Erika Leos, financial program wellness manager for Foundation Communities, feels deeply for the clients who come to her organization with debts accrued from payday loans. The high-interest loans appeal to people who need that last bit of money to help them pay rent or get food on the table.
"They think they have no other choice," Leos says. "They don't have the credit to take out a larger loan. They don't have savings. They have few to no options." So they take a loan, thinking it will be for a short time. "We see people who have paid over and over, but the balance remains the same. It's so frustrating for the clients and for us."
National Consumer Protection Week, which continues through March 11, is a time when organizations warn clients about payday lenders and other pitfalls that can undermine their financial health and financial future. In fact, the very nature of the week heightens awareness, says NeighborWorks America's Molly Barackman-Eder, director of Financial Capability. She points to a couple of areas where NeighborWorks network organizations are particularly strong – and fighting predatory lending is one of them.
Leos says Foundation Communities has programs meant to help clients find relief from payday loans, including a Fresh Start Loan. The organization will also raise awareness during National Financial Capability Month in April, providing workshops that center around the real costs of buy-now, pay-later products. It's important to talk about such hazards in a way that clients feel no shame.
"These things are out there," Leos says. "A lot of people use them. We say, 'let's talk about what happens if you save instead.'"
Taxes are another area where awareness can make a real difference, says Laura Ospina Jaramillo, financial capability manager at NeighborWorks. Too often, people go to organizations that aren't qualified to do tax preparation, or pay when they don't need to. Dozens of NeighborWorks network organizations serve as Volunteer Income Tax Assistance (VITA) preparer sites, providing the service for free.
Foundation Communities has been a VITA site for years, and the organization's goal this year is to help 16,000 clients with taxes, up from 12,000 last year. "Before the pandemic, it was closer to 20,000," Leos says. "We're incrementally working our way back up to pre-pandemic numbers."
Barackman-Eder says that when it comes to financial decisions and strategies, having a financial coach or housing counselor, like those available through NeighborWorks network organizations, can help with making safe, smart decisions. "NeighborWorks network organizations have trusted, unbiased support – people who can talk through your financial goals," she shares.
Other advice from Barackman-Eder and Ospina Jaramillo:
- Make sure you know who to go to if you're a victim of a scam. That includes the Federal Trade Commission for most common scams, the IRS for tax-related scams, and the Consumer Financial Protection Bureau for victims of fraud, as well as your state consumer protection office.
- Consider using direct deposit for your tax returns, should you get one. Not only is it safer, but your returns reach you more quickly.
- Digital awareness is key. While TikTok and Instagram might hold some useful advice, "there's also lots of bad advice out there," Barackman-Eder warns. In other words: Know your sources.
- Financial education can always help. There are classes on everything from saving to spending that teach clients to avoid pitfalls, and Ospina Jaramillo says there are classes geared toward people of varying ages, youth to seniors. .
