Built as a National Model, FAIR will Launch in the Twin Cities in December

Media Contacts:
Cathy Kennedy, Cathryn Kennedy Consulting – 612-309-3951
Pam McCarthy-Kern, Cathryn Kennedy Consulting – 612-360-0647
Stacy Opitz, Prepare + Prosper – 651-262-2162

Saint Paul, MINN. (Dec. 5, 2016) – Concluding three years of collaborative research with partners and financially underserved consumers, the Twin Cities-based not-for-profit Prepare + Prosper has announced a three-part FAIR (Financial Access in Reach) financial solution to help financially underserved individuals build credit, savings and rid themselves of high-cost fees and interest from predatory financial products and services.

The FAIR financial solution, which will launch in the Twin Cities in December, is designed to help financially underserved individuals (oftentimes called unbanked or underbanked) who do not have or use a banking account and/or rely on “wealth-stripping” sources such as check cashers, payday loans, pawn shops, money orders and money transfers that charge excessive fees.

The Problem
One in three Americans has no savings, according to Pew Charitable TrustsIn the Twin Cities, there are 254,436 financially underserved households, based on Federal Deposit Insurance Corporation (FDIC) 2015 data. Alarmingly, the most recent FDIC data broken down by race from 2013 found that 51.4 percent of African American and 45.7 percent of Latino or Hispanic households were financially underserved in the Twin Cities, as compared to 12 percent of white households. Reasons for not using banks vary. Research from FDIC and Prepare + Prosper show that many of those who are financially underserved do not trust banks, want to avoid fees, or have privacy concerns. There is also a perception by those interviewed that bank accounts are not for households with low income. More than half of those contacted for the FDIC report said they believe banks are “not at all interested” in serving households like theirs.

“Families are spending far too much of their hard-earned income on fees and interest,” said Tracy Fischman, executive director of Prepare + Prosper. “In fact, consumers spend $145 billion annually in fees and interest for basic financial services and products. (Source: Center or Financial Services Innovation) Without a savings cushion or access to reliable credit there are few affordable solutions that allow a household to affordably navigate their financial needs or build assets. This is harmful to families, communities and our economy.”

The Solution
To help families gain financial stability, the FAIR product suite, issued through Guaranty Bank will include tools to:

  • Transact through a checking account – with no overdraft fees and no minimum balance
  • Save via a savings account – with no fees, no minimum balance and $25 opening deposit
  • And build credit through a credit-building loan.

“This first-of-its-kind FAIR financial solution seeks to transform people’s lives by allowing them to keep more of their own money, develop a savings cushion and build or rebuild credit to ultimately achieve financial freedom,” says Fischman.

Also, unique to FAIR, is that these products will not rely on bank branches for delivery, but instead will be offered to people where they live, work and receive services, such as nonprofit organizations, employers and faith-based organizations. This delivery model is based on input of more than 150 financially underserved consumers who participated in listening sessions, which shaped the FAIR design and structure.

“We’re very excited to partner with Prepare + Prosper on the FAIR initiative,” said Doug Levy, CEO of Guaranty Bank. “For nearly 100 years, Guaranty Bank has been committed to helping everyday people meet their financial goals and has gone where other banks don’t by providing specially designed products to help the financially under-served community. We feel uniquely positioned to support the FAIR initiative because of this mutual passion for helping people, and we’re confident that our enhanced mobile and web services can help ensure the program’s ongoing success.”

Another key aspect of the FAIR financial solution will be technology and tools embedded to support consumers in working toward their goals and building financial confidence along the way. The technology and tools will be centered around human behavior and may take the shape of texts, apps, or social motivators to support continual savings and credit building.

“The FAIR solution addresses barriers to full financial inclusion for financially underserved communities. It’s innovative and has the potential to reshape the financial landscape for financially underserved households, locally and over time, nationally,” said Dorothy Bridges, senior vice president with the Federal Reserve Bank of Minneapolis and co-chair of the FAIR leadership team.

The FAIR Roll-out
The FAIR financial solution will be launched as a pre-pilot in a series of five enrollment sessions, Dec. 6-12 at the Prepare + Prosper offices in Saint Paul. Participants will be selected from the 13,000 Prepare + Prosper customers who receive free tax preparation services annually as well as those who participated in community listening sessions. Plans call for FAIR product offerings to expand throughout the Twin Cities and Minnesota in 2017 and 2018.

“In our community, which has an abundance of asset-stripping financial operations, the FAIR financial solution is a welcome answer to moving families toward financial independence. We are especially delighted with the use of trusted delivery systems and the innovative behavioral nudges that encourage new money practices,” said Eva Song Margolis, Eastside Financial Center.

Many from the Minnesota banking community have also endorsed the FAIR solution. “FAIR is a groundbreaking initiative that will bridge the financial market gap between underserved households and the financial mainstream,” said Therese Kuvaas, government relations manager with the Minnesota Bankers Association.“We believe FAIR will transform peoples’ financial lives and bring new customers into the mainstream too. This is truly a winning proposition.”

The FAIR initiative grew out of a call from the Northwest Area Foundation (NWAF)in 2013 to convene cross-sector leaders from across the Twin Cities to increase the financial health and wealth of the financially underserved population. Among the leaders of this group were members of the banking community, nonprofit sector, city and county government leaders and those who are financially underserved. FAIR also works in close partnership with Community Financial Resources (CFR) based out of San Francisco and receives funding from NWAF and several other funders across the country including The McKnight Foundation, The Minneapolis Foundation, JPMorgan Chase Foundation and Otto Bremer Trust.

About Prepare + Prosper
Prepare + Prosper is a nonprofit focused on financial capability for low-income households. It provides free tax preparation and access to financial services and products; builds the capacity of other organizations providing these services; and works to advance policies and practices that directly benefit the people it serves. In 2016, 575 volunteers prepared taxes for 13,227 taxpayers who received $24.7 million in refunds; 1,231 of those taxpayers committed to saving $1.9 million of their refunds.