Support from Bloomberg Philanthropies includes financial empowerment for low-income residents
— The city of Akron will receive technical assistance and a seed grant to bring free, high-quality, one-on-one financial counseling to Akron residents as part of the national Financial Empowerment Center (FEC) model. The program aims to help families reduce debt and build credit, along with other services.
The Cities for Financial Empowerment (CFE) Fund has spearheaded the program, supported by a $7.7 million investment from Bloomberg Philanthropies as part of their American Cities initiative. The city of Akron is one of 12 localities selected to receive a grant and intensive technical assistance to prepare to launch a local FEC program.
“This catalytic grant will provide a valuable, free service to Akron’s low-income families that will enable them to better manage their finances as a means of creating greater wealth and stability,” said Akron Mayor Dan Horrigan. “We are proud to be one of the select cities chosen to establish this proven program in communities across the nation. Through our partnership with the United Way of Summit County, and thanks to the support of the Bloomberg Philanthropies and the CFE Fund, I am confident that we will make a real, positive impact in the lives of Akron residents.”
FECs offer professional, one-on-one financial counseling as a free public service. At the Financial Empowerment Centers, professionally trained counselors help individuals and families with low and moderate incomes manage their finances, pay down debt, increase savings, establish and build credit and access safe and affordable mainstream banking products.
At the core of the FEC model is the integration of counseling into other social services, including housing and foreclosure prevention, workforce development, prisoner reentry, benefits access and domestic violence services, among others.
“Financial Empowerment Centers are exactly the kind of bold idea that should spread between cities. It is a proven model that helps low-income citizens and we are delighted to be doubling- down on our investment in this initiative,” said James Anderson, head of Government Innovation at Bloomberg Philanthropies.
“Local leaders know first-hand the connection between family financial stability and community financial stability,” said Jonathan Mintz, president and CEO of the Cities for Financial Empowerment Fund. “Mayor Horrigan and the city of Akron are joining a national movement to bring free, high-quality financial counseling as a public service to their residents; we are proud to partner with Mayor Horrigan and Bloomberg Philanthropies on this critical work.”
The national FEC platform promotes scale and sustainability for the growing movement of professional, one-on-one financial counseling as a free public service. First piloted in New York City under Mayor Michael R. Bloomberg in 2008, the FECs have worked with almost 80,000 clients, helping them reduce individual debt by almost $99 million, and increasing their families’ savings by close to $9 million.
In addition, a recent CFE Fund evaluation showed that this program works even for residents with very low incomes and other complex financial challenges. “,,,”
Earlier this year, the CFE Fund released “An Evaluation of Financial Empowerment Centers: Building People’s Financial Stability As a Public Service,” a three-year evaluation of the initiative’s initial replication in five cities (Denver, Colo.; Lansing, Mich.; Nashville, Tenn.; Philadelphia; and San Antonio).
- FEC clients reduced their debt by $22.5 million, increased their savings by $2.7 million, and nearly a quarter of unscored clients working on credit issues succeeded in establishing a credit score;
- FEC clients succeeded despite deep financial challenges. FEC clients averaged annual incomes of only about $21,000; they were twice as likely as all U.S. consumers to have a subprime credit score and half as likely to even have a credit score; nearly 23 percent had no health insurance; and over 60 percent had no savings;
- Clients meaningfully reduced debt. While FEC clients began counseling with an average of nearly $29,000 in debt —more than half with credit card accounts, 40 percent with utility debt, and 38 percent with student loans—over a third of clients who tried to reduce their debt succeeded, with total debt reduction at $22.5 million;
- FEC clients meaningfully built savings. FEC clients were much more likely than average U.S. residents to have no savings, yet overall, almost a third of clients working to increase their savings succeeded, averaging $1,634 and totaling $2.7 million among just those included in the evaluation; and
- Banking status matters. Unbanked FEC clients had a notably more difficult time achieving financial outcomes, underscoring the importance of a bank account. Compared to clients with accounts, they were less than half as likely to increase their savings, and over a third less likely to establish a new credit score, even working directly and repeatedly with a counselor in efforts to do so.
For info, visit www.cfefund.org or follow the program on Twitter at @CFEFund.