Financial Imprisonment: How Financial Literacy & Debt Are Shaping Reentry

Untitled2A new study from the University of Illinois surveyed 155 incarcerated men in two Midwestern prisons and conducted 12 in depth qualitative assessments with select participants to measure their financial knowledge. It found that inmates sought prison programming specific to investing, self-employment, budgeting, and savings because they were seen as viable skills needed to succeed outside of prison. Tasks like managing a checking account, maintaining a balanced budget, building savings are all relatively new skills for a population that has likely had financial stress since childhood. Offering comprehensive financial literacy skills can provide a new way of life for recently released individuals and help reduce recidivism.

“If any other institution in America were as unsuccessful in achieving their ostensible purpose as our prisons are, we would shut them down tomorrow.” ~ James Gilligan, Clinical Professor of Psychiatry at NYU.

Every year upwards of 700,000 inmates are released from federal and state prisons all across the United States with hopes of making a fresh start. Although some will see this future realized about 70% of these inmates will be rearrested and about 52% will be reincarcerated according to the Commission on Safety and Abuse in America’s Prisons. Research from the University of Illinois, in addition to research from the RAND Corporation, shows that rehabilitative programming in prisons, which supports education, training, and skills, can significantly improve the long term success rate for a person affected by the prison system.

Further complicating the issue, an increasing number of people are released from prison with significant debt from their trials and no immediate source of income to pay them. A report from the Brennan Center for Justice shows that some inmates incur as high as $2,464 in court fees upon their exit, which often doesn’t take in to consideration any additional fines, restitution or their ability to pay.

This is a reincarnation of “debtors prisons” as many of these men and women are returning to prison for failing to pay these court ordered fees . Additionally, released inmates are also being denied access to public benefits, receiving reduced credit ratings and garnished incomes to support themselves. These fees create social debt as well with at least four states denying the right to vote until these court fees are repaid. This cycle of prolonged debt begins affecting an inmate’s credit and in turn begins tipping the scales towards their slide back into the prison system. Recent research out of Villanova University finds that without the debt effect of the prison systems the official poverty rate would have dropped by 10% in the US.

UntitledThe United States prison system surpasses all other countries and makes us the most jailed country in the world. The Cook County Department of Corrections, one of the nation’s largest prisons, has an average daily population of between 8,000 and 10,000 inmates. That’s 10,000 people right here in Chicago that, if invested in, would be able to return to their communities and support themselves and their families. Not only would this save the city expenditures on their reincarcertion costs but it would help keep families and communities together.  Until we are able to fully shift away from our antiquated, costly, and harmful prison system we need to continue to advocate for a system of rehabilitation. We need to shift to a system that truly prepares people to rejoin and engage in their communities.

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Program Profile: North Lawndale Employment Network

Helping our clients build a solid credit history is quite rewarding because this will lead to them having access to safe products that will allow them reach their financial goals.
-Stacey Woods, Financial Coach, North Lawndale Employment Network

Employment & Credit Building to Rejuvenate a Community
The North Lawndale Employment Network (NLEN) is a 501(c)(3) nonprofit organization providing the North Lawndale community with innovative credit, asset, and employment building initiatives. NLEN believes that neighborhood –focused employment initiatives are fundamental to improving the quality of life for neighborhood residents and can influence policy by serving as a model for change. As a Center for Working Families (CWF) site NLEN pairs workforce development with financial coaching and bundled services. Clients receive free credit reports, personalized budgeting advice, assistance enrolling in public aid programs, help with establishing or rebuilding credit history, and access to credit-building products like a secured credit card and the Twin Accounts program. Twin Accounts is an innovative credit building loan that functions as a matched savings program. After one year of monthly payments, clients have savings to invest in their future. Since 2009, NLEN has helped more than 500 clients improve their credit scores.

A Unique Approach: Pairing Employment & Financial Education
CCGTThrough Sweet Beginnings, a wholly owned subsidiary of the network, NLEN offers full-time transitional jobs for formerly incarcerated individuals and others with significant barriers to employment in a green industry—the production and sales of all-natural skin care products featuring its own urban honey. NLEN sees Sweet Beginnings as a high quality, sustainable social enterprise that offers a unique product and a unique solution to overcrowded prisons. As the average recidivism rate is 65% nationally and 55% in Illinois, Sweet Beginnings’ recidivism rate of below 4% for former employees is evidence of something truly special. NLEN recognizes that financial insecurity is a driving force in recidivism, which is why NLEN integrates long-term financial counseling into Sweet beginnings and other existing services.

A Story of Impact
Eugene Reese is a 38 year old African American who came to NLEN to become self-sufficient after spending time in prison. He enrolled and graduated from NLEN’s U-Turn Permitted program, which helps ex-felons re-enter the workforce.  A creative man in general, Eugene hopes to turn his passion of making beautiful hard candy sculpted flowers into a business where he can sell them to wedding planners. When he first came to his financial coach at NLEN, he had a very thin credit score file. Eugene learned that in order to obtain the small business loan that could get his hard candy flowers business off the ground, he would first need a good credit score. Eugene worked with his financial coach to create a budget and applied for the Twin Account program to build his credit and save for his business. After 6 months of paying the Twin Account program on time, his credit score had risen high enough to successfully obtain a retail credit card. From his financial education Eugene knew that by having a mixture of credit lines his score would raise even more. He hopes to soon obtain a small business loan to get his hard candy flower business off the ground.

The Future of North Lawndale
NLEN’s vision is to see to the North Lawndale unemployment rate equal that of the city average-currently 9%. Thus, NLEN is laboring to help build a world in which people facing significant barriers to employment (including former offenders) are given a fair and just second chance to achieve self-sufficiency through gainful employment. Through the support of donors, NLEN continues to expand its services, reach, and positive impact in the North Lawndale community, by changing individual lives and improving the community’s quality of life, one person at a time, and one job at a time.

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Bank On 2.0 Launched Nationally

The JPMorgan Chase Foundation and the Cities for Financial Empowerment (CFE) Fund announced the creation of Bank On 2.0, a new effort to create a unified, national approach to delivering safe, affordable banking products and services to low-income and underbanked people through municipal programs across the country like Bank On Chicago. The JPMorgan Chase Foundation’s $1.15 million seed funding commitment is a two-year grant that will complement the CFE Fund’s raising of matching funds from other partner organizations, including other financial institutions.

Bank On 2.0 will build on the grassroots success of a wide array of Bank On and related banking access programs in cities across the country, like Chicago, San Francisco and Seattle.Bank On 2.0 aims to identify best practices and build a national, evidence-based strategy that will help people, who might otherwise be subject to costly alternative financial services, access basic, safe, and affordable bank services. The ultimate goal is to create a national approach and infrastructure that includes products, services, best practices, resources and other technical assistance that will facilitate local municipal efforts to connect unbanked and under-banked residents to safe and affordable mainstream banking services.

 

Community Organization Input

Bank On 2.0 has the potential to bring safer and more accessible banking products to the millions of un/underbanked in the United States and Illinois. Currently the hundreds of municipal and state Bank On initiatives across the country feature different checking account requirements, varying levels of financial and community support, and have yielded varying degrees of success and failure. The common thread in successful and dynamic Bank On initiatives has been an engaged group of local community organization partners. Community organizations understand local unbanked populations because they directly serve them. They know which checking account fees and barriers to access lead those who are unbanked to choose check cashers over financial institutions. With a hand in the unbanked community, they are a trusted voice for someone to learn about safer checking account options. The support, commitment, and presence of community organizations in their local Bank On initiative’s decision making process is often the deciding factor of whether or not that initiative is successful. IABG encourages the Bank On 2.0 national initiatve tp actively seek input and feedback from community organizations participating in their own local Bank On initiatives. Furthermore, IABG recommends that these community organizations have a presence in Bank On 2.0 equal to that of financial institutions.

 

Strong Product Recommendations are Necessary

Earlier this year IABG convened community partners participating in the Bank On Chicago initiative on how to make Bank On Chicago approved checking accounts safer, more accessible, and with lower fees. A list of recommendations, informed and supported by those who directly serve the un- and under-banked in Chicago, have since been presented to the City of Chicago Treasurer Stephanie Neely who manages the Bank On Chicago initiative. We recommend that the Bank On 2.0 initiative adopt a similar strategy of soliciting input from the nonprofit asset building advocacy, policy, and direct service provider field on product requirement specifics. Bank On 2.0 can be an opportunity to adopt strong standards for the banking products offered by participating Bank On financial institutions to enhance local Bank On efforts to provide safer, cheaper, and more accessible bank services to their communities.

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