By Haven Shannon, Program Associate
SCCV initiative Familas con Mas focuses on education and advocacy around predatory lending. This work was born out of the finding of our Mamas Con Mas study, a project with UCSC Blum Center. This study focused on Latina mothers' financial experiences with both traditional and alternative financial institutions. Mamas con Mas found that despite having bank accounts, many women found alternative lenders easier to access than traditional banks due to confusing fees and limited cultural competency of staff. However, the convenience of these services often comes at an interest rate as high as 459%!
Mothers used these alternative lenders to obtain funds to pay for basic needs such as rent and emergencies. The study results shed light on the fact that a lack of financial options and education often lead vulnerable community members to fall prey to predatory loan practices. SCCV created the Familias con Mas initiative to educate community members, and advocate to address predatory lending.
Payday lenders are predatory businesses that target low income, minority communities, and the elderly. In the city of Watsonville, where 82% of the population Latino, many residents experience barriers accessing mainstream banking services. As a result, alternative lenders such as payday loans, pawn shops and check cashing stores are perceived as easier to access. The high rates and density of these businesses is predatory on the community.
In California, the State Legislature is expected to pass the Fair Access to Credit Act, which blocks lenders from charging more than 36% on loans of $2,500 to $10,000. While this is progress in addressing predatory lending, it does not address the small dollar amount loans that hurt consumers' pockets the hardest.
At the local level, cities such as Gilroy and San Jose have adopted strategies to protect their residents. To explore what could be done in Watsonville, a community conversation is being planned to discuss the issue on October 15, 2019 at 9am at the Watsonville Civic Plaza Community Room with support of the City of Watsonville. The event is free and open to the public.
By Brando Sencion, Program Coordinator
Recently I’ve been receiving multiple phone calls threatening to “suspend” my Social Security number because of illegal activity or unpaid taxes to the IRS. I’ve also asked collages and community members if they have received these calls, and they have. Beware, these calls are a scam!
The purpose of these calls is to obtain personal information about you or trick you into giving them money. In each situation the main objective of the caller is to financially harm you. By obtaining your personal information, the scammer can use that information to steal your identity. With your information that person can then apply for credit under your name, open accounts, or seek medical attention.
These calls are also known as phishing. Phishing is the fraudulent practice of sending emails or phone calls acting to be from a reputable company or organization in order to convince individuals to reveal personal information, such as passwords, social security numbers, or credit card numbers.
One thing to note is that the IRS or Social Security Office usually (not always though) will contact you by first sending a letter. A phone call is possible, but government agencies tend to communicate with you by mail first. It is also important to note that if the person on the other side of the phone threatens to have you arrested or send police to your home it is more than likely a scam. Those types of threats are illegal and would not be made by a government employee.
Per the IRS website, the IRS will not:
If you have fallen victim to one of these phone calls, please refer to IdentityTheft.gov or IRS.gov for resources. Another proactive step you can take is to check your credit report for free on AnnualCreditReport.com, which allows you to check your report from all three credit bureaus every 12 months. Note you can choose to pull a report from one of the three credit bureaus and pull another two later down the road if needed.
By Brando Sencion, Program Coordinator
There are many ways to build credit: a credit card, a secured card, and small loans. These are the types of credit building products most commonly used by consumers. But as your credit journey begins it is important to avoid credit products with extremely high interest rates. According to WalletHub, the average credit card interest rate is 19.24% for new offers, and the average rate for secured credit cards is 18.81%. But some credit cards have interest rates up to 28%! Which can be dangerous for first time credit users. Especially for youth or new customers with limited knowledge or experience with credit.
Often credit card companies will charge first time credit card users high interest rates because of their lack of credit history. Which is common, but some credit companies create products specifically for those with limited knowledge and access of good credit products. These companies make it easy for consumers to obtain credit and often lack transparency around the true cost of the card. Which makes these types of credit cards or lines of credit predatory by nature. Be sure to take the time to understand the product or service you are obtaining to build your credit.
On the bright side there are products that look to help you build credit. For example, Amazon has partnered with Synchrony Financial to launch “Amazon Store Credit Builder,” a program that will lend to amazon shoppers with no credit history or bad credit. The card will be available to US residents over 18 with a valid social security number or ITIN, and can only be used for Amazon.com purchases.
The Amazon Store Credit Card Builder is expected to be a “secured card” with a credit limit up to $1,000. The card is considered secured because customers are expected to deposit a down payment for their credit limit. The deposit is refundable once the credit card is paid in full and you wish to close the account, or if you want to upgrade to their traditional Amazon Store Card.
In addition to credit card companies or banks some non-profits offer credit building programs. At SCCV, CreditBound, a credit building vehicle for youth (18-25 years old) combines an online platform with in-person credit education. The program offers youth entering the workforce the opportunity to build credit in a safe and controlled environment, paired with financial education to increase knowledge and access to financial wellbeing.
Una nueva oportunidad para proteger a los consumidores de las altas tasas de interés y los préstamos abusivos
El senador Bernie Sanders y la representante Alexandria Ocasio-Cortez propusieron un límite en las tasas de interés para tarjetas de crédito y otros préstamos de consumo a una tasa anual del 15 por ciento, para ayudar a los consumidores que enfrentan crecientes deudas de tarjetas de crédito.
El proyecto de ley impondría restricciones a los préstamos a corto plazo, como los préstamos de día de pago, que dependen de tasas de interés significativamente más altas. En California, un préstamo de día de pago puede tener una tasa de interés de alrededor del 460 por ciento para un préstamo de los semanas. Los prestamistas de préstamos pequeños dicen que quieren ayudar a los consumidores a acceder a préstamos, de lo contrario no podrían hacerlo con los prestamistas tradicionales. Pero la oposición cree que se está beneficiando de miles de millones de dólares en intereses y tarifas de los consumidores de bajos ingresos.
El proyecto de ley sería una victoria para los consumidores al limitar las tasas de interés que los bancos colocan en préstamos y tarjetas de crédito. Ser pobre en los Estados Unidos puede tener un precio. Las familias de bajos ingresos no solo no califican para los productos de prohibición tradicionales debido a ingresos, historial crediticio y otros factores, sino que se ven obligadas a recurrir a servicios de préstamos alternativos. Los prestamistas abusivos conocen bien a sus consumidores y operan sus negocios en comunidades de color de bajos ingresos. En el condado de Santa Cruz, hay 3 veces más servicios de préstamos predatorios en Watsonville, en comparación con Santa Cruz.
El proyecto de ley tiene como objetivo proteger a los consumidores de los grandes bancos y prestamistas abusivos. Servicios como los préstamos de día de pago y otros productos de préstamos alternativos no tienen en cuenta el bienestar de los consumidores. Cobran altas tasas de interés, imponen condiciones de préstamo oscuras y no tienen en cuenta la capacidad del prestatario para pagar el préstamo. Limitar la tasa de interés anual protegería a los consumidores de las prácticas predatorias y les daría acceso a todos para obtener mejores productos de préstamos y tarjetas de crédito.
Artículo: Sanders, Ocasio-Cortez proponen un límite del 15% sobre el interés de la tarjeta de crédito (https://www.bloomberg.com/news/articles/2019-05-09/aoc-bernie-sanders-credit-card-interest)
By Haven Shannon, Program Associate
My first job was at an alternative lender service provider. My main responsibility was in offering short-term loans with interest rates higher than 300%. These loans were to people who came in to borrow for an emergency. This didn’t sit well with me, especially because customers quickly became frequent borrowers, due to their inability to get out of a cycle of debt. I felt that finance and customer service were my key strengths, so I moved on to work at a credit union, where I believed that I could really help people with their financial needs.
At the credit union, I found that I really enjoyed helping people understand their accounts and the best ways to utilize them. I also found that people who could benefit most from our services were often turned away or underserved. These were predominantly people of color, Black and Latino families. As a Black woman who has experienced prejudice in business encounters, it was clear to me that there was an issue with low-income families and people of color accessing quality financial services, especially in relation to credit. Disheartened at my inability to create a positive experience for clients whom I felt would benefit from the credit unions services, I left the finance world.
In 2018, I returned to school to pursue a degree in Community Studies. And I joined Santa Cruz Community Ventures (SCCV) as their Program Associate. The work that excites me most is the Familas con Más initiative at SCCV because we are working to limit predatory lending services in Watsonville and increase accessibility to traditional financial services. Going forward in my career, I want to focus my efforts on changing systems, rather than trying to navigate them, and I feel that SCCV is working hard to create equitable opportunities for all members of the community. In a sense it is a marrying of my two strengths and I’m excited to see where this new path will lead.
By Ayde Guerrero Rosas, CSA Program Associate
My parents have worked all their lives doing back- breaking work ever since I can remember. Seeing both of my parents make ends meet at a young age inspired me to ask many questions such as “why do low income families work over time and still struggle to meet basic needs?” and “what does this sort of work do to their health”. Every time I saw my dad come home from work with flushed red skin and scarred hands from the broccoli fields. I could not help but feel so much admiration and respect for the work my parents did for over 20 years. I constantly remind myself that yes, I do everything for myself, but my parents made my dreams possible with sweat, hard work, and many tears. They are the reason why I aim to learn more about health and its correlation to financial well-being.
I chose Santa Cruz Community Ventures because of their mission statement on “creating compassionate and equitable local economies that contribute to the well-being of our communities”. This statement hits close to home because wealth inequity is greatly prevalent in my hometown of Santa Maria. Financial education is not encouraged in my community due to a lack of awareness and information. I am very excited to focus my time on the launching of the Children Savings Accounts because creating healthy habits for children in Santa Cruz County will encourage healthy habits for the generation of tomorrow. I hope to gain the skills needed to be a greater leader for Santa Cruz and my community.
By Brando Sencion, Program Coordinator
According to the Silicon Valley Business Journal, in 2012 there were 3.3 million Latino-owned businesses in the United States, which grew by 46% from 2007. In contrast, white-owned businesses declined by 6% in that same time period. Latino business ownership leads the nation in growth for businesses ownership, but they still face many financial barriers. A common barrier is access to bank loans.
A 2018 study by Stanford Graduate School of Business found that Latino business owners rely on informal financing and are subject to greater financial risk due to low credit score and limited credit history. The results of these circumstances are that Latino business owners are more than likely to have limited access to traditional bank loans and are subject to high interest rates.
The barrier to access traditional banking loans may lead Latino business owners to access quick and easy funds from alternative lending services. More than often alternative lending services can impose unfair and abusive lending terms for the borrow, which are predatory loans. These types of loans tend to be short term, easy to obtain, involve fees such as pre-payment penalties, and consist of unclear terms and pricing.
Here are 3 common signs of a possible predatory loan:
Find more warning signs here.
The issue with these barriers is that it limits Latino business owners to fully grow their businesses. At times additional capital is needed to inject in a business to improve its performance. Or a business is having a tough month and needs some extra funds to make ends meet. Not having access to funds that will benefit a business is tough. These barriers can inhibit business owners from reaching their full potential.
Elisa Orona is the Executive Director at Health Improvement Partnership of Santa Cruz County. She holds a B.A. in Rhetoric from UC Berkeley and an M.S. in Public Policy and Management from Carnegie Mellon University in Pittsburgh, PA. Elisa’s Masters concentration in Geographic Information Systems served her well in Peace Corps Guatemala, where she trained fellow volunteers and their Guatemalan counterparts in the creation and analysis of digital maps. Elisa has worked across multiple sectors, including non-profit healthcare, local government, and the arts, with a focus on community empowerment and collaboration. She is honored to serve as a Santa Cruz Community Ventures Board member and supports the meaningful work the organization does for the community.
Kayla Kumar is the Development Director at Food What?! She holds a Master of Arts in Applied Economics and is passionate about solution-generating policy research that addresses wealth disparities. Kayla’s work has mainly been with youth of color, ranging from environments like music classrooms, basketball courts, juvenile halls, and farmlands. She believes marginalized communities have the expertise, vision, and initiative needed to solve the problems they face. The purpose of her work is to clear barriers erected in our current society that prevents marginalized communities from unleashing their brilliance and developing community space where all are cared for.
David Brown is a Senior Administrative Analyst at the County Administrative Office in Santa Cruz County. He is also the Administrative Co-Director of the Hub for Sustainable Living and Co-Founding member of Co-op Santa Cruz. Brown is an advocate in the community to help build more inclusive and equitable local economies. Throughout his career in Santa Cruz County, he has served on a variety of nonprofit Boards and committees including a preschool, a veterans’ cultural service center, a home-owners association, and a school site committee. Brown is proud of Santa Cruz Community Ventures economic development work and is excited to contribute his talents, resources, and connections to further the organizations work.
Dr. Chris Benner is the Dorothy E. Everett Chair in Global Information and Social Entrepreneurship, and a Professor of Environmental Studies and Sociology at the University of California, Santa Cruz. He currently directs the Everett Program for Technology and Social Change and the Santa Cruz Institute for Social Transformation. His research examines the relationships between technological change, regional development, and the structure of economic opportunity, focusing on regional labor markets and the transformation of work and employment. Benner’s goals in joining the Board would be to: 1) help provide feedback and guidance; 2) share some of his experience and work on similar issues in other parts of the state and country that might be useful for the work locally; and 3) gain a deeper knowledge of how SCCV's work develops so that he can share this exemplary work with other people and organizations. (Chris' Term to begin in January 2020)
By Brando Sencion, Program Coordinator
Senator Bernie Sanders and Representative Alexandria Ocasio-Cortez proposed a cap on interest rates for credit cards and other consumer loans at an annual rate of 15 percent, to help consumers facing growing credit card debt.
The bill would place restrictions on short-term loans, such as payday loans, which rely on significantly higher interest rates. In California, a payday loan can have an interest rate of about 460 percent for two-week loan. Small loan lenders say they want to help consumers access loans, they otherwise wouldn’t be able to with traditional lenders. But the opposition believes they are profiting on billions of dollars in interest and fees from low-income consumers.
The bill would be a win for consumers by limiting the interest rates banks place on loans and credit cards. Being poor in the United States can comes at a price. Not only do low-income families not qualify for traditional ban products due to income, credit history and other factors, but they are forced to turn to alternative lending services. Predatory lenders are well aware of their consumers and operate their businesses in low-income communities of color. In Santa Cruz County, there are 3 times more predatory lending services in Watsonville, compared to Santa Cruz.
The bill aims to protect consumers from big banks and predatory lenders. Services such as payday loans and other alternative lending products do not have the consumers well-being in mind. They charge high interest rates, impose obscure loan conditions, and lack consideration for the borrower's ability to pay back the loan. Capping the annual interest rate would protect consumers from predatory practices and give access to all for better lending and credit card products.
Article: Sanders, Ocasio-Cortez Propose 15% Cap on Credit Card Interest
By Kiana Morales, Program Associate
I grew up in a low-income single parent household. When I was younger my mom and I went through financial hardships and no one was there to help or guide us through those times. No one was there to give advice about going to college.
Which is why the work we do at Santa Cruz Community Ventures means so much. In SCCV I have found an opportunity to ensure that others don't have to go through the same hardships I went through and that they know how to utilize the resources available to them.
I’m especially excited about the Children's Savings Accounts program being launched. The program will provide a small seed investment to every newborn in Santa Cruz County. As 51% of the children born in Santa Cruz County are low income and 56% would to be first generation college students, I understand how much this seed investment can mean to their futures. Being part of this work is exciting!
I first joined SCCV during my sophomore year are part of their Youth Leadership Fellow program. In that role I was certified as a Financial Counselor and developed a financial capability program for girls in Middle school. The program focused on introducing the girls to financial concepts, career choices, and related educational requirements and financial impacts. While working with them I saw how much one person with the slightest bit of information can really impact the girls’ future choices. Seeing the students faces brighten up and seeing them smile about their future was a very motivating experience for me.
Which is why coming back to SCCV as a Program Associate was one of the easiest decisions I have made. I can’t wait to see how impactful the work SCCV is doing will be to its community.
ABOUT KIANA: Kiana is a first-generation UC Santa Cruz student. She is graduating in June 2019 with a degree in Business Management Economics with a minor in Mathematics.