does your organization provide financial capability services to Black/ African American clients?
25%
11%
10%
32%
10%
8%
4%
0% 5% 10% 15% 20% 25% 30% 35%
No Answer
Don't Know
No
Yes, Over 50%
Yes, 26-50%
Yes, 11-25%
Yes, 0-10%
What is needed to support Black/African American clients in addressing debt and past-due bills through financial coaching?
Lillian SinghVice President, Programs & Racial Wealth Equity
Prosperity Now
Thank you to MetLife Foundation for making the work of this project possible
High Level Overview & Framing
Cat GoughnourAssociate Director, Racial Wealth Equity; RWDI, Prosperity Now
Prosperity Now partnered with:
• Urban League of Broward County, Ft. Lauderdale, FL;
• Bon Secours Community Works, Baltimore, MD; and
• Bedford Stuyvesant Restoration Corporation, Brooklyn, NY.
Together, we discovered, designed and tested approaches to address debt in Black/African American communities. Specifically, we partnered to:
1. Better understand and document how Black/African American-led and serving organizations use financial coaching to provide debt negotiation and consumer rights supports and what their programs and services entail
2. Administer fintech user tests and an exploration of consolidation loan products to gather first-hand feedback on how these products and services can better support Black/African Americans with debt
3. Inform a national survey to gain insight on the potential implications and limitations of the programs, products and services in communities beyond the partner locations
About the Project
Our Previous Reports
Prosperity Now’s work with community-based organizations that support people of color and people with low and moderate incomes consistently highlights that client debt situations are a major barrier to asset building.
In the National Financial Capability Study from 2016, over 40% of respondents with incomes $75,000 and below reported that they “have too much debt right now.”
In reviewing the literature, we affirmed that debt is a problem for many people with low and moderate incomes. According to the Survey of Consumer Finances:
▪Over 50% of families in the lowest 2 income quintiles hold any debt;
▪ The average amount held by a family is approximately $40,000; and
▪ Estimates vary, but high proportions of a lower-income household's pay are reportedly going to debt payments (i.e. 18% of annual income for credit card debt, 33% of biweekly income for payday loan).
The Survey of Consumer Finances shows that Black/African American people appear to be more negatively affected by debt than any other group. Nearly one in five Black households has zero or negative net worth. Additionally, Black/African American families are the most likely to have high debt payment burdens, with 9% having debt-payment-to-income ratios above 40%.
The Socioeconomic Reality
At the beginning of this phase of the project, we set out to answer the following question:
How might we support Black/ African American community members in optimizing their debt management strategies so that debt doesn’t stand in the way of their greater financial goals?
Exploration of:
▪Programs – Financial Coaching
▪Services – Debt Negotiation and Consumer Protection
▪Products – Fintech and Debt Consolidation Loans
Design Challenge
The Human Insights Approach
Upcoming Reports
▪ Insufficient
▪ Somewhat insufficient
▪ Neither insufficient nor sufficient
▪ Somewhat sufficient
▪ Sufficient
Use the Comment Box to let us know more!
Poll QuestionFinancial coaching, in the ways that it’s defined and provided traditionally, is sufficient or insufficient in addressing the debt challenges of Black/African Americans
Program Findings: Financial
Coaching
Spectra MyersAssociate Director,
Applied Research
Prosperity Now
Hiba HaroonAssociate Director,
Savings and Financial
Capability
Prosperity Now
Cat GoughnourAssociate Director, Racial
Wealth Equity; RWDI,
Prosperity Now
▪ Offering regular one-on-one sessions to clients in order to ‘coach’ performance improvements to meet goals mutually set by the coach and client.
▪Encouraging and supporting clients to adhere to positive financial behaviors.
▪Boosting client’s self-control over finances through goal setting and goal monitoring.
Definitions of financial coaching
Core Coaching Activities
• Build a relationship with a client
• Discuss client’s values and priorities
• Help client form realistic goals
• Develop action plans
• Identify resources, tools and services
• Make referrals as needed
• Discuss spending, saving, credit, protecting assets and maximizing income
• Monitor client progress
▪ Financial coaching does NOT eliminate harmful federal and state policies that keep low-income and people of color from acquiring what is needed to live a nurturing and secure life and acquire and preserve assets.
▪ Financial coaching is NOT one-size fits all.
▪ Financial coaching is NOT a quick fix—or an upward trajectory.
▪ Financial coaching is NOT a silver bullet for low-income and communities of color.
Limitations of financial coaching (and why so many programs have to go above and beyond)
Panel Discussion
LaTonya HamiltonCommunity Financial
Services Specialist,
Bon Secours Community
Works
Russchelle MartinCenter for Working Families
Program Coordinator,
Urban League of Broward
County
Molly OrnatiAssistant Director,
Bedford Stuyvesant
Restoration Corporation
Partner Discussion
What does your coaching or counseling model look like?
PROGRAM Urban League of Broward County’s Model: Financ ial coaching is built on
3 structured coaching sessions focused on goal sett ing, budgeting and credit.
However, financial coaching and follow up does not conclude after the init ial
3 sessions. Financial coaches continue to follow up monthly with clients while
they work to achieve their established financial and employment goals.
ON-DEMAND
Bedford Stuyvesant Restoration Corporation’s Model: Financial
counseling sessions offered on-demand to help residents manage credit,
reduce debt, increase savings and access critical banking services.
Participants often arrive in financ ial distress seeking immediate support to
resolve crit ical issues. Indiv idual clients may choose to return, developing a
coaching relat ionship depending on their goals. As part of the City of New
York’s Financial Empowerment Center, the program taps into addit ional
training and resources through the Cities for Financial Empowerment Fund.
BOTH Bon Secours Community Works’ Model: Financ ial coaching is offered to
community members through individual sessions as requested or through
group coaching and financial education sessions integrated into workforce
programming. The financial situations of c lients vary widely with some new to
building credit, others arriv ing in deep financ ial distress and still others with
some stability seeking to become homeowners or reach other goals.
1. Detailed guidance to develop or
optimize their debt repayment strategy:
▪ Reduction in dollars owed
▪ Reduction in emotional stress
2. Help negotiating with creditors to
address mistakes, ensure the debt is
legitimate and negotiate the best
repayment plan
Qualitative Research Revealed Community Members Want:
What we found out as we began to work with the partners’ frontline staff:
1. The partners coaching programs and services weren’t what we anticipated
2. The idea of a separate service constrained expertise and raised risks
3. Staff raised concerns about equitable compensation
4. There was a clear tension between ourfocus on individual-level services and the sources of racial economic inequality
5. Focusing on African Americans was not out-the-gate intuitive for our research teamand many project partner staff
What We Quickly Learned
Together, we revised the pilot design accordingly:
1. Support the development and delivery of cross-training and resources for coaches to tap into each other’s wisdom on how to provide debt, past-due bill and consumer rights support within financial coaching
2. Document the programs, identify and delineate what is core to financial coaching and what is “above and beyond” as it relates to helping clients address debt and past-due bills
3. Identify the limits of financial coaching to address debt and past-due bills for Black/African American community members through deep dive into racial economic equity and racial wealth equity
4. Work with the partners to explore the nuances of “Black or African American” as a demographic category as related to their work
The Revised Pilot Design
The Revised Pilot Design
Q: What did you learn about your own model of direct service coaching or counseling model from engaging in the project?
Althea Saunders-RanniarDirector of Financial Services
& Education, Bon Secours
Community Works
Russchelle MartinCenter for Working Families
Program Coordinator, Urban
League of Broward County
Pilayne FranklinFinancial Counselor,
Bedford Stuyvesant
Restoration Corporation
Client Data Collection and National
Survey
Spectra MyersAssociate Director,
Applied Research
Prosperity Now
Ivan AvilaResearch Associate,
Applied Research
Prosperity Now
Cat GoughnourAssociate Director, Racial
Wealth Equity; RWDI,
Prosperity Now
We drew from the strengths of each partner’s existing data collection
approach to capture as full a picture as possible of the following during a
3-month period:
1. The financial situations of new clients
2. The types of debt-related goals set by clients
3. What debt-related activities coaches and counselor were taking to
support clients
4. What steps client were able to take
5. What initial outcomes they achieved
Each partner also disaggregated the data within the demographic
category of “Black/African American”
The Pilot Data Collection Process
Debt Negotiation and Consumer Rights ActivitiesActivities % of Clients # of Clients
Review how debt management fits in with client values, priorities
and other goals
62% 73
Provide an assessment of a client’s capacity to repay debts or past-
due bills
62% 73
Help clients understand how their current debt affects their options
to acquire credit
52% 61
Strategize with client and/or model what they need to say to
creditors, banks or debt collectors to resolve issues or set up
payment plans
36% 42
Guide client through determining an order of repayment (e.g.,
smallest debt first, highest interest rate first, etc.)
31% 36
Refer consumers legal aid, nonprofit credit counselors, and/or a
reputable bankruptcy service
18% 21
Strategizing with clients on the best debt reduction approach 13% 15
Guide clients on how to navigate the courts/judicial systems to
resolve debt issues
9% 11
Other debt-related activity 35% 41
▪Most clients are entering the coaching programs with low monthly incomes▪Median monthly income
▪ Bon Secours: $1,232
▪Urban League: $1,908
▪Restoration: $2,000
▪Only 25% of client entered coaching with a monthly surplus in their budget
▪Limited financial resources limits debt repayment▪Median total debt
▪ Bon Secours: $4,892
▪Urban League: $13,625
▪Restoration: $19,016
Financial Situations
We observed coaching-relevant differences within the client populations.
Initial thinking on the differences in socioeconomic status for the various Black/African American subpopulations:
1) The material reality is different for clients who hold income and assets, and are less cost-burdened, than those with relatively lower income, assets, and more debt and expenses.
2) The distinction is important for financial coaches because the viability of tools and approaches and how they will be introduced and sequenced will be dependent upon which resources and “financial slack” the client has at hand, and the level of crisis they are experiencing.
Data Disaggregated by Race
Urban League Restoration Bon Secours
Clients of recent Afro-
Caribbean descent: • Higher income• More debt
• Higher credit scores • Similar expenses
Clients of recent Afro-
Caribbean or African descent:• Higher income• More debt
• Higher credit scores • Lower expenses
Did not serve clients identifying with a sub-population
Q: What story did the data tell you and what should be done about it?
LaTonya HamiltonCommunity Financial
Services Specialist,
Bon Secours Community
Works
Vanessa HillJobs & Training Division
Manager,
Urban League of Broward
County
Molly OrnatiAssistant Director,
Bedford Stuyvesant
Restoration Corporation
▪The community-based organizations offering financial coaching to predominately Black/African American clients have expanded the commonly-held definition of financial coaching
▪Our data collection affirmed that our partners are providing complex and intensive supports to support clients in addressing debt and past-due bills
▪Blackness is not a monolith. Recognizing the differences in socioeconomic status opens opportunities to design and refine programs that address the barriers beyond the knowledge and behaviors of individuals.
A Few Key Findings
▪Prosperity Now launched a national survey of 510 Black/African Americans with debt or past-due bills
▪In order to participate in the survey, all respondents had to meet the following inclusion criteria:
▪ Identify most with “African American or Black”
▪Age 18 or older
▪Hold debt or past-due bills
▪Must be at least somewhat involved in financial decision-making
▪In order to create as representative as sample as possible, respondent education and income levels were matched to the U.S. Census
▪The survey was fielded between December 8, 2019 and January 15, 2020 through Qualtrics
National Survey Findings
▪Except for credit counseling and its associated debt management plans, other services or products with broader awareness are largely for-profit
▪Financial advice apps and online tools and resources aren’t familiar to many of the target audience
▪Legal aid or consumer advocacy services are known by less than a 1/3rd of the target audience
▪A little over 1 in 10 respondents with one or more challenging debt aren’t yet aware of any of these debt-related programs, products or services
A little over 40% of African Americans with one or more challenging debt had heard of financial coaching
57.1%
51.5%
51.5%
48.0%
42.7%
40.7%
32.7%
31.2%
28.1%
17.5%
15.5%
10.8%
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%
Credit Counseling
Debt Settlement
Credit Report Monitoring
Debt Consolidation or Personal Loans toConsolidate Debt
Debt Management Plans
Financial Coaching
Financial Education
Legal Aid or Consumer Advocates
Online Tools and Resources
Financial Advice Apps
Debt Support Groups
None of the above
Awareness of Debt-Related Programs, Products and Services
Q: Which of the following programs, products or
services have you ever heard of? Please select all that apply. (n=452)
Nearly 89% of African American/Black respondents with debt indicated they found one or more of their debts challenging
37.8%
25.7%
17.5%
12.5%
11.6%
7.6%
6.9%
6.1%
2.9%
2.5%
2.2%
1.4%
0.39%
11.4%
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%
Student loans
Credit card debt (card not paid in full everymonth)
Medical debt
Past-due bills (utilities, telephone, etc.)
Auto (car) loan
Mortgage
Payday loan
Personal loan from a bank or credit union
Finance company loan
Title loan
Rent-to-own furniture or appliances
Home equity line of credit
Other, please specify
None
% of Total Respondents Indicating Specific Debt is a Challenge
Q: Which, if any, of your debts do you find challenging? Select all that apply (N=510)
▪ Student loans, credit card debt and medical debt are noted challenges for many respondents
▪Not all who hold debt experience a challenge. A little over 1 in 10 respondents indicated none of their debts are challenging
Nearly 63% of respondents with a challenging debt type skipped a bill or paid a bill late within the past 12 months
12.2%
26.3%
33.8%
34.5%
38.3%
62.8%
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%
None of the above
Rent or mortgage not paid in full
Over-drafted your bank account, used a payday lender, auto-titlelender, or pawn shop
Skipped essential medical care
Could not afford the type or amount of food you needed
You skipped paying a bill or paid a bill late
% of Respondents with Challenging Debt that Could not Afford Basic Necessities and Bills
Q: Was there any time in the past 12 months when any of the following happened? Select all that apply
(n=452)
Based on your responses to the previous questions, you may be facing undue hardship. Undue hardship is a special circumstance that partially or fully exempts someone from performance of a legal obligation so as to avoid an unreasonable or disproportionate burden or obstacle.
Successfully proving undue hardship can result in:
1. Complete loan forgiveness; you no longer have to repay debt
2. Partial loan forgiveness; you must repay only a portion of your debt, or
3. Full repayment of your debt, but at a lower interest rate
The 430 respondents that indicated one or more hardship and/or said that they would not be able to meet their basic needs if they made full and on-time payments to their debts were prompted with the following:
79.3% of respondents with a challenging debt type believe that they would benefit from loan forgiveness
6.7%
14.0%
79.3%
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0%
No
Not Sure
Yes
% of Respondents with a Challenging Debt that if they were able to prove undue hardship, they would benefit from forgiveness. (n=430)
1. An overview of the project and human insights process
2. An introduction to each partner and how they provide debt and past-due bill supports backed up by 3-months of data collection
3. Reflections on racial economic equity in financial coaching
4. How each partner disaggregated “Black/African American” as a category and what we learned from that effort
5. Insights from a national survey including data on awareness of programs, products and services and the potential of debt forgiveness
What to expect in the comprehensive report
Product and Service Findings
Stephanie LandrySr. Research Manager,
Applied Research,
Prosperity Now
Ivan AvilaResearch Associate,
Applied Research
Prosperity Now
Exploring FinTech for Debt Management
• What you’ll see in the report:
• Why we chose to test fintech for these clients
• Tested two apps based on key features: Albert & Pefin
• Found the Albert came close, but debt features were hard to find
• Pefin’s option to manually enter information was highly appealing but the tool didn’t meet the criteria
• Overall, we continue to note that fintech’s are not attuned to the socioeconomic reality of Black/African American community members with debt – missing debt types, past-due bills, more expansive sources of income; assumptions are off
Initial Grounding interviews
Develop criteria for fintech scan
Field scan of available fintech
User TestsAnalyze user test data and share
findings
Debt Consolidation Product Exploration
▪What you’ll see in the report:• Proposed assessment criteria and the findings
of a national field scan of debt consolidation products
• Insight from lenders and financial experts on the circumstances in which debt consolidation may or may not be a good debt management strategy
• Lender reactions to example profiles developed with the partner organizations
Debt Consolidation Product Exploration
▪ Navigating Debt Consolidation
Conversations with Financial Coaching
Clients
• Developed a tool prototype
• Goals
• Guiding questions and
considerations
• Example client profiles
Group Discussion and Q & A
▪This is a group discussion! However,
all webinar attendees are muted at the
start to ensure sound quality.
▪Share comments or ask questions at
any time by typing the question into the
text box on the control panel.
▪If you experience any technical issues,
email [email protected]
Group Discussion Technology
Next Steps and Wrap Up
Tupa HovekaProgram Associate, Field Engagement
Next Steps
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