Spring 2014
NBCSL EVENTS: ALC Pre-Conference

The Unbanked: Structuring Responsible Offerings and Facilitating Responsible Choices

By Ajenai Clemmons, MPP, NBCSL Policy Director serves as NBSCL’s policy director. She was formerly the ombudsman for Denver’s Office of the Independent Monitor, where she helped establish a civilian agency that monitors police and sheriff internal affairs investigations. She has worked in the Iowa State Legislature as well as non-profit and private sectors. Ms. Clemmons holds a Master of Public Policy and B.A. in International Relations, Spanish, and Latin American History.
01 NILA Leadership TN Del OfficersNBCSL Executive Officers, Tennessee leadership, and NILA representatives pose during the NILA reception.On December 10, 2013, the eve of NBCSL’s 37th Annual Legislative Conference (ALC) in Memphis, Tennessee, NBCSL members convened a financial literacy pre-conference supported by the National Installment Lending Association (NILA). The event, “The Unbanked: Structuring Responsible Offerings & Facilitating Responsible Choices,” provided legislators with the opportunity to hear from experts in the academic, public, private, and nonprofit sectors about unbanked and underbanked Americans—people who have no or limited access to financial services. Throughout the day, legislators learned about strategies and solutions to help their constituents and exchanged ideas about state efforts.

NBCSL President, Representative Joe Armstrong (TN), welcomed attendees and set context for the day, emphasizing the great need to increase financial literacy and access to responsible lending products. He introduced Philip Holt, Executive Director of NILA, who stressed the critical importance of extending access to credit to all of America’s communities, especially communities of color, as many financial institutions have been restricting credit access since the onset of the Great Recession. He called on legislators to help carry the message back to their colleagues during the ALC and beyond.

Mr. Holt was followed by founding board member of NILA and Executive Vice President of Brundage Management Company, Andrew Morrison, who provided a history of NILA. He spoke about its effort to strike the balance between addressing consumer protections and private market concerns as well as educating the public on financial literacy. Citing a policy resolution NBCSL passed at the previous ALC, BFI-13-14 Promoting Safe and Affordable Lending Practices, Mr. Morrison expounded on the indicators of safe and affordable credit:  loans that are low-cost rather than low-rate, structured to facilitate repayment, reported to credit bureaus to allow the building of credit scores, deriving from a lender with a physical community presence and right of redress, and repaid in equal installments of principal and interest. Conversely, he highlighted characteristics of unsafe credit: balloon, minimum, and interest-only payments that keep borrowers mired in debt and are unlicensed by state authorities.

Next, President Armstrong introduced the day’s moderator, Representative Larry Miller (TN), who serves both as NBCSL’s Vice Chair of the Business, Financial Services, and Insurance Policy Committee and Chair of the Tennessee Black Caucus of State Legislators. Rep. Miller set forth meeting goals, which were to better understand the structural barriers facing the unbanked, how legislators could ensure that safe credit is available to their constituents, and how to connect constituents to high-quality financial literacy programs to help them make informed choices. 

Rep. Miller introduced the keynote speaker, Dr. Harold Black, Professor Emeritus of Finance, University of Tennessee at Knoxville.  Dr. Black provided an overview of the unbanked population, the barriers they face to banking, and recommended solutions. Many people without banking accounts, he explained, were challenged by barriers such as lack of proper ID, no credit history or poor credit history, delays with check cashing services, concerns of overdraft fees, long wait times on financial decisions, and inconvenient locations and hours. Dr. Black strongly urged legislators to avoid restrictions on access to credit, warning that regulatory actions to ban providers would mean less competition and higher prices for consumers. He recommended that legislators mandate all financial service providers to report to credit bureaus so that customers could build credit.

Following the keynote address, the first panel discussed how legislators can help structure an environment in which unbanked individuals can gain access to responsible and sustainable credit offerings. Panelists were Dr. Tom Miller, Professor of Finance at Mississippi State University; Desmond Brown, Program Specialist in the Office of Financial Empowerment at the Consumer Financial Protection Bureau (CFPB); Dan Wieckenand, CEO of Orion Federal Credit Union; Jena Roscoe, First Senior Vice President and Chief of Government Affairs and Public Policy for Operation HOPE; and Mike Igney, Assistant Commissioner of Compliance at the Tennessee Department of Financial Institutions.

Dr. Miller asked legislators to think through the unintended consequences of restricting access to certain forms of credit. He explained the relationship between loan size, interest rate (APR), and return on equity, demonstrating what lenders have to charge borrowers in order to make a profit as well as the negative effect that rate caps have on lenders’ ability to do business. He agreed with Mr. Morrison and Dr. Black that focusing on low APR can be misleading. Rather, policymakers should look to whether a loan is low-cost.

Mr. Brown spoke on behalf of the Office of Financial Empowerment at the Consumer Financial Protection Bureau (CFPB), which focuses on communities that lack access to banks and other financial services. The Bureau works to shape the market to meet consumers’ needs at affordable rates and to inform consumers about wise financial choices. The CFPB encourages consumers to make savings plans, balance their household budgets, gain access to financial products and services, take control of knowing what is on their credit reports, and manage their credit. Consumers can use web tools at www.consumerfinance.gov to file a complaint and begin repairing their credit.

Mr. Wieckenand described Orion Federal Credit Union as a Memphis’ largest low-income designated credit union with nine locations in areas of need.  Orion offers free checking accounts and free mobile services as well as credit repair, bill pay, and other services at the lowest cost possible. Mr. Wieckenand highlighted Orion’s Home Run program to help consumers re-establish credit. Orion-owned homes that would not sell were rented for two years to individuals who had previously filed bankruptcy. Orion then applied the two years’ worth of payments as a down payment on the home and sold rental customers the home for 70% of the tax value. The home owners then walked into the home with a significant amount of equity – a great step toward building wealth.

Ms. Roscoe of Operation HOPE, a nonprofit private banker for the working poor and underserved, listed four ways for legislators to help their constituents: (1) create partnerships with community-based organizations and other entities through resolutions, bills, or Memoranda of Understanding (MOUs) to educate consumers and help them repair/raise their credit scores; (2) establish youth-focused financial literacy programs; (3) work with state attorneys general initiatives to help constituents recovering from bankruptcy; and (4) support entrepreneurs through the Small Business Administration’s micro-credit and crowdfunding initiatives to build credit and acquire capital.

Assistant Commssioner Igney spoke on behalf of the Tennessee Department of Financial Institutions, which regulates all entities providing financial products and services in the state. Mr. Igney explained that although the Department engages in outreach, training, and education, it needs help from legislators to alert the public to the Department’s existence. He asked legislators to encourage consumers to contact the Department in advance of doing business with a lender to see if it is legitimate and licensed to operate. The Department also accepts and investigates consumer complaints.

After a networking lunch, the session resumed with an afternoon panel that focused on how legislators can increase access to financial literacy and help constituents make healthier financial choices. This panel featured Dr. Rickie Keys, Founder and President of Renewal Financial Services, LLC; Terica Lamb, Community Outreach and Financial Empowerment Manager for the Shelby County Trustee; Jeremy Hancock, Manager of Government Affairs and Public Policy for Experian; and, rejoining the stage, Ms. Roscoe of Operation HOPE.

Dr. Keys presented findings from his research conducted in conjunction with NBCSL in 2007 to map access to credit in 25 cities, including in Dallas, Denver, New Orleans, Miami, and Memphis. Analyzing zip codes, Dr. Keys found areas with the greatest concentrations of African Americans were highly correlated with the following conditions: compared to other neighborhoods, mainstream banks were sparse to non-existent; non-mainstream institutions such as payday lenders had the highest prevalence; credit scores were lowest; median incomes were lowest and poverty was highest; unemployment was highest; and homeownership was lowest. Dr. Keys also talked about the importance of providing online tools for consumers with along with resources and a game plan on which they can immediately act to raise and repair their credit scores.

Ms. Roscoe urged legislators to lead financial literacy movements by creating councils to attract mainstream banking services and help individuals and entrepreneurs to raise their credit scores. She also encouraged legislators to coordinate BankOn movements, which are private-public collaborations to provide financial literacy. Finally, she recommended that legislators look to leverage other campaigns in finding ways to provide financial literacy. For example, during tax season, millions of people are eligible to claim the Earned Income Tax Credit, a refundable tax credit program targeted to help people of low- and moderate-income levels; this population could also be well-served by quality financial education.

Ms. Lamb spoke about her work with the Shelby County Trustee, an entity similar to a property tax collector or treasurer.  The Trustee’s program for delinquent taxpayers helps them to avoid the sale of their property by completing financial literacy workshops. The Trustee’s office had also just re-launched the BankOn Memphis program. Recognizing the legislators’ challenges with stretched resources and budgets, she encourage finding opportunities to provide financial literacy in existing activities.

The last panelist was Mr. Hancock from Experian, one of the three large national credit bureaus in the U.S. Recognizing that consumers need actionable information, Experian awards financial literacy grants annually and many of its employees volunteer in the community to provide financial education. Mr. Hancock also discussed the Experian Credit Educator program in which a coach walks the consumer line-by-line through his or her credit report and advises specific ways to improve the credit score. People who have completed the program have seen a 22-point improvement on their credit report on average.

Legislators expressed gratitude for the “wealth of information” they received and looked forward to helping their constituents break vicious cycles of debt. The lawmakers were enthusiastic that the ensuing economic freedom would benefit not only the individual consumer but would also uplift the community—a daily aspiration for NBCSL members.
Click to enlarge image 02_Phil Holt.jpg

NILA Executive Director, Philip Holt, brings greetings.

Ajenai Clemmons, MPP

NBCSL Policy Director serves as NBSCL’s policy director. She was formerly the ombudsman for Denver’s Office of the Independent Monitor, where she helped establish a civilian agency that monitors police and sheriff internal affairs investigations. She has worked in the Iowa State Legislature as well as non-profit and private sectors. Ms. Clemmons holds a Master of Public Policy and B.A. in International Relations, Spanish, and Latin American History.

LATEST Highlights