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The Impact of Financial Counseling. March 14, 2014

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(1)

The Impact of Financial Counseling

(2)

Panel

Moderator:

Ann Solomon

, Strategic Initiatives Manager, Federation

Panelists:

Karen Casler

, Product Development Manager, Case CU

Amber Paxton

, Director, Office of Financial

Empowerment, Lansing, MI

Justine Zinkin

, CEO, Neighborhood Trust Financial

(3)

The Need

• 17 million people in the US are unbanked

• 43% of US Households used an alternative financial

service providers

• 56% of Americans have no emergency savings

• 34% of Americans pay the minimum amount on their

credit cards

3

Sources: FDIC 2011 National Survey of Unbanked and Underbanked Households; FINRA Investor Education Foundation 2012 National Financial Capability Study

(4)

Financial Counseling in the

Industry

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Mainstream Credit Unions Low Income Designated Credit Unions

CDFI Certified Credit Unions

Percentage of Credit Unions Offering Financial

Counseling

4

Sources: National Federation of Community Development Credit Unions and Credit Union National Association, CDFI Certification: A Building Block for Credit Union Growth, May 2014.

(5)

Need for Better Understanding

• How are financial counseling programs staffed?

• How many people do they serve?

• What is there impact on the individuals served?

• How can we meet the need?

• What does a sustainable financial counseling program

look like?

(6)

Financial Counseling

Helping our community obtain financial freedom

Karen Casler, CCUFC Compliance Manager

(7)

•Chartered in 1936 as a Lansing School based credit union

–Community Charter in 2003

•Field of Membership - Live, work or worship in 7 counties in Lansing area •Low Income Designated Credit Union

•Community Development Credit Union

•2013 National “Social Responsibility/Community Development” First Place Award •2013 National Youth Financial Education Award

•Affordable, Fair Financial Services

(8)

Our Program

• Formal Program for 5 years

• Nine Credit Union Certified Financial Counselors on staff

• All staff are trained to recognize financial distress and offer counseling • Automated referral tracking

• Intake monitoring shared within counseling group • Contact goal within 24 hours

• Appointments up to 90 minutes

– Additional appointments as needed • Phone counseling when appropriate

(9)

Why offer Financial Counseling?

• Meet our mission to help members achieve financial success • Improve money management skills

• Improve ability to live within means • Reduce debt and payment outlay

• Understand credit report and credit scores • Increase ability to become loan ready • Improve access to account opportunities • Build savings

• Provide external resource referrals • Reduce financial stresses

(10)

What we offer

• Budget Counseling

– Workable, realistic budget – Spending plan

– Reduce debt – Debt restructuring – Savings plan – Cash flow

– Negative budget strategies – Financial goals

• Credit Counseling

– Report review – Repair credit

– Credit score education – Improve credit score

• Crisis Counseling

– Judgments – Garnishments – Eviction

(11)

Financial Products

• Loans

– PayDay alternative loan – CASE Cash – Share Secured loan

– Share secured VISA – Consolidation – Skip a Payment

• Accounts

– Savings – Save to Win

– Sub Account – specific need – Free checking

• Services

– Free Online banking – Free Bill Pay – Free Mobile Banking – Free Remote Deposit Capture – Free Text Banking

– Identity Theft Protection

(12)
(13)

LANSING FINANCIAL

EMPOWERMENT

CENTER

Municipal Financial

Counseling

(14)

Lansing Financial Empowerment Center

A partnership of the City of Lansing, Capital Area

Community Services, and Lansing Community

College

Established in March 2013 by a three-year, $1.5

million grant from Living Cities’ Cities for Financial

Empowerment Fund – one of 5 cities

(15)

The Case for Financial Empowerment

Supervitamin Effect:

“Integrating financial empowerment activities with

traditional anti-poverty programs and services

(16)

Center Structure

Program Director (Cabinet level position within

Mayor’s office, City employee)

Program Manager (Non-profit partner employee)

(4) full-time financial counselors (Non-profit partner

employees) in 6 locations

13 “official” referral partners create the

(17)

Financial Empowerment Center Model

Service Plans

Debt

Credit

Savings

Banking

(18)

Financial Empowerment Center Model

Outcomes

Debt

Decrease debt by at least 10%

Credit

Establish credit score

Increase credit score by at least 35 points

Savings

Increase savings by at least 2% of income

Establish and maintain a regular savings habit

Banking

Open or transition to a safe and affordable bank account

Bank account is open 6 months later

(19)

First Year Results (March – Dec 2013)

916 clients served

1818 sessions delivered

30% attended two or more times

10% attended three or more times

56% of clients were referred by a community

based organization

Average client’s annual income: $16,847

35% of clients unbanked

(20)

Connecting Clients to Financial Products

Use the partnerships already created by Bank On

Mid-Michigan: CASE Credit Union, Flagstar Bank,

and PNC Bank

Outcomes measured:

Open or transition to a safe and affordable bank

account (67 accounts opened in 2013 – 21% of the

unbanked clients)

Account open six months later

(21)

Partnering with a Financial

Empowerment Center

Be a satellite location for an existing Center

Be a referral partner for an existing Center

(22)

Questions

Contact Information:

Amber Paxton

amber.paxton@lansingmi.gov

517-648-6643

(23)

THE CREDIT UNION EXTENSION PROGRAM

Financial Counseling Integrated Into CDCUs

JUSTINE ZINKIN, CEO

(24)

A Nonprofit Financial Services Provider

Mission:

Empower low-income individuals to

become productive participants in the

U.S. financial system and achieve their

financial goals.

(25)
(26)

Team of Financial Advisors

Highly trained staff deliver one-on-one and group workshop advisory services  Financial Advisors guide clients to develop a Financial Action Plan to work towards

clear financial goals

The Gateway Banking Package

 The coupling of financial advisory services with quality financial products provides clients with the education and tools to achieve their financial goals and increases the likelihood of effecting behavioral change

Partnerships

 Financial empowerment is most successful when integrated into the poverty-fighting initiatives of trusted community organizations

 Our services are embedded in host credit unions, nonprofits, government agencies, and businesses

(27)

Nonprofits Government Agencies Institutions Financial Businesses / Employers

(28)

A financial counselor is a part of the credit union team

and operations

 Engages members and the community

 Delivers financial counseling as core offering, embedded into product offerings, as part of application and / or underwriting process

 Success measured via improvements to members’ balance sheets and credit profiles

 Success measured by improvements in members’ usage of credit union services resulting and bottom line results

Benefits

 Clients: empowered with financial action plan and productive financial products to achieve financial goals

 CDCUs: reach full potential as vehicles for economic development via more financially healthy members who are better able to use credit union services

(29)

Call To Action

Join Us. We guarantee members affordable, fair financial services. Savings. Credit. Money Management.

Build your Financial Future. We offer members a personal Financial Advisor who builds Financial Action Plans.

Bank Wisely. We connect members to today’s banking technologies, using online and phone banking for smarter money management.

Invest In your Community. As a nonprofit cooperative we make sure your

deposits stay in our neighborhood and strengthen our neighborhood economy.

Our mission is wealth-building for you.

And your community.

(30)

The Trust Card Is Easy

Transfer all of your debt to one card.

Make the same payments each month and watch your balance go down more quickly.

The Trust Card Saves You Money

The Trust Card has a lower interest rate.

Unlike other cards, as you pay off your debt, the minimum payment stays constant. You will be out of debt faster and spend much less on interest.

The Trust Card Gives You Control

Don’t fall back into bad habits.

As you pay off your debt your access to new credit is limited—and you can choose a lower limit upfront. The Trust Card strikes a balance between reducing your debt and the need for available credit.

A Product Example: The TRUST CARD™

From Pilot Launch:

40 cards

originated

Median balance refinanced

:

$7,122

Median debt reduction:

$1,000

Median life of active cards:

182 days

(31)
(32)

Collaborating with the Federation to develop a scalable model to strengthen and

expand the provision of financial counseling throughout the community development credit union (CDCU) field.

Goals:

 Develop a robust and sustainable model for the integration of financial counseling into credit unions’ operations:

Combine counseling with high-impact financial products and services to achieve

greater outcomes for clients:

 Systematically track and demonstrate the impact of counseling on the member and the credit union through a uniform data collection platform:

Vision:

 By embracing and promoting a culture of financial capability, CDCUs can reach their full potential as vehicles for financial empowerment and economic development.

(33)

END

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