Demystifying Prepaid Cards Workshop  – Friday November 16th 8:15 am – 9:30 am

The largely unregulated prepaid card industry has spread across the nation as an alternative to check cashing, checking accounts, credit cards, and even cash. The gulf of differences among prepaid cards, the companies which offer them, and the vast array of fees, often undisclosed prior to purchase, make it difficult to determine if it is the right product for consumers. The Demystifying Prepaid Cards Workshop will help shed light what positive features people should look for, what are some red flags, how community groups are using them, and what are some efforts to regulate the industry.

Demystifying Prepaid Cards Workshop Speakers:

• Navid Vazire and Veronica Spicer of the Consumer Financial Protection Bureau (CFPB),
• Janet Raffel of the Center for Economic Progress (CEP)
• Monica SanMiguel of Center for Financial Services Innovation (CFSI)

This workshop session comes at a time when the prepaid card industry leapt forward with the introduction of Wal-Mart and American Express’ Bluebird prepaid card. Reported in the New York Times, the Bluebird prepaid card will be sold by Wal-Mart with American Express as their financial partner. This is the second prepaid card sold by Wal-Mart. Bluebird will offer greater support services through American Express than Wal-Mart’s previous prepaid MoneyCard, offered through GreenDot, likely making it more popular. Few details of the Bluebird prepaid card have been released, but we do know:

• No Credit Check prior to opening an account
• Direct Deposit
• Fee of $2 per withdrawal without direct deposit
• Menu of fees will be universal regardless of where you live

The introduction of this new prepaid card by Wal-Mart and American Express will only expand the footprint of the prepaid card market. Stay ahead of this wave by attending the 2012 IABG Conference in Champaign, IL November 15th-16th.

Click Here to Register

Cynthia Waldeck
Heartland Alliance

A new study was released this month by EARN Research Institute about parents’ perspectives on saving for education beyond high school. The study consists of information from telephone surveys asking about parents’ views on issues related to saving for their children’s high education.

The study found that 87% of parents in the United States think that a college degree is important for their children but are concerned about college affordability. Furthermore, although 69% of parents considered saving for their children’s higher education a priority, only 53% of parents have actually started saving. The study also found lack of resources and access to appropriate accounts impact their ability to save. Parents express clear preferences about account features when saving for their children’s education, and mainstream accounts do not currently suit parents’ needs and preferences. Parents are looking for accounts with the following features:

• Deposits are guaranteed not to lose value
• No minimum account balance in required
•  Deposits can be made in person or online
• Funds can only be used for college expenses for your child
• Funds can be used for college and pre-college expenses

This study highlights the need for accessible accounts. IABG advocates for, not only universal Children’s Savings Accounts, but for increased access to Illinois’ existing 529 college savings program. The following changes to the 529 Bright Start College Savings Program will expand the program to lower-income families:

•  Exclude 529 accounts from all asset tests on public benefits programs
• Create a matched-savings component to their 529 college savings program for lower-income individuals.
• Change the Illinois Income Tax Return to include an opportunity for direct deposit of a parent’s (or other relative’s) tax refund into a child’s 529 college savings account.
• Develop a refundable tax credit based on the contributions to the 529 plan to boost savings for lower-income individuals.
•  Promote their 529 college savings program through the Volunteer Tax Assistance Program (VITA) sites.

These changes speak to some of the needs expressed by parents in the EARN study. They will give parents more access to this important savings tool and ensure that there are incentives to save for your child’s future rather than disincentives or barriers.

To learn more about Children’s Savings Accounts and the barriers and solutions to college access, register for the 2012 IABG Conference taking place November 15^th & 16^th in Champaign, IL. The conference will feature a number of experts in the field of children’s savings accounts, including Margaret Clancy the Policy Director and College Savings Initiative Director at Center for Social Development at Washington University in St. Louis, Min Zhan Associate Professor in the School of Social Work at University of Illinois at Urbana-Champaign, Anee Brar the Program Manager of the Kindergarten to College program at the San Francisco Office of Financial Empowerment, and Tracy Frizzell Executive Director at the Economic Awareness Council.

By Karen Harris, Shriver Center

The U.S. is facing a growing debt crisis, the baby boomer generation is entering retirement, people are living longer today than ever before, and long-term health care costs are rising to unmanageable levels for many older Americans. Given the retirement demands facing the nation and its retirees, saving more for retirement has never been more important, yet not enough Americans save enough for a retirement free of financial hardship and worry.

A major cause of this lack of long term savings retirement savings, according to a recent report by the Woodstock Institute and IABG, is a lack of opportunity: 50% of workers in Illinois lack access to employer-sponsored retirement savings plans.  To increase access to retirement plans, several states have stepped in to provide workers with an option to save for retirement through state sponsored private employer retirement savings plans in the absence of an employer offered plan. California recently became the first state to pass a law creating an automatic enrollment individual retirement account (IRA) program and Illinois is currently considering similar automatic IRA legislation.

The California Source Choice Retirement Savings Trust Act would create a statewide retirement savings plan for private sector workers without access to an employer sponsored retirement savings plan.  Under the law:

• All California employers with more than 5 employees not offering a retirement savings option would be required to offer the new state IRA program.
• Eligible employers not electing to offer their own savings option, would be required to automatically enroll all employees into a 3% payroll deduction Auto IRA plan, called the California Secure Choice Retirement Savings plan.
• Employees could opt-out of the program and/or change their deduction amount.
• All investments would be placed in a pooled trust fund administered by an appointed 9-member board that contracts with 3rd party firms to manage, invest, and administer the funds.  The trust fund would provide a modest guaranteed rate of return through the use of private insurers who will insure the return rate and bear any liability for losses. Before the law is implemented several factors like possible preemption by the  Employee Retirement Income Security Act (ERISA) and a preliminary market analysis will have to be assessed.

Unfortunately, before the law can be implemented several conditions must be met.  First, a preliminary market analysis must be paid for by an entity other than the state.  Second, the proposed plan must be approved by the IRS and be deemed, by the U.S. Labor Department, not to be an employer sponsored plan subject to the Employee Retirement Income Security Act (ERISA).   Finally, the California legislature would need to enact legislation approving the final plan.

The Illinois General Assembly is currently considering a similar bill, SB3278/HB4497, which would also create a statewide automatic IRA program for workers in Illinois.  All employers not currently  offering a retirement plan that employ between 10 and 100 employees would be required to automatically enroll their employees into a 2% payroll deduction IRA type account administered by the State Treasurer’s office.  Similar to the California program, employees would be able to opt-out or change their contribution amount. Similar to the California board, the State Treasurer would contractwith 3rd party investment firms to invest and administrate the fund.  Unlike the California plan, employees could choose from a limited range of investment options or be put into a default investment. Most importantly, unlike California, the Illinois plan does not establish a guaranteed rate of return.

Both pieces of legislation address a growing problem of retirement insecurity by developing a concept that promotes both progressive and conservative values.  They  address equal access, while simultaneously promoting personal responsibility and individualism. Although there is concern that states cannot afford such programs given their budget crises, states should remember that there are benefits beyond those enjoyed by enrollees. These types of investment strategies ultimately pay dividends to the states in greater wealth owned by their citizens.

IABG’s efforts to pass Automatic IRA legislation in Illinois will increase access to a vital tool people need to build financially secure retirements. Learn more about IABG’s work and the importance of Automatic IRAs at IABG’s upcoming conference in Champaign, IL on November 15th & 16th. The conference will highlight Automatic IRAs in a workshop featuring Karen Harris – Director of Asset Opportunity at the Shriver Center, Spencer Cowen – Vice President of Applied Research at the Woodstock Institute, and David John – Senior Research Fellow in Retirement Security and Financial Institutions at The Heritage Foundation. Register now for the statewide conference.

This blog was written by gues blogger, Alex Hoffman. Alex serves as an Americorps VISTA with the Sargent Shriver National Center on Poverty Law

LEND, the student-run non-profit out of Northwestern University, provides microloans and business training services to Evanston entrepreneurs. Serving primarily low-income women, LEND most often helps entrepreneurs transition businesses like salons, paint contractors, or boutique jewelers to the next stage. LEND leverages existing community assets—municipal officials, community leaders, and social service organizations, among many others—as well as their own resources to help entrepreneurs create, invest, and safeguard assets in the form of a storefront, a car, or equipment.

The LEND process involves hands-on staff support, comprehensive business training, and affordable loans. 2 to 3 staff members meet with each LEND client at least once a month, and every client receives personalized business training for at least 8 to 10 weeks. Lend Account Managers and Business Training Ambassadors go beyond collecting payments and simply reviewing documents to understand the status of the business and then actively work with clients to analyze issues and implement solutions. LEND’s small dollar loans range from $500 to $5,000 and come with very low APR complete with a 1 to 2 year payback period. Through these manageable loan characteristics and hands-on support, LEND has managed to achieve a 100% loan repayment rate.

As LEND adds new staff members to handle increasing numbers of microloans and business training clients, they hope to simultaneously respond to the community of Evanston’s needs by expanding their lending and business training services to women, lower-income/low-credit entrepreneurs, and ex-offenders among others. While LEND raised much of its initial capital from private donors during fundraising campaigns, they are looking to tap more traditional, reliable sources of funding—especially grants from foundations, corporations, and government. As they expand and seek out new parnters, they continue to grow existing relationships with organization like CEDA, SCORE, and YWCA. LEND is a special program as the staff, entirely composed of Northwestern University students, commits such significant time and effort with each client. It is clear just how seriously they take their mission to uplift the economic fortunes of Evanston’s entrepreneur class. The LEND program is a win-win as Northwestern business students gain valuable business training and consulting skills while simultaneously helping low- and moderate-income residents transition their businesses to the next stage and achieve financial independence.

LEND is based out of Northwestern University in Evanston, Illinois

By Dory Rand, Woodstock Institute

All children deserve the opportunity to pursue their dreams of becoming a veterinarian, astronaut, teacher, or whatever they desire. Without an education, however, many of these dreams will remain unattainable, as will the economic mobility these careers provide. Knowing that there’s a plan in place and savings accumulating for college is a strong motivator for many children, but too few children have the security of a college nest egg.

My children’s experience is a testament to the power of college savings. Having an affordable, fixed-rate, long-term mortgage allowed me to also set aside money for my children’s college education. Despite ups and downs in the stock market and some losses in my kids’ college savings plans, significant savings accumulated because we started saving for their postsecondary education as soon as they were born. The savings were not sufficient to cover all of their college costs—they still need scholarships, grants, savings from summer jobs, and help from parents and grandparents—but they were large enough so that my kids never doubted that they would have the financial wherewithal to go to college.

At Woodstock, we’re working towards a future where all children could grow up with a savings account started at birth like my kids had. Research shows that children with a savings account in their name are six times more likely to attend college than children without such accounts, and that having financial and non-financial assets (such as equity in a house, vehicle or business) is positively correlated with attending and completing college. Controlling for other factors, including income, assets have a significant, positive effect both in terms of financial ability to attend college and in the aspirational impact on children and parents.

While the day that all children have savings accounts at birth is a ways off, there are steps we can take now to expand access to postsecondary education for more children. The Illinois Asset Building Group is urging that we take the following steps:

• The State Treasurer, who administers Illinois’ Bright Start 529 College Savings Plan, should provide a safe, conservative, default 529 investment plan for new applicants to simplify the process for families with little or no investment experience.
• The State of Illinois should create a college savings incentive program for children of noncustodial parents who owe child support arrears.
• The State of Illinois should eliminate requirements in the Temporary Assistance for Needy Families (TANF) program that disqualify applicants with more than $2,000 in assets or exempt education savings accounts the asset limit so that parents of minor children who are in need of short-term cash assistance are not discouraged from, or penalized for, saving for their children’s postsecondary education. (Six states have already abolished TANF asset limits.)

I strongly support these policy recommendations and look forward to the day that all Illinois children can have savings accounts from birth that will help them to achieve their dreams.

To learn more about Illinois Asset Building Group, see its website and register for its conference November 15-16, 2012, in Champaign, Illinois.

This article, by Dory Rand, first appeared on the Woodstock Institute website.