FAIR MONEY

Face to Face with Inequality

Author Archives: Marijke Rijsberman


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Bank Robbery

In May of this year, Rose graduated from college with a Bachelor’s in Business Administration. She was flying high: she had her degree, she had started her own business, a nail salon, which was close to running a profit, she liked living in San Jose with her boyfriend. Life was good, and she was taking a vacation with her parents to celebrate her achievements.

The first thing that augured a problem was pretty innocuous: a credit card purchase was declined. These things happen, and Rose didn’t pay too much attention. She was on vacation after all. Next, she got an email that her credit limit was increased to $1900, from $1500, without further explanation. A week or so later, she found out that the Wells Fargo bank account she used for internet purchases was wildly in the red. How could this have happened?

Someone had gotten into Rose’s bank account, which had  $25 in it at the time, and siphoned about $1400 to Western Union, where it becomes essentially untraceable. The bank account is linked to her credit card–the one for which the credit limit was raised. The fraudulent transaction went through, but since the credit limit on her card was insufficient to cover the amount, she ended up maxed out on her credit card and in the red on her bank account.

Rose appealed to Wells Fargo for help, but all they did was slap her with one overdraft fee after another. Everyone she talked to said it was not their fault. They said they would investigate, but only after she had reported the theft to the police and to the FBI. Even so, they didn’t offer her much hope of recovery. She went to the police, to see if they would help her, but they said there was nothing they could do. And the overdraft fees kept coming. She went to the FBI, because the money had crossed state lines, given the involvement of Western Union, they said there was nothing they could do. And the overdraft fees kept coming.

Now Rose had to borrow money to stop the overdraft bleeding. She requested a personal loan, to get back into the black, but the overdraft fees had ruined her credit score and the bank declined to give her the loan. And the overdraft fees kept coming. She tried other banks, but they declined to help her for the same reason. And the overdraft fees kept coming, the overdraft fees kept coming. So Rose tried to get a payday loan, but all they can give you is $400 and by now she needed thousands. She tried crowdfunding to come up with the money, but she didn’t make her goal and came up with zero. And the overdraft fees kept coming.

In more and more desperate straits, Rose turned to her family and asked for help. She had hesitated, because in her community it is embarrassing to owe money, even if it’s not your fault. At first, her family didn’t understand her situation. When they finally did understand, they told her they didn’t have anything to spare. And, remember, all this time, the overdraft fees kept coming. In all, it took about a month for the bank to put her $3000 in the red.

Eventually Rose gave up and turned to an online usury outfit, loanme.com, which offered her a $3100 loan,  took $100 off the top in fees, and then started charging her  an interest rate of 135%.

By now Rose has two jobs. She’s a carrier for Amazon, with irregular hours. She has another part-time job, also with irregular hours. She’s running her nail salon–which generates just enough revenue to allow her to pay her employee. And she’s looking for a better-paying job to be able to pay back that loanme.com loan. She hopes to pay  off that loan before the end of the year, because in January her student loans kick in. So far, she has paid $800 to loanme.com, of which $2.00 went to reduce the principal, meaning she still owes $3098. What if she can’t pay it off before January? “Then I’m screwed,” Rose explains.

So here’s the score:

  • Thief takes about $1400 (illegally, but with impunity).
  • Bank takes something on the order of $3000 (totally legally).
  • Loanme.com takes at least another $3000 or so (legally) if Rose pays off the loan by December. Much more if she can’t (also legally).

They are pretty much indistiguishable, except the legal ones seem to have more leverage.

So what to do? There are a few things:

Any other ideas? Please let us know. We’d love to hear them.

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Open House – August 23!

Want to learn more about FAIR Money? Think you might want to participate? Are you frustrated and offended by inequality and want to find a way to do something about it? Want to hang out with some really interesting people and exchange ideas for a few hours?

If you’re in the San Francisco Bay Area, then come to FAIRMoney’s Open House:

August 23, 2:00 – 6:00pm, 1414 W Selby Lane, Redwood City, CA

If you’d like, you can RSVP via the FAIRMoney Meetup. But you can also just swing by and come say hello when the spirit takes you.

(And if you’re not in the San Francisco Bay Area, then drop us a note at fairnetwork at gmail.com to say hi and let us know you want to be a part of the solution too.)


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Program Description: Survival Skills

Do you support FAIR Money’s mission? Would you like to be a part of it? Then drop us a line at fairnetwork at gmail.com. Or perhaps you would like to contribute financially? Send your donation via PayPal or Square Cash to fairnetwork at gmail.com.

Project “Survival Skills” Mission

  • Create insight and empathy into the financial realities of Americans struggling with low wages, shrinking income and rising expenses, and the fallout from the 2008 financial crisis.
  • Facilitate conversation about money and money management options and so break through isolation.
  • Inform the work of organizations that provide aid or develop tools meant to alleviate struggle.

Project Description

In FAIR Money’s earlier research, it became apparent that people who struggle financially, for whatever reason, have important financial skills that are not typically recognized by standard financial literacy education and that are in fact more relevant to real-life situations that are common under our current conditions of high inequality. Project [name] is an extension of that earlier research.  It seeks to build a knowledge base of financial skills and knowledge that:

  • Is cognizant of and suited to the financial realities people face when they find themselves trapped by low wages, wage stagnation, and a variety of external forces they cannot control.
  • Contributed and tested by the people who are living those realities.
  • Takes into account the local context of Silicon Valley, with its exceptionally high cost of living and high proportions of relatively recent immigrants.

In three distinct phases, Project [name] will gather skills and knowledge that are relevant to different contexts:

  1. Skills, tactics, tools, connections, and knowledge that help a person weather a financial crisis
  2. Conceptual models and financial tools that facilitate long-term financial stability
  3. Parenting approaches that contribute to resilience and sound financial decision-making in young adults

Data will be gathered through a variety of interactions with participants, including interviews, participatory design workshops, and online diaries.

Although the research will be conscious of local conditions, we expect that many of the financial skills, concepts, and approaches will be more widely applicable and can form a foundation as the model is replicated in other locations.

Phase I: Crisis Skills

This phase will consist of a round of individual interviews with people who find themselves in a financial crisis or have recent experience with financial crisis to gather initial data. It will be followed by several series of group discussions to identify, trial, and evaluate crisis-management skills put forward within each group. Group findings will be published by FAIR Money and will be made available, in the form of workshops, to other organizations that offer aid or create financial management tools for low- and moderate-income Americans.

The anticipated outcomes of the project are as follows:

  1. Identification of financial information and concepts that are most helpful in dealing with a financial crisis [other than the fake solutions offered commercially], with insights into how the information makes a positive difference.
  2. Identification and definition of skills that are important in order to regain more stable financial footing, illustrated with testimonials and step-by-step instructions.
  3. Identification of the most useful financial management tools (whether high-tech or low-tech), affordable financial services, and organizations that offer assistance.
  4. [Identify how findings apply to other contexts/locations.]

Phase I Timeline

Data gathering for Phase I is anticipated to take approximately 4 months, followed by an analysis, collation, and publication phase of approximately 2 months. The project start date is contingent on fundraising success, but is assumed to be September 2015.

  • Initial Interviews: October/November 2015
  • Group Meetings: December 2015/January/February 2016
  • Analysis and Publication: Summer 2016

Do you support FAIR Money’s mission? Would you like to be a part of it? Then drop us a line at fairnetwork at gmail.com. Or perhaps you would like to contribute financially? Send your donation via PayPal or Square Cash to fairnetwork at gmail.com.


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What Would Happen … ?

This Sunday’s New York Times has an editorial by Lee Siegel about refusing to repay one’s student loans, as Siegel himself has done.  He suggests that if only more people would follow his example, a long sequence of  good things would start to happen. At the end of this sequence, like the pot of gold at the end of the rainbow, we will find affordable higher education.

The collection agencies retained by the Department of Education would be exposed as the greedy vultures that they are. The government would get out of the loan-making and the loan-enforcement business. Congress might even explore a special, universal education tax that would make higher education affordable.

There would be a national shaming of colleges and universities for charging soaring tuition rates that are reaching lunatic levels. The rapacity of American colleges and universities is turning social mobility, the keystone of American freedom, into a commodified farce.

If people groaning under the weight of student loans simply said, “Enough,” then all the pieties about debt that have become absorbed into all the pieties about higher education might be brought into alignment with reality. Instead of guaranteeing loans, the government would have to guarantee a college education.

Sounds nice. But it might perhaps be a slight bit optimistic.


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Poverty Apps and What’s Wrong with Them

The New York Times magazine for May 3 has an article Want a Steady Income? There’s an App for That, about the app Even, which means to tackle extreme income volatility and the attendant risk of having to resort to short-term loans like payday loans and title loans and similar forms of subprime exploitation. As Even explains their (currently non-existent) service:

With Even, you can stop worrying about low paychecks. Because you’ll get the same consistent money, every payday. For $3/week. No interest. Zero fees. Less stress.

In essence, Even looks at the history of your income, calculates the monthly average, and pays out that amount to you regardless of how much you make. When make more, it holds back money to build a cushion. When you make less than the average, it makes up the difference out of your savings–and there’s a suggestion it might even kick in some money if you haven’t built up your cushion yet. In other words, it’s a short-term savings account that costs you money: $3/week. (I’m not sure how “zero fees” manages to add up to $3/week.)

The article’s author, Anand Girigharadas, is appropriately skeptical and point out that if you don’t have enough money, smoothing it out won’t help you.  He  quotes Heather, one of the people he portrays: Thinking about money gives her a jolt, “like you’re about to get into a car accident.” And she feels this way, not because she foolishly spent money she needed to save up, but because she’s got a crappy job and a boatload of debt, incurred in part to receive the training that would qualify her to do that crappy job.

Income volatility is bad, of course, but only if you live near the edge or are already way off the cliff. The real problem is the disappearance of good jobs that pay a predictable living wage. As Girigharadas puts it:

People in Silicon Valley may believe there’s an app for everything. That’s their hammer. But improving the lot of the poor will require other tools, including an old one the valley often wants to wish away: politics.

Efforts to tackle some of the negative consequences of inequality (such as income volatility) without trying to tackle the underlying causes (stagnating wages, shifting more and more risk from the corporation to workers, shifting more and more profits from the workers to the corporation), just end up papering over the ugly truths of unregulated capitalism.


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CFPB Takes Action?

FAIR Money came to be out of frustration with the CFPB, which initially declined to tackle payday loans. But now some new rules appear to be under consideration, according to this press release. Here’s the summary:

[CFPB] “is considering proposing rules that would end payday debt traps by requiring lenders to take steps to make sure consumers can repay their loans. The proposals under consideration would also restrict lenders from attempting to collect payment from consumers’ bank accounts in ways that tend to rack up excessive fees. The strong consumer protections being considered would apply to payday loans, vehicle title loans, deposit advance products, and certain high-cost installment loans and open-end loans.”

Better late than never. But it will be interesting to see what happens if the new rules go into effect. In all likelihood, the people who need emergency cash the most will be the least likely to be underwritten, if a means test of some sort is applied. So then what? It could create an opening for more communitarian, informal solutions to deal with cash crunches. Or it could drive more folks into the arms of the internet lenders.


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Measuring the Difference

Remember the Walmart siblings? Well, they are not the only ones who can give us a measure of how unequal things really are.

In “Off the Deep End,” Sarah Anderson of the Institute for Policy Studies calculates that Wall Street bonuses for 2014 are double the size of the total earnings of all full-time minimum-wage earners in America combined. The approximately 1 million full-time minimum wage workers in this country all together pulled down about $14 billion. The bonuses of the 167,000 people on Wall Street came to $28.5 billion.

So if you took those bonuses, Anderson points out, you could just double the minimum wage.


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FAIR Money Meetup on Inequality

FAIR Money is kicking off a monthly Meetup on Saturday March 21 in San Francisco. We’re hoping to meet other people who are interested in inequality and who are itching to do something constructive about it. Interested in joining us? Check out the Meetup page.

We’re planning to make it a movable feast and pick different locations around the Bay Area, so if you can’t make it this time, perhaps another month will work for you.

We hope to see you there!


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Good with Money

Good with Money CoverFAIR Money has just published its first report, Good with Money: Getting by in Silicon Valley. The report, which is based on interviews and a diary study with 10 people struggling to gain or hang on to firm financial footing in a booming local economy, focuses on the most striking finding: how skilled people are with money and how little their skill set overlaps with the money management skills traditionally taught in financial literacy classes.

The report’s introduction sums up the central arguments:

The “master narrative” of financial probity that dominates American culture at this historical moment makes it almost impossible to see the financial behavior of low- and middle-income Americans without a strong punitive bias. This dominant narrative focuses on living well within one’s means, using credit cards responsibly, saving for financial milestones, and managing one’s credit score. It refuses to acknowledge that wage stagnation, underemployment, and rising costs of health care and education leave vast numbers of Americans with insufficient income to cover basic expenses. When we consider financial actions and decisions from the inside out, in their full complexity and in the context of meaningful relationships and life choices, it becomes readily apparent that struggle, hard work, ingenuity, and bad luck are much more common than financial irresponsibility or ignorance.

One of the practical manifestations of this master narrative of (assumed lack of) financial probity is the financial literacy industry, both for-profit and not-for-profit. Financial literacy education makes a foundational assumption that adverse financial outcomes are due to ignorance and/or irresponsibility and that education can effectively eradicate both. This report argues that offering education as a solution to financial struggle is a fairy tale that does real harm. It obscures the massive 30-year-long redistribution of wealth to the very top of American society. It blames the victims of this redistribution for their misfortune and distorts our thinking and our judgment. In obscuring the causes of the financial struggles experienced by average Americans, financial literacy education also makes it much more difficult to think about true solutions.

Good with Money discusses particular “scripts” in the master narrative condemning people who struggle financially, and it proposes a different way to think about their choices and decisions. The report also contains the financial stories of the research participants told through a lens of empathy and historical understanding.

We look forward to your comments.

The FAIR Money Research Collective


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PAYE Stands for …?

Anna Bahr presents an analysis of the impact of Obama’s recent “Pay as You Earn” legislation, suggesting that it might really stand for PAY Extra. According to Bahr, “PAYE tends to save money only for those low-income borrowers who have incurred an unusually large federal debt.” Bahr offers a few examples of people with more usual loan amounts, who would actually pay more under PAYE than under current rules, because as they repay more slowly they will incur more interest on their outstanding loans.