Payday Loans Are Fatally Flawed

Rhode Island is in its fourth year of trying to reform payday lending in the state, and here at Capital Good Fund (CGF) not only have we been part of the lobbying effort, we’ve also launched our own payday loan alternative product.  Funded by United Way of RI, this loan ranges from $300 - $500, carries an interest rate of 30% + a 4% closing fee, a one-year term and very flexible requirements.

In the 5 months since the product launched we’ve done nearly 70 loans with phenomenal repayment rates.  Still, compared to the payday loan industry, which did $70 million in lending in 2011, that’s peanuts.  And indeed our tiny scale fuels the industry’s argument that only by charging an effective APR of 260% can they afford to deliver these “essential loans.” 

Financial Coaching Corps Profile - Jennifer Vacca

In her job at Fidelity Investments, Jennifer Vacca works to ensure that employees are engaged in their   So when she heard about the opportunity to serve as a Financial Coaching Corps (FCC) volunteer through a partnership between Capital Good Fund (CGF) and the Office of General Treasurer Gina Raimondo, she jumped at the chance.  Not only did she see this as a unique opportunity to engage in community service, but it is also aligned with her day-to-day work at Fidelity.  “I found the concept of the FCC compelling,“ Jennifer points out, “Because I think an initiative that provides financial advice to those that would ordinarily be unable to afford it can really make a difference.”

work—productive, happy and connected to their fellow Associates, the company and the community at large.

Minimum Wage Kills Jobs! Or Maybe It Doesnt: CBO

I'm going to come right out and say it: I'm incensed.  The reason for my ire?  You may have heard that the Congressional Budget Office (CBO) just came out with a report looking at the impact an increase in the minimum wage would have on the economy.  Well, you may have also seen the headlines about this, which tend to read as follows: 'Raising Minimum Wage Reduces Jobs, Poverty, Study Says,' (WSJ) or 'U.S. minimum wage hike would kill jobs but alleviate poverty: CBO' (Reuters)

Now as you might imagine, I take no umbrage at the estimate that nearly 1 million people will move out of poverty: that's actually fairly easy to calculate, since we know how many minimum wage workers there are today, and we can therefore realistically project how many people's annual incomes will increase.  What's more, I believe strongly that it is morally wrong for someone to work full-time and still live below the poverty line.

No, what has pissed me off is the part about losing 500,000 jobs.  And the reason is simple: that number is a complete and utter misrepresentation of the data.  In fact, the CBO seems to have absolutely no idea how many jobs the increase in minimum wage would kill; they don't even seem to know if it would kill any at all!  Here's what they actually say: "...in CBO's assessment, there is about a two-thirds chance that the effect would be in the range between a very slight reduction in employment to a reduction in employment of 1.0 million workers."  What?  They are saying that they are 66% sure that there will either be no impact at all, or an extremely significant one.  And in the other 33% of scenarios? Based on their projections, we could just as well assume that 1 million jobs will be created.  In other words, their findings are simply worthless.

What is especially galling is that I've yet to find a media outlet that has pointed this out.  I mean think about it: everyone is getting hopped up on an estimate that is, at best, a wild guess.  The 500,000 number is about as useful as saying that there's a 60 percent chance of the weather tomorrow being somewhere between a tropical paradise and a category 5 hurricane.  No one would plan their day based on such idiocy, and neither should we base federal poverty on similarly ludicrous data.

And let's be clear: this matters.  Politicians are going to use this report to argue against raising the minimum wage, and advocates are already on the defensive.  Equally importantly, the focus on the loss in jobs is overshadowing the fact that nearly 1 million working families will move out of poverty, and it's critical to note that the CBO report doesn't cast any doubt on that figure. 

So yes, I'm hopping mad, and you should be as well. The lives of million of families, and the fairness of our economy and society, are at stake. We live at a time of unprecedented income inequality, a time when wealth and political power are being concentrated at the top.  We can't afford to lose momentum on a policy issue that can have so much impact, and we certainly can't base that policy on ignorance and manipulation.

Financial Coaching Corps - In The Community

Last Sunday I had the honor of presenting about the Financial Coaching Corps to members of the
congregation of Temple Beth Shalom on the East Side of Providence.  The Corps, a partnership between Capital Good Fund and the office of General Treasurer Gina Raimondo, is all about financially empowering the residents of Rhode Island, and one of the ways we do that is by going out into the community and talking about financial topics in general and the Corps program in particular.

The 13 people in attendance and I talked about how the credit system works (and why it matters); tips and tricks for budgeting and building savings; how to avoid, or get out of, a debt trap; and the dangers of predatory services.  What I enjoy most about these events is that they help people understand our complicated financial system; and Treasurer Raimondo and I share the belief that understanding the system means that families will navigate it in a way that serves their life goals.

In addition, attendees learned about the opportunity to receive a free session of Financial Coaching through the RI Financial Coaching Corps.  This truly unique program connects financial service professionals with Rhode Islanders seeking assistance with creating a budget, building a savings plan, increasing their credit score and managing their debt.  Nearly everyone on-hand signed up for a session, a trend that we've seen across the state.

As we continue to bring the Coaching Corps to hundreds of families, we are thrilled with the results, and so are the volunteer Coaches.  You can see some of their stories below, and you can learn more about the Financial Coaching Corps by clicking here.

Corps Profile: Randy Sacilotto
Corps Profile: Farouk Niazy

Financial Coaching Corps Profile - Randy Sacilotto

As the Vice President of Business and Community Development at Navigant Credit Union, Randy

Sacilotto’s job is to be out in the community, ensuring that the needs of businesses and individuals are being met.  Yet Randy’s dedication to serving others extends well beyond his day job. Indeed, the list of his volunteer commitments is telling: he is the past President and current Board member of the Lions Club of Pawtucket, and sits on the Board of Directors of the Project Learn Family Literacy Center in Woonsocket.  And given his expertise in banking and financial services, Randy was intrigued when he heard that General Treasurer Gina Raimondo would be launching a financial empowerment initiative; he immediately emailed her about the opportunity, and was one of the first volunteers to sign up.

Financial Coaching Corps Profile - Farouk Niazy

As a first-generation American, Farouk Niazy embodies the spirit of the successful and hardworking American immigrant.  Farouk’s mother was an accountant, and ever since he arrived in this country he has had to apply her financial knowledge to his own life.  Now retired, Mr. Niazy spent his career in the engineering field, eventually moving into program management, where he was involved in the financial aspects of engineering: budgets, financial projections and the like.

Three Financial Tips From Cameron Cunningham

Let’s face it – it’s a jungle out there when it comes to finances. Between credit card offers, high

Photo credit Seth Mazow

pressure “one day only!” sales at retail stores, and the feeling that everyone else has more than you, it can be really tough to stay financially fit. Never fear! CGF is here, with three financial tips that will keep you in the clear.

1. Stick to a Budget
Tracking expenses… sounds fun, right? I’m guessing you’re not jumping for joy. Paying attention to expenses can be tedious and can feel like a waste of time. However, I would venture to say that sticking to a budget – aka, living within your means – is the single most important thing you can do to stay financially fit. It doesn’t matter how much money you make, if you don’t live within your means, you will be in trouble. While this seems obvious, we all know it is really hard to do. Temptation to spend is literally at every corner, and even if we know our “end of month self” is going to regret the decision, we often still spend when we know we shouldn’t. It is hard to maintain long-term thinking when short-term satisfaction is just a click away. At the end of the day, no matter how hard it is, we have to stick to a budget.  (And there are some credit online tools, such as Mint.com, that can make budgeting easier and more fun)