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

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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 gotomeeting@prosperitynow.org

Group Discussion Technology

Next Steps and Wrap Up

Tupa HovekaProgram Associate, Field Engagement

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