Into The Belly of the Beast

Going Undercover

"Pay Off Later", of course!

Once per quarter we gather the staff of Capital Good Fund for a half-day "staff date." Each of these staff dates revolves around a different topic: customer service, fundraising, social impact, etc.  Last Friday's topic was all about understanding our competition, and to do that we decided to go into the "belly of the beast."

We met at our storefront office in Woonsocket, RI and then split up into two-person teams.  We assigned each team to a predatory lender--payday lender, pawn shop, or rent-to-own store--and then sent them out to pose as customers and learn how they do business.  Laura, our Connecticut Programs Coordinator, and I posed as a brother and sister making $1,500 per month and looking to purchase the biggest TV possible.  To do that, we went to Aaron's Rent-to-Own, a publicly traded firm that sells TVs, furniture, appliances, and other electronics.  Our goal was to pay attention to signage, the layout of the store, the nature of our interactions with their employees, and how they pitched their products.

Predatory Lending - Brazil and the UK

I've spent so much time thinking about predatory lending here in the US that it's been a while since I've contemplated what the picture looks like in other countries. Sure, I know that Grameen Bank got started in Bangladesh in the '70s to put the money changers out of business, but I haven't stayed on top of what's going on today.

Some of Pocket Money's outrageous material.

Two articles this week helped me gain some perspective. First, Eli, my Development Assistant, spotted a hilarious art installation called Pocket Money Loans, which satirizes the payday loan industry in the UK; I highly recommend you check out their website, http://pocketmoneyloans.com. The joke is brilliant: pocket money cash advance loans for kids at the wonderful interest rate of 5,000%!

The fact that such a site exists indicates that payday lending is an issue in the UK, and that indeed is the case: according to Consumer Affairs, "In a relatively short period of time, the UK payday loan industry has experienced explosive growth" from about £900 million in 2009 to over £2 billion in 2012. And much as in the US, these payday lenders charge obscene interest rates; engage in shady, if not outright illegal, collection practices; and profit off the financial vulnerability of the working poor.

Second, a NY Times article blew my mind with the its opening paragraph: "Interest rates in Brazil would make an American loan shark blush. Credit cards charge more than 240 percent a year. Bank loans top 100 percent." After re-reading that three times, I still struggled to believe it; Brazilians pay more for "mainstream" financial services than Americans pay for "alternative" financial services. The article then goes on to note that pawn shops, which--thanks to the decree of a former dictator (a weird story in-and-of-itself)--can only charge 19%, have become one of the most viable and affordable options in the country. Talk about an interest rate environment that's wildly different than ours!

It's certainly not good that other nations struggle predatory lending, but it's undoubtedly interesting. To paraphrase the opening to Tolstoy's Anna Karenina: all equitable financial services are alike; each unjust financial service is unjust in its own way.



-Andy

The Financial Implications of the President's Executive Order

President Obama's recent executive order on immigration will have a significant impact on the 4-5 million immigrants who are at present living in this country illegally. I'm not interested in discussing the politics of his action, so no need to read on if you're looking for that! Rather, I want to go over a key challenge for immigrants who wish to participate in the programs (known as DACA and DAPA): the cost.

This is nothing new. Ever since our founding in 2009 we've been providing loans to cover the cost of applying for US citizenship: $680 to the government plus legal fees. For many low-income families, that cost is simply too high; in fact, the Pew Charitable Trusts estimates that there are 700,000 to 800,000 legal permanent residents in this country who are eligible for citizenship but don't begin the process due to cost.

An Ongoing Miasma: The Misdeeds of Big Banks

It has become a cliché to excoriate the big banks for their financial misdeeds, in large part because the public has grown tired of the litany of law-suits, controversial settlements, accusations of manipulation, cover-ups and other shenanigans.  But I'm going to write about it anyway, for a simple reason: this is no laughing matter, and it's not going away.

The inspiration for this post came from two stories, both posted on November 12th, detailing the latest corporate malfeasance.  In the first story, we learn that "some of the nation’s biggest banks ignore bankruptcy court discharges, which render the debts void. Paying no heed to the courts, the banks keep the debts alive on credit reports, essentially forcing borrowers to make payments on bills that they do not legally owe."  The second story informs us that a number of big banks have agreed to a $4.25 billion fine for illegal currency-rigging.

Ideas For Serving Deeply Vulnerable Populations

Yaay Equitable Financial Services!
There are a lot of wonderful things about the use of financial services as a tool to tackle poverty: it respects the dignity of the poor; generates a revenue stream for the lender; builds the borrower's credit; and allows borrowers to make investments, such as in a security deposit or computer purchase, that they would otherwise be unable to make.  One challenge, however, is that there is an inherent tension between making loans to the poor and maintaining high repayment rates: the lower the income of the borrower, the riskier the loan.  This is not due to any character flaws on the part of the poor, but rather the instability--financial and otherwise--that often defines their lives.

Given that our poverty-fighting mission, it is imperative that we figure out how to make loans to deeply vulnerable populations without taking on an unacceptable level of risk.  Many of our referrals come from caseworkers and agencies that work with the temporarily homeless, the mentally ill, ex-offenders and survivors of domestic violence, and there it is very frustrating to deny a loan application that can transform the life of the applicant--a loan to cover the cost of a security deposit for a homeless family, for instance.

Whence The Next Check?

The Things You Just Have to Do

Ask any CEO of a nonprofit about the worst part of their job, and they will almost certainly speak to the never-ending struggle to raise funds.  I come to that conclusion not only because it is how I respond to the question, but also thanks to nearly six years of interacting with my fellow nonprofit leaders. Grant reports, newsletters, proposals, lunch meetings, and calls with potential donors are all critical elements of our job descriptions; yet they, on the face of it, have nothing to do with the mission.

Almost all of us get into the nonprofit sector to serve others and solve problems.  What motivates us is knowing that our clients' lives are improved: we like to see the borrower, talk to the recipient of Financial Coaching, and read success stories.  Of course we all know that without money, none of this good work can be accomplished.  Still, as we spend hours staring at a computer or schmoozing, it can at times feel like you are more a glorified paper-pushed and beggar than agent of social change.

I Must Write

I need to write something, anything, be it profound or prosaic, masterful or awful. For once, I can't afford to worry about grammar, for I fear that unless I release the flow of stymied creativity, the poetry will languish and grow heavy, like so much ballast sinking me to the bottom of the sea.

I'm afraid to pause.  My fingers tremble, so let them strike the keys, and to do so violently if they must.  I am tired and frustrated and angry.  My inadequacy follows me wherever I go.  I question my ability to better the world; to put my best foot forward; to inspire others; to write poetry and prose of worth to others, and worthy of my lofty expectations; to live up to my ideals; and to persevere in the face of hopelessness.