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The goal of the asset-building component is to provide services and connect families to other partners that will help them begin personal and family asset-building strategies to move them toward economic independence. Residents will be offered a “menu” of activities as part of a comprehensive approach to promoting family economic success that include:
- Earned Income Tax Credit (EITC) outreach to maximize local participation rates among New Haven residents
- Enhanced access to public benefits through education, counseling and referral
- “Financial Fitness” literacy training
- Credit Repair counseling referral
- Workshops on predatory lending and recognizing financial scams
- Individual Development Accounts (provided by others)
- First time home buyer training
Assist families and individuals with opening bank accounts and establishing relationships with local financial institutions
Earned Income/Child Care Tax Credit (EITC) Project:
This component is an extension of the Internal Revenue Service (IRS) Volunteer Income Tax Assistance (VITA) program that has been successfully implemented in a number of communities across the United States. While there have been VITA sites in New Haven during recent tax seasons, a key difference in our approach is that it will seek to mobilize the EZ community to use a number of VITA sites in key locations, not just establish a single site. Our goal is to take this effort to scale at a level that will have significant impact for working families and their neighborhoods, and use the EITC campaign to engage residents with complementary asset-building services. NLC will partner with the IRS and others to offer workshops on EITC, provide “hands-on” tax assistance, electronic tax filing, and connection to asset-building services.
Financial Literacy Education and Supports:
Residents who participate in the EITC program will be invited to take advantage of additional services such as financial literacy education and other related activities. We estimate that 150-200 of the 400-500 residents who access EITC services will participate in the financial education services which will include an eight week course that covers topics such as budgeting, investment, responsible use of credit, credit repair, etc., money management clubs, and possibly access to IDA programs run by other organizations. As a result of this new knowledge and credit counseling, we further expect that 75-100 residents who complete the financial literacy curriculum will cease or reduce their use of predatory financial services such as check cashing stores, pawn shops, payday loans, high interest credit cards, and sub-prime loans.
Access to public benefits:
NLC's services will provide personalized assessment of each client's potential eligibility for public benefits such as food stamps, child care subsidies, transportation assistance, etc. Many low-income individuals do not apply for public benefits for which they are entitled to because they either do not know of them, or assume that they are ineligible because they are employed. For example, food stamps have one of the lowest take-up rates of all benefits. By accurately assessing an individual's eligibility for public benefits, NLC will be contributing to income growth by ensuring that those benefits are available to supplement the individual's earned income from wages.
Connecting Residents with mainstream financial institutions:
Effectively achieving this goal will require NLC to work at a policy level with one or two local banks in order to overcome the realities of low-income populations and their dealings with mainstream financial institutions. Those residents who participate in the EITC program will also be assisted with establishing new savings and checking accounts with partner financial institutions in order to reduce their use of higher-priced financial services. In many cases, these new clients will have blemished or poor credit histories that will require credit repair because some banks do not allow such persons to open accounts. Some prospective clients may also have negative histories with the Chex system , which would require NLC to broker an accommodation from the bank to allow our clients to open new accounts. Both of these issues are significant barriers to re-establishing connections between prospective NLC clients and partner banks that NLC will have to mitigate. The ability to connect clients with mainstream financial institutions is key to long-term asset development because it provides an avenue for securing market rate credit for future purchases, while reducing the transaction costs for financial services to low-income people.
The Chex system is used by banks to report individuals who owe money to a bank – often because of bounced checks. In most instances, banks will not allow an individual to open a new account if they are in the Chex system, regardless of which bank the infraction occurred at. |
