After a number of closed-door meetings, Senate Majority Leader Mitch McConnell just released a discussion draft of the American Health Care Bill.

There are a number of reasons to be concerned.The bill:

• Ends Medicaid expansion – albeit a bit more slowly than the House bill – by phasing it out over three years beginning in 2021. When this happens,it is likely that states will not be able to absorb the costs and will cut Medicaid coverage. And in several states including Indiana, “trigger laws” will mean that the state will cut Medicaid expansion as soon as there is a drop in federal funding – so expansion in these states will end in 2021.

• Caps Medicaid reimbursement with a growth rate to adjust it for inflation. This means that overages occurring because of a health crisis or natural disaster would rest entirely on the state’s shoulders. It also effectively cuts reimbursement by reducing the growth rate cap in 2025.

• Maintains ACA exchange subsidies, but increases deductibles and eliminates assistance to some middle-income families.

• Allows states to waive essential health benefit requirements and removes restrictions requiring states applying for waivers to demonstrate that the waived rule will not: result in a drop in individuals covered, reduce the comprehensive nature of the coverage, or impact affordability.

• Provides nearly identical tax cuts to the House version, largely benefitting wealthy households, insurers, and drug companies.

Why does this debate matter to asset development? There isstrong evidence to suggest that health and wealth are inextricably linked in complex and bi-directional ways. In other words, wealth improves health and health impacts wealth. Asset and income poverty makes adults less likely to be able to weather a major health event, especially if they lack insurance coverage. At the same time, untreated chronic conditions can make employment and, subsequently, wealth accumulation more challenging; and this is more likely to happen when individuals are uninsured or underinsured.

Advocates should call their Senators and, at a minimum, ask them to take the time to carefully consider this newly-released discussion draft and any subsequent proposals or amendments. A quick, clear message: “If this is a bill you are proud of, bring it home and discuss it with your constituents over the July recess.” Rushing a vote before the recess does a disservice to the millions of Americans whose health and wealth will be affected by the outcome.  

Today, 7 out of 9 members of the Indiana House delegation voted to undo consumer protections put in place after the financial crisis to guard against future economic crashes and bailouts. The legislation in question, the so-called Financial CHOICE Act, passed the U.S. House of Representatives by a vote of 233-186.

“We just don’t understand it,” said Kelsey Clayton of Indiana Assets & Opportunity Network. “Elected representatives are supposed to stand up for Indiana communities but instead they decided to support legislation that explicitly protects payday lenders, cripples the government watchdog, and allows banks to go back to doing the same kinds of deals that forced us to bail them out. It’s hard to believe a lesson was learned.” 

The Financial CHOICE Act destroys the Consumer Financial Protection Bureau’s ability to create or effectively enforce laws that stop mortgage companies, debt collectors, student loan servicers, and other financial services companies from harming consumers. In addition, the CFPB’s Consumer Complaint Database would hide the names of companies – removing an incentive for treating customers fairly and a valuable tool for tracking companies with systemic abuses. Since the agency’s inception, its consumer complaint system has helped over 8,000 Hoosiers with such concerns.

Additionally, the bill would:

• Take away the CFPB’s core authority to stop companies from pushing unfair, deceptive, or abusive products and practices. This is the authority that has allowed the CFPB to stop, for example, debt collectors from illegally threatening consumers or credit card companies from ripping off customers with hidden fees.

• Create massive loopholes in the rules put in place to discourage the kind of unaffordable mortgages that were at the heart of the foreclosure crisis.

• Exacerbate “Too Big To Fail” by stripping agencies of the power to wind down megabanks without bailouts or inflicting widespread harm on the economy.

• Barred from regulating payday lenders, who drain over $70 million in fees from Indiana residents with a typical loan charging 391% APR and designed to trap borrowers in a cycle of debt.

The members who voted in favor of H.R. 10 legislation included Rep. Walorski, Rep. Brooks, Rep. Rokita, Rep. Messer, Rep. Banks, Rep. Hollingsworth, and Rep. Bucshon.

Meanwhile, Hoosiers continue to see $70 million in fees drained by payday stores

FOR IMMEDIATE RELEASE:

June 2, 2017

Contact: Kelsey Clayton, Indiana Assets & Opportunity Network Manager

kclayton@prosperityindiana.org, 317-454-8540

June 2, 2017 – One year ago today, the Consumer Financial Protection Bureau (CFPB) issued a draft rule aimed at reining in the worst abuses of payday, car title and other high-cost debt trap lending schemes. While these protections are sorely needed in Indiana, where such loans carry APRs reaching 391 percent and many borrowers become trapped in a cycle of debt, Congress is actively working to protect payday lenders.

Specifically, the U.S. House of Representatives will soon vote on the so-called Financial CHOICE Act, which would essentially undo all of the consumer protections put in place after the Great Recession and bank bailout.

This bill, among other things, specifically bars the CFPB from regulating payday and car title lenders. This means the draft payday rule – which requires lenders to assess a borrower’s ability to repay a loan before making one – would never go into effect, and the Bureau would be barred from enforcing existing laws.

“We are actively working to make sure Hoosiers have access to safe and affordable products that help them build wealth, not drain it,” said Kelsey Clayton, Manager of the Indiana Assets & Opportunity Network. “This bill undermines those efforts by blocking common sense safeguards and barring any enforcement actions.”

Since its inception, the CFPB has used its authority to enforce existing laws to return to 29 million consumers, $11.8 billion from financial companies that broke to the law. Most recently, it helped Hoosiers who were harmed by online payday lenders.

In addition to special protections for payday lenders, the House bill removes the Consumer Bureau’s authority to stop other financial services businesses, like credit card companies and mortgage brokers, from pushing abusive products on their customers or tricking them into paying for things they can’t use, don’t want and don’t need.

Among the other distressing components of the House bill are its repeal of the fiduciary rule to require investment advisers to act in the best interest of their clients which would help Hoosiers save an additional $259 billion a year for retirement, and its increase to loan fees allowed for manufactured home purchases.

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A project of the Annie E. Casey Foundation, KIDS COUNT is the premier source for data on child and family well-being in the United States. Access hundreds of indicators, download data and create reports and graphics on the KIDS COUNT Data center that support smart decisions about children and families.

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Earlier this month, Prosperity Indiana and the Indiana Institute for Working Families staff met outside the American History Museum on the National Mall in Washington, D.C. to prepare for a whirlwind round of visits to our lawmakers on Capitol Hill. On our agenda: ensure that lawmakers considered the perspectives of working Hoosiers and the agencies that stand alongside them each day, helping to make financial well-being a reality. 

Our main policy target was the Financial CHOICE Act. This bill – which passed out of the House Financial Services Committee in early May – dismantles many of the financial reforms and consumer protections that were put in place following the Great Recession. This made our starting point at the American History Museum a bit ironic; how quickly many of our lawmakers seem to have forgotten the lessons of the past.

Of particular concern is the bill’s gutting of the Consumer Financial Protection Bureau (CFPB). It turns the agency – currently led by a single director – into a multi-person commission and makes its funding subject to the appropriations process. Then, it limits the agency’s rule-making authority, repeals its authority to address unfair, deceptive and abusive practices (UDAP), and outright blocks any regulation of the payday lending industry. Section 733 of the Financial CHOICE Act states, “NO AUTHORITY TO REGULATE SMALL-DOLLAR CREDIT – The Agency may not exercise any rulemaking, enforcement, or other authority with respect to payday loans, vehicle title loans, or other similar loans.” Beyond this, the Financial CHOICE Act nixes thefiduciary rule and raises the limits on interest and fees on manufactured home loans – anaffordable entry point into home ownership for many families.

We sat across the table from legislative staff, asking them to stand beside the Hoosiers still reeling from a recession that cost many their jobs and their savings. We asked them to think about the cities and towns wherehigh-cost loans or deceptive practices syphon hard-earned dollars out of the local community. We asked them for robust consumer protections and a strong watchdog. And now, we can only hope they will heed our call when the Financial CHOICE Act comes up for a vote in the House in early June.

It’s not too late to make your voice heard – and you don’t have to travel to D.C. to do it! Please considersigning our letter to show support for the CFPB and its efforts to reign in abuses that impact Indiana consumers. Members will also be home over Memorial Day recess. Contact Kelsey Clayton to learn how to make an appointment for an in-district meeting.

Education levels have long been closely associated with economic outcomes; and a college degree, in particular, is seen as an indiscriminate vehicle of economic mobility. While the U.S. Census Bureau finds that a young adult working full time with a high school diploma makes more than an equivalent young adult working full time without a high school diploma ($30,000 per year vs. $25,000 per year, respectively), a young adult with a bachelor's degree will, on average, make $49,900 per year. This dramatic wage difference means that a typical American with a bachelor's degree will make 66 percent more in lifetime earnings than the typical American with only a high school diploma.

Unfortunately, ballooning costs of a college education have become a de facto gatekeeper, repelling children from low-to-moderate income families from accessing one of the most effective drivers of economic mobility. This discourages parents from disadvantaged backgrounds who gradually lose the expectation that their children will attend college. As a result, the parents less likely to put aside resources for their children’s education and less so are motivated to encourage their children scholastically.

Luckily, evidence suggests that children with a college savings account with as little as $500 or less are three times more likely to attend college and four times more likely to graduate when compared to their peers without a college savings account. These accounts have multiple benefits, including flexibility to spend the money on any post-secondary education, such as traditional colleges, community college, or trade schools, and for tuition, fees, books, supplies, room and board, and required equipment. In addition, investing in a children’s savings account, such as a 529 college savings plan, provides significant tax advantages, which can include state income tax deductions, tax-free growth, and tax-free withdrawals.

While low-to-moderate income families will admittedly need to work harder in order to send their children to college, simply having a college savings account creates a family culture with strong college expectations. By creating a shared family objective to send their children to college, parents instill into their children at an early age the importance of excelling academically in order to be accepted into college and obtain necessary scholarships. As a response, experts from the asset building, community economic development, and education fields have worked hard to promote programs that utilize children’s savings accounts in order to increase the access of secondary education to children from low-to-moderate income households.

One example is College Kids - a program of the City of St. Louis’ Treasurer's Office, which began automatically opening a children’s savings account for the roughly 3,200 kindergarteners enrolled in city public and charter schools. Each account was seeded with an initial investment of $50, paid for by the money collected from parking fines and parking meters within the city. However, contributions made by business and philanthropic communities within the city have funded an additional opportunity for participating children to earn more money for their college savings account including $1 for every week of perfect attendance during the first year, dollar-for-dollar matched deposits up to $100, and an additional $50 if parents and guardians complete financial education courses in-person, online, or through the College Kids official smartphone app.

Although College Kids uniquely funds its investment in children's savings accounts using money collected through parking meters and parking violations, cities and programs across the nation enroll students and offer a free initial investment into college savings accounts. Examples include Maine which invests $500 into a college savings account for every newborn, the Treasurer of San Francisco provides $50 for every kindergartner with an additional $50 if they are eligible for free or reduced lunch, and Beyond Housing offers a $500 529 college savings account to kindergarten students in St. Louis’ high poverty Normandy school district.

In Indiana, families have several options to choose from including Promise Indiana which seeds children’s 529 college savings accounts with $25 and will match an additional $75 raised by the child’s “champions” within the community. 21st Century Scholars will pay full tuition for low-to-moderate income Indiana students if they attend an Indiana public university or college and will provide equivalent financial aid for students attending an Indiana private university. Finally Hammond, Indiana’s College Bound Program awards all Hammond, Indiana children up to a yearly $10,500 scholarship depending on how many years the child spent living in a home in Hammond, Indiana.

Although these initial seed investments may not be able to fully finance the costs of college, the programs are designed to raise awareness of the economic advantages of saving in a college savings account, instill smart money saving habits, and most importantly, inspires hope into low-and-moderate income families that college education for their children is obtainable if they begin saving as early as possible.

For instance, in addition to Beyond Housing’s initial $500 investment into a child’s college savings account, high school students are incentivized to save for college with a 3:1 matched savings program - meaning that for every $1 a student saves, Beyond Housing will invest $3. Shatera Davis, a recent graduate from the University of Missouri-St. Louis and recent beneficiary of Beyond Housing, took full advantage of Beyond Housing’s 3:1 matching program while in high school. Shatera applied for scholarships and when she got a job at a movie theater her junior year, began saving $20 of every paycheck in her college savings account. By her senior year, Shatera had $3,000 in her college savings account, primarily due to Beyond Housing’s matched savings program. Because of Beyond Housing, Shatera developed smart money savings habits that will serve her for the rest of her life and cultivated her desire to attend college with every matched deposit. In describing Beyond Housing, Shatera stated that, “It gave me a goal to aspire to. I’m raising all this money, and I want to do something with it.”

Additional evidence of the benefits of college savings accounts were found by researchers at Washington University and St. Louis University while studying infants in Oklahoma. The study gave a $1,000 college savings account to 1,350 randomly selected Oklahoma infants and encouraged parents to start saving for college by offering to double any contributions made, up to a limit. Conversely, the researchers followed a control group made up of a nearly equal number of infants and provided them with nothing. Ultimately, the study found that 17 percent of families given money added additional funds to their child’s college savings account compared to only 1 percent in the control group. Psychological benefits were also found. Families who were given a college savings account with a seeded investment had a more optimistic outlook on themselves and their child's future, higher college expectations, were more gentle with their children, and the children developed better social skills. These findings also showed a clear trend where the lowest income families and the most disadvantaged kids experienced stronger positive outcomes.

As a college education continues to gain importance, it is crucial that families from all socioeconomic backgrounds understand that their children have the ability to obtain a college degree. It is the responsibility of the entire community - friends, family members, and neighbors - to raise awareness of the benefits of children’s savings accounts and other similar programs that provide an initial seed investment or match contributions. Although the high costs of a college degree can be daunting, contributing to a children’s savings account is critical for incorporating college expectations into a child’s environment and ultimately providing an opportunity for economic mobility.

Now that our state lawmakers have returned home and will not return until January 2018, our eyes turn to Washington, D.C. where members of the Indiana congressional delegation will help decide the fate of a number of consumer protections.

What will happen to the Consumer Financial Protection Bureau’s prepaid card rule? These days, more than12 million households use prepaid cards to conduct financial transactions and a number of employers use the cards to pay their employees in lieu of direct deposit or paper checks. The rule would make a number of protections available to users of prepaid cards, including transparency about fees, notice from employers that they can opt out of paychecks via prepaid card, quick and easy access to card balances, and fraud protections. Netspend has aggressively fought this rule, projecting that it stands to lose a substantial portion of the $80-85 million it collects annually in overdraft and other fees. And unfortunately, some members of Congress are standing by Netspend’s side, including Representative Luke Messer and Representative Trey Hollingsworth, who have both signed on as sponsors of a resolution that would block these common-sense protections.

What will happen with the Department of Labor’s conflict of interest rule (or for short, the fiduciary rule)? This rule holds retirement investment advisors to the fiduciary rather than suitability standard, meaning that they have to act in the best interests of their clients when providing investment advice. As the Institute for Working Families argues, this is an important safeguard for Hoosiers who reach this step in the economic security pathway, as more and more retirement savings plans are defined contribution plans, which Hoosiers must manage on their own. Those who turn to a financial advisor for help should feel confident that the advisor’s suggestions are in their best interests. President Trump has delayed implementation of the rule – set to go into effect this month – in order to review it further.

What will happen to the Consumer Financial Protection Bureau (CFPB)? This watchdog agency guards Americans against unfair, deceptive and abusive practices (UDAP) in the financial sector. This recent Indiana A&O Network press release sheds light on just one of the recent actions the CFPB took to return hard-earned dollars to Hoosier consumers when a financial services company deceived them. Unfortunately, the recently-reintroduced CHOICE Act (dubbed CHOICE 2.0) would strip the CFPB of UDAP authority, allow the director to be removed at will, and turn the Bureau into an enforcement agency only with no rule-making or market study capabilities. That spells bad news forthe vast majority of Americans hoping for stronger regulation of the payday lending industry and for continued consumer protection in general.  

In early May, co-leads of the Indiana A&O Network policy committee will bring this letter to Washington, D.C. and look for answers to the questions listed above and others. Be sure to sign on now to make your voice heard so that the Indiana congressional delegation clears the path for Hoosiers to build assets rather than throwing more obstacles in our way.

In the United States 650,000 inmates are released from prison every year-nearly 68 percent of them are rearrested within three years of release. Although studies have largely found that employment has a significant effect in reducing the recidivism rate, or the rate an ex-offender relapses into criminal behavior, low reading and technological literacy levels and the stigma of being an ex-offender in the eyes of potential employers, largely prevents ex-offenders from getting a job. Initiatives, such as Ban the Box which encourage public and private employers to remove the check box from their hiring applications asking if applicants have a criminal record, do help destigmatize an ex-offender’s criminal history. Unfortunately many states do not widely acknowledge these initiatives including Indiana, which recently passed SB 312: a bill that prevents municipalities from enacting Ban the Box ordinances. Fazed out of the job market, ex-offenders are often left with no other choice but to return to crime to provide for themselves and their families.

However, recent prison reform movements that offer college credit to inmates have been gaining traction due to their effectiveness in reducing recidivism rates. Bard College has spearheaded the effort through its Bard Prison Initiative (BPI), a program which currently provides an accredited liberal arts college education to over 300 inmates across New York. Although students of BPI are all inmates at one of six prisons across New York State, the course material and academic standards match the equivalent classes taught to traditional undergraduates at Bard College. To date, BPI has awarded over 430 associates and bachelor’s degrees to BPI students and has all but eliminated the recidivism risk amongst its students who recidivate at a rate of under 2 percent.

BPI draws its success through its perfect combination between providing ex-offenders a college education and empowering them with the opportunity to genuinely improve their lives. Although inmates often return to their criminal behavioral patterns due to the relationships they maintain in and out of prison, Kathy Fox, Professor of Sociology at the University of Vermont and the program leader for the university’s Liberal Arts in Prison Program states that, “higher education can change the equation for motivated prisoners who otherwise have few career choices when they are released.” Beyond the practical benefits of a college degree, the liberal arts education itself directly engages students in a constant conversation about the value the pursuit of knowledge has on their lives. This pursuit of knowledge provides inmates a critical alternative to their criminal behaviors and students including Dyjuan Tatro, who has spent the last 11 years at Eastern Correctional Facility in New York, tend to fully immerse themselves into their studies. In a testimonial for BPI, Tatro states that, “I wake up in the morning, and I don’t say to myself, 'I'm in prison'… I try to think of it like I'm in college. And you can't entirely separate the two out, but it's healthier to think about it that way. It gives you meaning and it gives you purpose."

The success of BPI soon catalyzed into a wider coalition known as The Consortium for Liberal Arts in Prison which has grown to include universities and colleges across the country including Yale, Washington University, Wesleyan University, University of Vermont, and local Indiana schools Notre Dame and Holy Cross. Member schools of the Consortium model their prison education programs after BPI’s success by offering college credit and college degrees which provides their students with much needed motivation to leave their criminal history behind as they realize, many for the first time, that they are capable of obtaining a college degree and understanding the economic advantages of having one.

BPI and the Consortium have proven that providing college education is an effective method to rehabilitate. Although not all students graduate with a degree, students are released back into society with the tools, knowledge, and the desire to make positive changes in their communities and in their own lives.  

FOR IMMEDIATE RELEASE:

April 7, 2017

Contact: Kelsey Clayton, Indiana Assets & Opportunity Network Manager

Kclayton@prosperityindiana.org, 317-454-8540

Indianapolis, IN – Thanks to complaints from 43,000 consumers around the country - including over 450 from Indiana consumers - the Consumer Financial Protection Bureau (CFPB) investigated and shut down a nationwide credit score scam that tricked Americans out of their hard-earned dollars by marketing and selling credit scores that they claimed were used by lenders to make credit decisions. In truth, lenders did not use those credit scores when deciding whether to make loans. The CFPB also hit the company with a $3 million civil penalty.

Experian was among the top ten most-complained-about companies in CFPB’s database of consumer complaints nationwide. Hoosiers’ complaints against Experian make it the third most complained-about company by Hoosiers in the CFPB complaint database.

Credit scores are numerical summaries designed to predict consumer payment behavior in using credit. Many lenders and other commercial users consider these scores when deciding whether to extend credit. No single credit score or credit scoring model is used by every lender. However several companies including Experian have developed so-called “educational credit score” intended to inform consumers, which lenders rarely, if ever, use. These scores are intended to inform consumers. 

Experian developed its own proprietary credit scoring model, referred to as the “PLUS Score,” which it applied to information in consumer credit files to generate a credit score it offered directly to consumers. The PLUS Score is an “educational” credit score and is not used by lenders for credit decisions.

The Experian scandal is just the latest in a series of schemes to cheat consumers that the CFPB has uncovered over the past year, including

• the multimillion-dollar fraud perpetrated by Wells Fargo

• a pattern of abusive mortgage lending practices perpetrated by affiliates of Citibank

• Illegal activity by Navient, the nation’s largest student loan servicer, which failed borrowers at every stage of the repayment process

“Yet again, the CFPB is doing exactly what it was designed to do: Respond to consumer complaints and shut down the endlessly creative tricks and traps that schemers have set up for the sole purpose of bilking hard-working Americans out of their weekly paycheck,” said Kelsey Clayton, Indiana Assets & Opportunity Manager. “Instead of trying to shut this effective agency down as some in Congress are trying so desperately to do, we should be applauding it and making sure it has the resources necessary to keep doing its important job.”

Since its inception, CFPB has said returned nearly $12 billion to consumers who have been cheated out of their hard earned dollars by unscrupulous lenders and financial services companies.

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Indiana saw another close call on predatory lending in the General Assembly, but may face a challenge in Congress on loosening limits on prepaid cards. The payday lending industry attempted a late-in-the-game adjustment to Indiana’s uniform consumer credit code last Monday, March 20th. The language they proposed would have allowed lenders to charge a .395 percent daily “customary fee” to offset the cost of origination, ability-to-repay determinations, and so on. This could have been layered onto the 25 percent interest rate allowed under the statute, bringing the total possible APR up to 169 percent. This proposal was also unusual in that it was not within the statute governing small loans (a.k.a. payday loans), but instead was in the section of code that applied to all forms of open- and closed-ended installment lending. Fortunately, the amendment was not offered thanks to opposition from consumer advocates and members of the House committee in which it would have been heard.

Even without this new avenue, there are still other ways to slip hidden fees into financial products. National Consumer Law Center has written about a variety of prepaid cards, including payday lender prepaid cards, which charge overdraft fees.  Most prepaid cards are useful tools to control spending and stay out of debt: the consumer pays an up-front fee for the card and puts money on the card to spend or has her paycheck direct deposited on it. When the money is gone, the card no longer works. However, according to the Consumer Financial Protection Bureau (CFPB), about 2 percent of prepaid cards charge fees.

Last October, the CFPB issued a rule to provide consumers with up-front information about fees, allow them easy access to their account balances, provide fraud protection, and require prepaid card companies that extend credit to follow the same rules as credit cards. Although these rules to do not prohibit fees, they do proscribe the manner in which fees can be collected. Unfortunately, two members of Indiana’s Congressional delegation have signed on to an effort to block the rule. If you are interested in signing on to a letter asking them to protect the prepaid card rule, you can do so here.

Hidden fees can drag on Hoosiers’ efforts to achieve and maintain financial security. Vigilance and advocacy at the state and federal levels can save all of us from having to scrutinize the small print or face that “wish I had known” moment after the fact