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Shake the Yoke 

by Cara Gardner


Add credit cards to the list of Weapons of Mass Destruction. Unlike the purported ones in Iraq, these little pieces of plastic are not hard to find; the average American household has about seven of them in use, which shouldn't be surprising if you consider that creditors mailed 5 billion cards to about 200 million individuals in 2001. It's a nation under siege from the buy-now-pay-later mentality. Credit is offered to students who've never even had a checking account; it's given to people who don't make enough to pay off their limits. It's extended, and extended again. And then the interest rates rise, and rise again. In 2002, the credit industry's revenue from all fees was about $21 billion.


"We see everyone from the single moms on public assistance to attorneys, judges and accountants. It's surprising how many accountants and bookkeepers we have on a debt management program," says Trish Potts, regional manager for Consumer Credit Counseling (CCC) in Spokane. CCC is an outlet for the larger National Foundation for Credit Counseling (NFCC), a nonprofit organization established by credit card companies in order to collect what's owed to them. According to Potts and others in her profession, more and more people are seeking help for out of control debt.


"The amount of unsecured debt through credit cards and the dollar amounts today are much larger than they have been in the past, and it's very difficult for some to make progress. Credit card debt is expensive," says Gene Fitzpatrick, vice president of lending for Numerica Credit Union in Spokane.


There's little data separating consumers in Spokane from those in other cities, but one indicator of a debt-ridden community is predatory lending services, such as pawnshops, payday loan outfits and fee-based check-cashing businesses.


"I've never lived in a town with so much [predatory lending]," says Rose Ayars, business development specialist with the Spokane Neighborhood Action Program (SNAP). "It's indicative of the poverty level here. The poverty has created a market for these providers."


The phonebook lists about 50 pawnshops in the Spokane/Coeur d'Alene area. Fast cash and payday loan services are plentiful as well; these businesses are part of the poverty industry, a market that feeds off the desperation fueled by debt.


"Spokane has a level of poverty that is unique," Ayars continues. "And because of that, predatory lending has moved in to the marketplace and left consumers with very little resources. The broad, systemic problem is education. A lot of people suffer from financial illiteracy."


That, says Ayars, is why SNAP decided to start Neighborhood Assets, a program that allows people with poor credit and little banking experience to open accounts with local credit unions in order to save money and balance their personal budgets. Neighborhood Assets is a partnership among SNAP, Numerica Credit Union and Washington State Employees Credit Union, which is essentially a banking service for people who otherwise wouldn't be able to open an account.


SNAP realized that about a third of its clients didn't have any banking services. Many would cash their checks at convenience stores and have wads of money stolen or lost.


"What's happened is most of these people have had problems in the past and have had their checking accounts closed because of overdraft activity," says Robin Lovejoy, business development manager for Numerica. "We help them reconcile that unpaid debt so they do not have that hanging over their head."





Finding Balance


Antwon Ross just opened a savings account with Numerica through the Neighborhood Assets program. He's 31, has four children and, until recently, no bank account.


"For the longest time, I had an account, but I was disputing fees with the account and wasn't gonna pay so they closed the account and sent it to collections about eight months ago," he says. Since then, he's cashed his checks at 7-Eleven or Albertsons. Ross says he never received any financial education growing up, but was doing OK until disaster struck. When the mother of one of his children left town, Ross was stuck between showing up for work and staying home with his daughter. He says he missed work for a week and was fired. He had no backup savings and no plan.


"I started to go through the legal channels to get custody of my daughter," Ross says, relaying his dire-financial-straights story. "The legal work costs about $2,000. All my family is in New Jersey, so I don't have a support system here, and I wasn't eligible for public assistance."


Ross used his credit cards to pay for the court costs and then couldn't make payments on them.


"At first I stayed communicable and apologized, but I just couldn't make the payment, you know. We lost our place, and at that point everything was prioritized on our survival as opposed to, you know, dealing with them."


Ross ran the gauntlet of predatory lending; he's pawned video games and jewelry, he's dealt with fees for cashing checks and he's borrowed from payday lending businesses.


"I had to," he says, shrugging. "But the payday loan, that's what started the snowball effect."


Now he's starting over as one of about 50 clients in the Neighborhood Assets program. In order to open a free checking or savings account through Neighborhood Assets, however, he has to go through a complete money management assessment, which includes saving a minimum of five dollars every month. Clients are offered a $50 savings match as an incentive. If they continue to save for three months, they are eligible for a checking account; six months into it they can have an ATM card.


Ayars with SNAP says the program takes patience. There are no quick fixes and the going is slow, but that so far clients have felt good about the progress they make. In addition, they're not paying fees for getting control of their bills, like they'd be charged if they went to any number of the credit counseling services. Lovejoy, with Numerica, says above all, clients are less intimidated in the Neighborhood Assets environment, which means they communicate, ask questions and tend to walk away with a better understanding of what they need to be doing with their money. Ross says he's not waiting until his children are grown to teach them about money.


"I think about it now with my children," says Ross, holding out both hands as if they have cash in them. "This is a withdraw, this is a deposit. Make sure this" -- the deposit -- "is always more than what you take out."





Neighborhood Assets is located at 212 S. Wall Street in downtown Spokane. The office is open Monday and Thursday from 10 am to 4:30 pm. For more information about the program, call 456-7378 or visit www.snapwa.org; to learn more about Numerica Credit Union visit www.numericacu.com and to learn more about Washington State Employees Credit Union, visit www.wastatecu.org.





Adding It Up (sidebar)


70 -- The percentage of the United States' GDP that consumer spending accounts for





$751 billion -- Current U.S. personal revolving debt





$2 trillion -- U.S. consumer debt in 2003





$1,100 -- Amount the average American family pays annually in credit card interest





$9,450 -- Total average credit balance by U.S. households in 2003





$7.3 billion -- Credit card industry revenue generated by late fees in 2002





56 -- Number of years it takes, if making only minimum payments, to pay off $10,000 at 18 percent interest





$28,079 -- The amount of interest you would pay on that debt by only making minimum payments





20,000,000 -- Rough number of American families that had problems paying medical bills in 2003





29 -- The number of states that have no limits on the interest rates credit card companies can charge





For more information on money management, debt-reduction or credit counseling agencies, visit the following online resources: www.responsiblecredit.com


www.cardweb.com


www.ftc.gov/bcp/menu-credit





Get a free copy of your credit report:


www.experian.com


www.equifax.com


www.tuc.com





Publication date: 09/16/04

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