Program offers escape from payday loans
By Elizabeth Stortroen
Denver Mayor John Hickenlooper is banking on the National League of Cities to help promote greater financial stability for Denver residents who spend millions of dollars a year on payday-loan and check-cashing fees because they don’t have bank accounts.
The National League of Cities’ Institute for Youth, Education and Families has chosen Denver as one of eight cities to participate in its 2009 Bank On Cities Campaign, which will offer starter accounts and provide financial education to residents who have had little or no connection to banks or credit unions.
At a press conference unveiling the program last month, Hickenlooper noted that it should, “give responsible, hard-working citizens a chance to achieve prosperity and financial security.”
According to a Brookings Institute report, in 2006, Denver residents spent $26 million on payday loan and check-cashing fees just to get access to their pay. The Institute estimates that the average full-time worker who doesn’t use a bank or credit union will spend $40,000 over a lifetime to turn his or her salary into cash.
“What this project has shown so far in other cities is that people don’t completely understand what they were or should be investing in, or the impact their investments have on the city’s overall economic health,” said André Pettigrew, executive director of Denver’s Office of Economic Development.
Pettigrew said he hopes the program will raise the financial IQ of the city, allowing its economy to recover more quickly.
The program is modeled largely on Bank On San Francisco, an initiative launched in 2007 that offers low-cost, checkless accounts to residents who either never developed a relationship with a bank or had a troubled banking history. Community liaisons help identify those who are ready to open accounts.
“This program provides a tremendous opportunity for cities to engage their citizens in an effort to build assets and create financially stable households,” said Kathlenn Novak, president of the National League of Cities and mayor of Northglenn. “The opportunities this program provides are critical to enhancing the broader economic vitality of cities.”
The Denver Economic Prosperity Task Force has provided the push behind the initiative, and its members will continue to provide input.
“We are hoping — through this program and other programs coming out of the Economic Prosperity Task Force — to help people learn more about how to manage their money well,” said Doug Linkhart, Denver city councilman and co-founder of the Denver Economic Prosperity Task Force. “So in the tough times like we are in now, (people) can weather the storm. And even in the good times, they can afford to live in our city.”
The program has partnered with the City and County of Denver, the Colorado Bankers Association, the Credit Union Association of Colorado and Mile High United Way to connect low- and moderate-income families to mainstream financial services to help them keep more of their paychecks, build savings and establish a credit history.
“When San Francisco began their Bank On program they had almost 50,000 residents that they viewed as being underbanked,” Pettigrew said. “But over the period of time the program was in place, close to 20,000 to 30,000 people set up bank accounts in the area. We are hoping to get these same relationships in place in Denver.”
Barclay Jones, member of the innovations team for Mile High United Way, said his organization has been working for the past eight to 10 years to help families gain access to mainstream financial products and knowledge.
“We wanted to partner with this initiative because it is a nice complement for what we believe in as an organization and what we have been working toward,” said Jones in an interview with The Colorado Statesman. “We feel that the work that was done in San Francisco really created an exciting and lasting partnership between the banks, credit unions and government in promoting financial education for all of its citizens … we are hoping for the same results here.”
“The Bank On Denver program essentially provides technical assistance,” said Pettigrew, noting that participants will learn why it’s important to have a bank account and how to open and maintain one.
“This is a concentrated effort to bring the resources that are available from our banks to our citizens, who might not be informed on the topic, in order to give them a better understanding about their investments and their savings,” he said.
Krista Ferndelli, chief marketing officer for the Denver Community Credit Union, said the credit unions of Denver hope to integrate this initiative with programs they already have in place in order to offer real solutions to the underserved.