Community Financial Resources

As the economy worsens, many low- and moderate-income families are succumbing to debt and turning to “fringe banking” products – high-fee bank accounts, payday lenders, check-cashers, loan sharks, debt peddlers and high-cost money transmitters. But Berkeley, CA organization Community Financial Resources (CFR) works with organizations to offer products to serve as an alternative to these products, therefore preserving the assets of low-income families.

In 2005, CFR partnered with Center for Community Change and Center for Financial Services Innovation (CFSI) and presented the benefits of prepaid cards as a low-cost banking tool at a conference in Chicago organized by NCTC and the Aspen Institute. It was there that Jean Hunt from another NCTC affiliate – Campaign for Working Families – recognized the product’s potential and asked CFR to train their staff to enroll clients for the prepaid cards at tax preparation sites. Since then, the “CFR Card” has grown at a rapid pace.

CFR has now issued 13,000 prepaid debit cards through more than 90 organizational partners, including VITA sites, AssetPlatform.org, Service Employees International Union (SEIU), social service agencies and community-based organizations. CFR’s prepaid card functions as a checking account, purchase and money transfer card and a money management tool. More than 1,500 refunds were direct deposited on CFR prepaid cards in 2010, totaling close to $1.8 million.

In addition to the prepaid cards, CFR has also developed other banking and financial education tools, including an employer-based short-term loan program, a low-cost Refund Anticipation Loan (RAL) alternative, training for healthcare/social workers to improve financial stability in order to improve health outcomes and more.  CFR also offers community organizations resources and training to help them deliver a product-based financial education that builds the financial capabilities of low-income households.

To build their distribution channel, CFR began building behavioral economic concepts into VITA site workflows, said Leon Sompolinsky. “We help VITA sites to employ simple concepts such as offering the card as the norm. For example, instead of asking a client how they would like to receive their refund, they ask where they would like to direct deposit their refund.” Sompolinsky said CFR is also working on a way to educate clients on the year-round usefulness of prepaid cards, rather than simply a way to get their tax refund quicker.

In addition to offering these consumer-friendly products, CFR also acts as a consumer advocate for their customer base. “CFR understands that people are not poor because they don’t know how to manage their money,” said Sompolinsky. “The financial capability curriculum we developed addresses political economic issues. By drawing connections between the personal and political, this type of financial education sets the groundwork for mobilizing communities to advocate for economic justice.”

Using CFR’s unique staff composition of ex-bankers and social activists, monitoring the financial services industry and researching consumer money management behaviors continue to be a priority. Sompolinsky said he is most excited about expanding two pilots from last year, one on an alternative RAL product and the other on an employer-based alternative to payday loans.