2 Center for American Progress | The Benefits of Local Financial Empowerment Initiatives
While consumers ofen ﬁnd i diﬃcul o make ends mee, he sakes are also very high when hey have diﬃculy managing heir money. According o he U.S. Consumer Financial Proecion Bureau, he average consumer who overdraws a bank accoun uli-maely pays $225 in overdraf or insuﬃcien-unds ees over he course o one year.
I is esimaed ha wo-hirds o all payday-loan borrowers ake ou more han seven loans in one year.
I is no surprising ha amilies wihou savings are also much more likely o ace hardships, such as ood insecuriy, orgone docor visis, missed ren paymens, and shu-oﬀ uiliies, compared o hose wih even a small amoun o savings, according o a 2010 Urban Insiue analysis.
New York Ciy is well poised o deal wih many o hese broader changes in he ﬁnancial markeplace because avorable consumer proecions exis a boh he sae and ciy levels. Te sae o New York bans he high-cos payday and auo-ile loans ha plague low-income consumers in oher pars o he counry.
Te sae limis check-cashing ees a 1.95 percen, whereas many oher saes have a 3 percen o 5 percen cap. And he sae also requires banks o oﬀer basic accouns wih a monhly ee no exceeding $3.
A low-income worker could easily spend 10 imes ha amoun each monh in check-cashing and money-order ees. And he New York Ciy Deparmen o Consumer Aﬀairs regulaes many oher ypes o consumer ﬁnance businesses such as pawnbrokers and used auo dealers hrough is licensing auhoriy. Ye avorable sae and local laws are only par o he soluion. CAP applauds he New York Ciy Oﬃce o Financial Empowermen, or OFE, or being a naional leader in proecing low-income consumers in he ﬁnancial markeplace. As we noed in a repor released in Ocober 2013, local governmens can and should do more o build ﬁnancial securiy or heir residens. Agencies such as OFE can coordinae wih ﬁnancial insiu-ions on a neighborhood basis, hereby building rus wih residens in communiies ha have ofen been underserved.
Wih nearly 1 million New York Ciy residens lacking bank accouns, he eﬀors o he OFE have he poenial o pu millions o dollars back in he hands o residensdollars ha can hen be saved or spen in he local economy.
Agencies can also oﬀer one-on-one suppor wih residens’ ﬁnancial challenges as New York Ciy does wih is sysem o Financial Empowermen Ceners. Tese ceners have served 25,000 cliens, reduced heir deb levels by $14.7 million, and helped ciy residens save $2.4 million.
Te beneﬁs o he OFE also spill over ino oher governmen uncions across he ciy. Having in-house experise wih he consumer ﬁnancial needs and challenges o low-income residens can make oher ciy programs work more eﬀecively. Among oher parnerships, OFE has worked o provide ree checking accouns o employees o ciy agencies and some nonciy employers and incorporaed ﬁnancial counseling ino evic-ion prevenion and workorce developmen programs by he ciy’s Human Resources Adminisraion and repaymen programs by he New York Ciy Housing Auhoriy or residens who are behind on ren.
Tese eﬀors expand access o aﬀordable ﬁnancial services and encourage beter ﬁnancial managemen wih he poenial o reduce long-erm reliance on public beneﬁs.