FAIR Financial Solution for underserved neighborhoods

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Twin Cities-based nonprofit Prepare + Prosper, known for annually serving 12,500 low- and moderate-income families with free tax preparation, financial services and coaching, has announced that four nonprofit Twin Cities organizations will offer the three-part FAIR (Financial Access in Reach) Financial Solution to their customers. FAIR, launched as a pilot program with Sunrise Banks in July 2018, is designed to help financially underserved individuals build credit and savings, and rid themselves of high-cost fees and interest by using products designed especially for them.

The four nonprofit distribution partners for the FAIR Financial Solution are: Build Wealth MN; Community Action Partnership of Ramsey & Washington Counties; EMERGE Community Development; and Lutheran Social Services Minnesota – Eastside Financial Center.

The FAIR Financial Solution is designed for financially underserved people (oftentimes called unbanked or underbanked) who often don’t have access to fairly priced and designed products, and often rely on costly services such as check cashers, payday loans and bank accounts that charge excessive fees. FAIR is unique in providing a scalable approach to solving the financial inclusion gap by bundling consumer-designed financial products with fairer fees, coupled with financial coaching.

Unique to FAIR is that these products will not rely on bank branches for delivery, but instead will be offered to people where they work or receive services, such as nonprofit organizations and employers. This delivery model is based on the input of more than 150 financially underserved consumers who participated in listening sessions, which shaped the FAIR design and structure.

One of the nonprofits involved is Build Wealth MN, serving clients on the Northside. David McGee is the executive director and says, “Build Wealth MN’s mission is to strengthen communities by empowering families to build wealth through economic development and we are excited to add FAIR products to our toolset as we work with families to help them gain financial independence…Not only are the FAIR products necessary for our clients to transact, save and build credit, the fee structure and guided support will help customers use the products to their fullest benefit. I have been a part of FAIR since its inception and I am proud to be able to offer the service to our clients so seamlessly.”

The Problem: Too many people’s financial situations are volatile and many lack access to financial products that work for them. One in three Americans has no savings, according to Pew Charitable Trusts, making it difficult to withstand an emergency. According to the Federal Deposit Insurance Corporation’s (FDIC) “National Survey of Unbanked and Underbanked Households,” 33.5 million U.S. households are excluded from the financial mainstream. Of those households, 44 percent are households of color, as compared to 19 percent that are white households. In the Twin Cities, there are 194,432 financially underserved households. The most recent Prosperity Now Scorecard data found that 54.8 percent of households of color were financially underserved in the Twin Cities, as compared to 15.4 percent of white households.

There are many reasons traditional banking doesn’t work for everyone. Research from the FDIC and Prepare + Prosper shows that many who are financially underserved do not trust banks, want to avoid unpredictable fees, or don’t have enough money to maintain an account. There is also a perception that bank accounts are not for households with low incomes. More than half of those included in the FDIC report said they believe banks are “not at all interested” in serving households like theirs. According to the 2017 Market Size Study presented by Center for Financial Services Innovation, underserved consumers spent $173 billion in fees and interest.

“The financial inclusion gap is a big problem in the U.S. and in Minnesota. It negatively impacts people’s economic footing, well-being, health and more, and not enough people are talking about it,” said Tracy Fischman, executive director of Prepare + Prosper. “People need financial products and a system that works for them and not against them as they strive to be financially successful.”

The Solution: To help families gain financial well-being, the FAIR Financial Solution, issued through Sunrise Banks, includes tools to: Transact through a checking accountno account overdraft fees, no monthly minimum balance requirement, $25 to start and a $3 monthly fee.* Save through a savings accountstart with $25, no monthly minimum balance requirement.* And build credit through a credit-building loanthere is no credit score requirement to get started.

Another key aspect of the FAIR Financial Solution will be enhancing technology and tools to support customers in working toward their goals and building financial confidence along the way. The technology and tools will be centered around human behavior and may take the shape of texts, apps or social motivators to support continual savings and credit building.

Note: The FAIR program is a pilot project. For info visit fairfinancial.org or prepareandprosper.org.