We utilize volunteer financial counselors who provide a "high touch"/"deep intervention" relationship for our clients. There's a gap between knowledge and execution that the financial counselor coaches each client through. They know they need to change, but don't know how. Like learning any new skill, you need a coach to teach you the fundamentals and put you through the practice. A high touch counselor is one that spends deliberate one-on-one time with the client to understand the dynamics of their life situation. This means establishing a relationship (one of the identified "barriers" we're addressing) with the client that transcends simple financial knowledge. It has to ecompass all of life's circumstances and complexities (job, marriage, kids, etc.) The "deep intervention" part addresses the second barrier (a lack of education). In one case, this has meant the client has to run all financial decisions past the counselor first. This will continue for a period of time until competence is achieved. Other clients need different interventions (like assistance in communicating with their landlord, employer, or payday lender). We've also had our counselors acquire lower cost housing, review paycheck withholdings, help with AEITC enrollment, and introduce the client to other agencies. These are "first-ever" relationships centered around moving from financial knowledge to execution. Through the financial literacy training, they are not only acquiring knowledge (education), but also quality relationships with their counselor and others.

Initial results show that this model is highly effective, but also very intensive in terms of volunteer committment (e.g. diverted clients from eviction, increased cash flow, reduced debt, improved credit, prevented homelessness). The most essential component is the high touch/deep intervention relationship. Without it, there is no accountability to stay connected to the program. We combine basic financial literacy concepts with a "coaching" style relationship. We regard this as innovative because it fuses together concepts that have been separate (financial counseling, coaching, and accountability relationships). By wrapping those into our program, clients are seeing excellent results.

We have not directly confronted privacy issues with our clients. Usually at this stage, they are ready for anyone to help them and more than willing to engage in the process that we have laid out for them.

Of course, we have an accountable application process that conforms to the UCCC guidelines we are registered under. This allows us to safeguard personal data at all times. We have a full loan committee comprised of business, banking, and nonprofit leaders who make their decisions based in an unbiased manner--like any other loan committee.

The fear of all of our clients is more that the will be taken advantage of, lose their home or children, or become homeless. We combat this through personal relationship and investment in the outcomes we are pursuing. We have to have the human element through the counseling, or there is no trust.

Thanks Kaylena...I'll post this response in the body of the entry as well.

The biggest barriers are the lack of financial education and relationships. Between payday lenders, check cashing stores, buy-here-pay-here car lots, same day tax perparation services, working poor Americans lose thousands of dollars to high priced services. Mostly this happens due to lack of education.

Client 031 came to us with over $2000 in payday loan debt. Before giving a loan, our counselor was able to increase 31's take home pay by nearly $300/month by enrolling in the Advance Earned Income Tax Credit program and changing the paycheck withholdings. These two changes allowed us to loan the money more safely, and would not have happened without the education and relationship with the counselor.

Without the education and relationships that many middle class Americans take for granted, working poor Americans confront an entire industry of high-priced financial services designed to pick their pockets. Working poor individuals comprise $650 billion of income in America. Helping them hold on to their own money and teach them to use it more effectively is step one in the emerging model. This is where the education and relationships begin.

The next layer (after helping the client help themselves) is support that can be provided by the government in the form of TANF, food stamps, child care, or Diversion. Through the emerging model, America's Family can direct the government assistance to the right place, ensuring that recipients are using it for the best and most strategic needs.

Third, we access community benevolence through churches and other human service agencies to help reduce debt (such as utility bills, medical bills, and rent payments).

After all of these avenues are exhausted, we extend them a loan at a cheap interest rate (19.99% APR vs. 520% APR at payday lenders) to make up the difference. Reporting to the credit bureaus helps improve FICO scores, and the relationship with the counselor continues the financial education process for many months to come.

Lending in the emerging model is simply a tool. Right now, good and hardworking people are turning to payday lenders at 500%+ APRs. Establishing new financial relationships is the first step toward behavior change. Our "high-touch" counselors are involved directly with the client, helping them to get on a budget, prioritize bills, and avoid scams. Without the life changing transformative behaviors, the loan is just another bill (at best) or a different expression of a bad financial habit (at worst).

A capitalist free market economy will never eliminate the need for loans because the leverage of private property to "liquidate" or "free" the value of the asset is a defining feature of our economic system. Without leverage, there is no American economy in my opinion.

The only thing worse than expensive capital (via payday lenders) is no capital at all. We don't want to legislate them away, we want to build a better model that allows the client to find greater participation in our current financial system. By having successful installment loans, our financial system rewards you in the form of a higher FICO score which can lead to better interest rates on all sorts of financial products (particularly vehicles). Once someone can afford a car, they can open up new job opportunities and expand their income potential.

The emerging model goes to where poor families are: the line at the payday lender's shop. By providing a lower cost alternative, banks get compliance with the CRA, and the client acquires life transforming financial behaviors and new financial relationships to lever themselves out of poverty. By helping them keep more of the money they already earn, they can move up the ladder of prosperity even faster.