Debt Traps by Necessity

San Jose     The Everett Program at the University of California at Santa Cruz specializes in technical solutions for social change organizations.  ACORN has enjoyed a partnership with the program for the last three years that has seen several students work with our hawkers union in Bengaluru the first year, another team work with the ACORN Home Savers Campaign in the USA last year, and this year work to produce PSAs to run for ACORN Honduras on television in that country.

Annually, I visit there when I’m in the California in order to meet the students face to face and move the partnership along.  This year was interesting not only as they showed me the progress on the video, but also talking to a class of Everett students about techniques to develop organizational commitment and how to develop campaigns.  I also interviewed several of our interns for Wade’s World.  The combination of these conversations may have been helpful to them, but the real eyeopener to me was the huge debt trap that seems almost inevitable for these students, even with their eyes open as well.

Having just done a campaign training in Oakland only days before on payday lending, I used that as an example in Santa Cruz as well.  The students told me that the average all-in cost for this public university was about $36,000 per year.  There is a housing shortage on campus where many of the common spaces are now bedrooms, and two-person rooms are now sleeping three.  In town, it’s no better.  Asking the class about their individual rents, the responses were as low as $750 for one young woman living with 7 or 8 others, but more commonly the rents per person ran from $1200 to $1400 per month.  The Census Bureau recently released a report indicating that the median rent is now over $1000 per month throughout the country.  A rent freeze measure on the ballot in Santa Cruz in the last election fell short along with the statewide expansion of rent control for additional cities.

Some students knew about payday lending, but that tended to be only the few who had come from lower income neighborhoods in California.  Most had bank accounts, but no one had a physical checkbook, and most claimed little experience with overdrafts since they lived out of the instantaneous information online on their balances, and banks blocked them going past the levels.  Asked how they picked their banks, one explained he was “born into it,” and others nodded in agreement.  Virtually all of them seemed to be facing the prospects of significant school debt when they would graduate.

Financial literacy is a fairly meaningless phrase when you really don’t have much money and are forced by necessity to embrace predatory products and debt prospects.  I thought about this reading about a migration of payday lending practices into lending arrangements for rent for millennials with irregular income.  An article in the Wall Street Journal described the companies entering this space:

Uplift, one of several startups offering loans to recent college graduates, professionals moving to a new city and others who want to build credit or could use assistance making rent payments. These companies, which also include Domuso and Till, are entering a market long associated with payday lenders. Compared with cash-advance loans, which come with annual interest rates as high as 700% in some states, funds from the rent-lending startups are available at much lower cost. Some are competitive with credit-card borrowing rates at less than 20%.

Reading that piece and thinking about what I was hearing from these young students, I couldn’t help thinking that I was working with minnows while the barracudas were circling.  It wouldn’t be pretty, and swimming in debt and desperation, too many of them will be easy prey through desperation rather than choice.


Impacting Systems with Campaigns

Oakland          As a special East Bay treat, I helped Francis Calpotura and Lisa Castellanos, run a fascinating workshop organized by In-Advance as part of their series of working with community-based organizations on impacting systems.  The topic for this session focused on developing campaigns.  My piece was to layout the scenario for a campaign on reigning in payday lenders and their predatory practices in lower income neighborhoods, using Oakland as a setting for the campaign.  I had shared pieces from ACORN Canada’s successful campaigns there with some additional material on the ACORN Hamilton bylaw effort going on now.  In-Advance had also distributed articles on ACORN’s H&R Block campaign as examples of another successful case study.

The biggest problem I had was the usual.  Doing some research while I was in Milwaukee early one morning on the law in California and the state of the industry so that the organizers would have some local context, I found myself getting angrier by the minute, especially since California legislation is often among the most progressive in the country.  Yes, Virginia, there was a law, but no Santa Clause except in the gifts it gave the industry through its toothless passivity.  The industry was licensed and capped at 15% directly on a maximum loan of 31-days with only one loan permissible every 90-days.  Sounds like it might work, doesn’t it?  But it allowed 360% APR on the loan once the rest of the fees were larded on.  There was also no central database that would determine whether or not a consumer did in fact get multiple loans, and the reports turned into the oversight board made it clear that there were frequently repeat loans.  The industry had beaten back an effort as recently as last year in 2018 to create a central database.  Furthermore, there seemed to be no penalties.  Listening to the small groups later describe their proposed campaigns, I wanted to do the campaigns even more than I wanted to hear about their excellent proposals about how such effort might be able to succeed in Oakland!

Francis Calpotura

The best part of the session was being challenged to be helpful on the issues the various groups were grappling with.  KidsFirst was trying to restore funding for healthy feeding programs in the school district with a share of the money coming in from the sugar sweetened drink tax.  Neighbors for Racial Justice were incensed that the city was spending $300 million on policing and didn’t make other issues a priority.  Mujeres Unidas y Activas, composed mainly of Latino domestic workers, found itself caught in constant defense of its immigrant members being deported and seeking asylum in the caldron of the Trump administration’s draconian policies. The Ella Baker Center was trying to bridge many of these issues as well as was the APEN and Mandela Partners, one that deal with economic justice for Asian-Pacific populations and the other that was a food coop trying to promote food justice.

At the end of the day as everyone went around, we all hoped we had pushed the needle forward enough to make not only a difference but create some power and change.