Reclaiming Workers’ Money

Reclaiming Workers’ Money

Reclaiming Workers’ Money

2023 ANNUAL REPORT

2023 ANNUAL REPORT

2023 ANNUAL REPORT

Neighborhood Trust is pursuing worker freedom from exploitative debt.

Neighborhood Trust is pursuing worker freedom from exploitative debt.

Neighborhood Trust is pursuing worker freedom from exploitative debt.

Our solutions, TrustPlus and Pathways, give workers access to products and tools to move from a debt to a savings cycle, leading to millions of dollars back in their pockets. Our data and insights are shining a light on how workers are forced to use predatory products to make ends meet, and how access to better products translates to the financial leverage workers need to pursue what matters.

Our solutions, TrustPlus and Pathways, give workers access to products and tools to move from a debt to a savings cycle, leading to millions of dollars back in their pockets. Our data and insights are shining a light on how workers are forced to use predatory products to make ends meet, and how access to better products translates to the financial leverage workers need to pursue what matters.

Letter from the CEO

Dear Friends and Colleagues,

This year, as we serve thousands of clients across the country, we are laser-focused on the fact that 96% of these workers hold non-mortgage debt with an average balance of $24,479. About half spend over 40% of their income on debt payments.

To quote James Baldwin, “Anyone who has ever struggled with poverty knows how extremely expensive it is to be poor.” Low-income workers, especially workers of color and those from immigrant communities, face cash-flow shortages and pay high interest and fees for access to cash to cover basic expenses, educational and medical expenses, car payments, and more. Once trapped inside a cycle of debt, workers take on new, more expensive debt to cover old, and may forgo savings and long-term planning for housing, higher education, and retirement.

The most accessible financial products in the marketplace are often the most exploitative. If the money extracted through these products instead stayed in the hands of workers, the impact would be profound.

In 2023, we connected workers to more affordable and innovative products at credit unions and CDFIs and built a framework to identify and defang the most financially harmful products on the market. Our interventions helped clients recoup a total of $32 million of their hard-earned income, including $27 million in reduced debt and $5 million in liquid savings.

To multiply this impact in 2024 and beyond, we developed a growth plan to exponentially increase our reach. Each individual we help represents thousands of dollars recouped; and the potential for a catalytic tipping point from debt to savings.

Thank you to our donors, industry partners, and customers for being on this journey with us.

In partnership,

Justine

Letter from the CEO

Dear Friends and Colleagues,

This year, as we serve thousands of clients across the country, we are laser-focused on the fact that 96% of these workers hold non-mortgage debt with an average balance of $24,479. About half spend over 40% of their income on debt payments.

To quote James Baldwin, “Anyone who has ever struggled with poverty knows how extremely expensive it is to be poor.” Low-income workers, especially workers of color and those from immigrant communities, face cash-flow shortages and pay high interest and fees for access to cash to cover basic expenses, educational and medical expenses, car payments, and more. Once trapped inside a cycle of debt, workers take on new, more expensive debt to cover old, and may forgo savings and long-term planning for housing, higher education, and retirement.

The most accessible financial products in the marketplace are often the most exploitative. If the money extracted through these products instead stayed in the hands of workers, the impact would be profound.

In 2023, we connected workers to more affordable and innovative products at credit unions and CDFIs and built a framework to identify and defang the most financially harmful products on the market. Our interventions helped clients recoup a total of $32 million of their hard-earned income, including $27 million in reduced debt and $5 million in liquid savings.

To multiply this impact in 2024 and beyond, we developed a growth plan to exponentially increase our reach. Each individual we help represents thousands of dollars recouped; and the potential for a catalytic tipping point from debt to savings.

Thank you to our donors, industry partners, and customers for being on this journey with us.

In partnership,

Justine

Letter from the CEO

Dear Friends and Colleagues,

This year, as we serve thousands of clients across the country, we are laser-focused on the fact that 96% of these workers hold non-mortgage debt with an average balance of $24,479. About half spend over 40% of their income on debt payments.

To quote James Baldwin, “Anyone who has ever struggled with poverty knows how extremely expensive it is to be poor.” Low-income workers, especially workers of color and those from immigrant communities, face cash-flow shortages and pay high interest and fees for access to cash to cover basic expenses, educational and medical expenses, car payments, and more. Once trapped inside a cycle of debt, workers take on new, more expensive debt to cover old, and may forgo savings and long-term planning for housing, higher education, and retirement.

The most accessible financial products in the marketplace are often the most exploitative. If the money extracted through these products instead stayed in the hands of workers, the impact would be profound.

In 2023, we connected workers to more affordable and innovative products at credit unions and CDFIs and built a framework to identify and defang the most financially harmful products on the market. Our interventions helped clients recoup a total of $32 million of their hard-earned income, including $27 million in reduced debt and $5 million in liquid savings.

To multiply this impact in 2024 and beyond, we developed a growth plan to exponentially increase our reach. Each individual we help represents thousands of dollars recouped; and the potential for a catalytic tipping point from debt to savings.

Thank you to our donors, industry partners, and customers for being on this journey with us.

In partnership,

Justine

OUR NORTH STAR: WORKER FREEDOM FROM DEBT

Neighborhood Trust is a national financial services innovator dedicated to building worker financial security. OUR APPROACH HELPS WORKERS RECLAIM CONTROL OF THEIR MONEY NOW AND INTO THE FUTURE, and helps reshape the marketplace for financial services to drive long-term systemic change.

SOLUTIONS FOR WORKERS

We provide trusted financial guidance to workers, and connect them to safe and effective products that help REDUCE AND AVOID DEBT, create positive cash flow, and increase savings. Learn more about our TrustPlus solution.

INSIGHTS FOR CUSTOMERS + PARTNERS

We inform our customers and institutional partners how to more effectively advance and support workers’ financial needs, and we co-design INNOVATIVE FINANCIAL PRODUCTS. Learn more about our Pathways to Financial Empowerment solution for credit unions.

TRANSFORMATION FOR THE MARKETPLACE

We share data and qualitative insights on the financial realities of workers to inform, influence, and motivate market leaders, advocates and policy makers as we pursue A MORE EQUITABLE ECONOMIC SYSTEM together.

OUR NORTH STAR: WORKER FREEDOM FROM DEBT

Neighborhood Trust is a national financial services innovator dedicated to building worker financial security. OUR APPROACH HELPS WORKERS RECLAIM CONTROL OF THEIR MONEY NOW AND INTO THE FUTURE, and helps reshape the marketplace for financial services to drive long-term systemic change.

SOLUTIONS FOR WORKERS

We provide trusted financial guidance to workers, and connect them to safe and effective products that help REDUCE AND AVOID DEBT, create positive cash flow, and increase savings. Learn more about our TrustPlus solution.

INSIGHTS FOR CUSTOMERS + PARTNERS

We inform our customers and institutional partners how to more effectively advance and support workers’ financial needs, and we co-design INNOVATIVE FINANCIAL PRODUCTS. Learn more about our Pathways to Financial Empowerment solution for credit unions.

TRANSFORMATION FOR THE MARKETPLACE

We share data and qualitative insights on the financial realities of workers to inform, influence, and motivate market leaders, advocates and policy makers as we pursue A MORE EQUITABLE ECONOMIC SYSTEM together.

In 2023 we served nearly 7,000 clients across 44 states partnering with 75 TrustPlus and Pathways customers

In 2023 we served nearly 7,000 clients across 44 states partnering with 75 TrustPlus and Pathways customers

In 2023 we served nearly 7,000 clients across 44 states partnering with 75 TrustPlus and Pathways customers

65%
WOMEN

73%
PEOPLE OF COLOR

96%
CARRY DEBT

$31,200 median annual income

$24,479 median baseline non-mortgage debt

55% spend over 40% of income on non-mortgage debt payments

65%
WOMEN

73%
PEOPLE OF COLOR

96%
CARRY DEBT

$31,200 median annual income

$24,479 median baseline non-mortgage debt

55% spend over 40% of income on non-mortgage debt payments

65%
WOMEN

73%
PEOPLE OF COLOR

96%
CARRY DEBT

$31,200 median annual income

$24,479 median baseline non-mortgage debt

55% spend over 40% of income on non-mortgage debt payments

Our solutions helped workers get out of debt and improve their cash flow

Median debt reduction per client: $4,848

Total aggregate debt reduced across all clients: $27,442,280

Total savings built: $4,663,503

Our solutions helped workers get out of debt and improve their cash flow

Median debt reduction per client: $4,848

Total aggregate debt reduced across all clients: $27,442,280

Total savings built: $4,663,503

Our solutions helped workers get out of debt and improve their cash flow

Median debt reduction per client: $4,848

Total aggregate debt reduced across all clients: $27,442,280

Total savings built: $4,663,503

SPOTLIGHT: TACKLING PREDATORY DEBT TO RECOUP WORKERS’ MONEY

The majority of Americans are in debt—but not all debt is created equal. For individuals with good credit and strong assets, debt can be affordable and over time, help to grow wealth (e.g., mortgage debt for valuable real estate). For those with weak or no credit, and monthly expenses that exceed income, debt relief options are more expensive and often predatory—with lenders capitalizing on the limited choices of low-income workers.

Payday loans drain more than $2.2 billion in fees each year from borrowers who have an average income of $25,000.

SPOTLIGHT: TACKLING PREDATORY DEBT TO RECOUP WORKERS’ MONEY

The majority of Americans are in debt—but not all debt is created equal. For individuals with good credit and strong assets, debt can be affordable and over time, help to grow wealth (e.g., mortgage debt for valuable real estate). For those with weak or no credit, and monthly expenses that exceed income, debt relief options are more expensive and often predatory—with lenders capitalizing on the limited choices of low-income workers.

Payday loans drain more than $2.2 billion in fees each year from borrowers who have an average income of $25,000.

“There’s no way to get out of payday loans without being in the hole. At one point I had $700 coming out of each paycheck. There were so many different apps I owed balances on. I didn’t even know what it was for anymore, by the time it came out of my paycheck I had already eaten the food I bought.”

—Wendy, Neighborhood Trust client

“There’s no way to get out of payday loans without being in the hole. At one point I had $700 coming out of each paycheck. There were so many different apps I owed balances on. I didn’t even know what it was for anymore, by the time it came out of my paycheck I had already eaten the food I bought.”

—Wendy, Neighborhood Trust client

WORKERS OF COLOR ARE AT PARTICULAR RISK OF DEBT AS A BARRIER TO BUILDING WEALTH. AVERAGE DEBT-TO-ASSET RATIOS BY RACE/ETHNICITY:

Black Families: 46.8%

|

Hispanic Families: 46.2%

|

Other non-white races and ethnicities: 37.3%

|

White Families: 26.5%

|

WORKERS OF COLOR ARE AT PARTICULAR RISK OF DEBT AS A BARRIER TO BUILDING WEALTH. AVERAGE DEBT-TO-ASSET RATIOS BY RACE/ETHNICITY:

Black Families: 46.8%

|

Hispanic Families: 46.2%

|

Other non-white races and ethnicities: 37.3%

|

White Families: 26.5%

|

WORKERS OF COLOR ARE AT PARTICULAR RISK OF DEBT AS A BARRIER TO BUILDING WEALTH. AVERAGE DEBT-TO-ASSET RATIOS BY RACE/ETHNICITY:

Black Families: 46.8%

|

Hispanic Families: 46.2%

|

Other non-white races and ethnicities: 37.3%

|

White Families: 26.5%

|

OUR FINANCIAL COACHES HELP WORKERS AVOID AND ESCAPE PREDATORY PRODUCTS

Some easy-access financial products may be appealing on the surface for their convenience and promise of quick cash in hand. However, they have CHARACTERISTICS THAT INFLICT REAL FINANCIAL HARM ON WORKERS. These predatory products are more expensive and siphon off more dollars from workers’ paychecks, MAKING IT HARDER TO BREAK THE CYCLE OF DEBT. Neighborhood Trust Financial Coaches identify these predatory characteristics and offer safe alternatives.

EXCESSIVE COST
Having an APR above a given threshold (e.g., >36%)

EXCESSIVE OR HIDDEN FEES
Fees that are above market-rate, and/or fees that are hidden from borrowers

HIDDEN OR MISLEADING REPAYMENT STRUCTURE
Repayment terms that conceal the true cost of borrowing

WEAK UNDERWRITING
No or limited assessment of ability to repay the debt

TRAPPING MECHANISMS
Product features or terms that encourage borrowers into a cycle of reborrowing and/or excessively long repayment periods

POOR LENDER CREDIBILITY
History of misleading or defrauding consumers and/or offering products that meet other predatory criteria

EXPLOITATIVE TARGETING
Marketing efforts that are misleading, offered at point-of-sale, and/or target those unlikely to qualify for prime lending and more susceptible to exploitation

“It’s just too much. Month after month, your money runs out, so you’re trying to bridge from one (loan) to the other. And it’s just really easy, you know, they (the lender) make loans in the neighborhood of probably a minimum of $300, up to about $1,200 to $2,000. And it’s just really easy. You walk in with some paperwork and walk out with some money.”

—Sharon, Neighborhood Trust client

“It’s just too much. Month after month, your money runs out, so you’re trying to bridge from one (loan) to the other. And it’s just really easy, you know, they (the lender) make loans in the neighborhood of probably a minimum of $300, up to about $1,200 to $2,000. And it’s just really easy. You walk in with some paperwork and walk out with some money.”

—Sharon, Neighborhood Trust client

WORKERS RECLAIM CASH, LEVERAGE AND OPPORTUNITY

Our coaching and trusted client relationships put us in close proximity to the market and to the real harm predatory products inflict on workers. We look beyond credit scores and balance sheets to UNDERSTAND THE FULL SCOPE OF EACH CLIENT’S NEEDS, THE IMPACT DEBT IS HAVING ON THEIR LIFE, AND THEIR PERSONAL FINANCIAL GOALS. Our guidance enables workers to recoup their own money, create positive cash flow, enhance self-efficacy, and build possibilities for the future.

WORKERS RECLAIM CASH, LEVERAGE AND OPPORTUNITY

Our coaching and trusted client relationships put us in close proximity to the market and to the real harm predatory products inflict on workers. We look beyond credit scores and balance sheets to UNDERSTAND THE FULL SCOPE OF EACH CLIENT’S NEEDS, THE IMPACT DEBT IS HAVING ON THEIR LIFE, AND THEIR PERSONAL FINANCIAL GOALS. Our guidance enables workers to recoup their own money, create positive cash flow, enhance self-efficacy, and build possibilities for the future.

Annette’s Story

In need of an easily accessible, quick loan to refinance her credit card debt, Neighborhood Trust client Annette secured a loan promoted by the online, for-profit company CreditKarma. The loan turned out to be predatory, with excessive interest which translated to high monthly costs and a four-year payoff period. “It felt like it wasn’t moving,” said Annette of her original loan. “You know, the more I paid, it just felt like it wasn’t going anywhere.”

With the help of Financial Coach, Elise, Annette was approved for a term loan with an interest rate 50% lower than her original loan. This has allowed Annette to reduce her payoff time by eight months, reclaim $4,700+ in interest payments and increase the amount she places in personal savings by nearly $11,000.

ORIGINAL PREDATORY LOAN

LOAN SECURED
WITH TRUSTPLUS COACHING

ANNETTE’S
SAVINGS

Interest Rate 25% 12% 50%
Less Interest
Total Monthly Debt Payment $606 $460 $146 More
in Monthly Savings
Time to Get Out of Debt 48 Months 40 Months 8 Months
Faster Out of Debt
Total Interest Paid $8,020 $3,245 $4,775 Saved
on Interest Payments
Total Savings Created $0 $10,688 $10,688
TOTAL SAVED

Annette’s Story

In need of an easily accessible, quick loan to refinance her credit card debt, Neighborhood Trust client Annette secured a loan promoted by the online, for-profit company CreditKarma. The loan turned out to be predatory, with excessive interest which translated to high monthly costs and a four-year payoff period. “It felt like it wasn’t moving,” said Annette of her original loan. “You know, the more I paid, it just felt like it wasn’t going anywhere.”

With the help of Financial Coach, Elise, Annette was approved for a term loan with an interest rate 50% lower than her original loan. This has allowed Annette to reduce her payoff time by eight months, reclaim $4,700+ in interest payments and increase the amount she places in personal savings by nearly $11,000.

ORIGINAL PREDATORY LOAN

LOAN SECURED
WITH TRUSTPLUS COACHING

ANNETTE’S
SAVINGS

Interest Rate 25% 12% 50%
Less Interest
Total Monthly Debt Payment $606 $460 $146 More
in Monthly Savings
Time to Get Out of Debt 48 Months 40 Months 8 Months
Faster Out of Debt
Total Interest Paid $8,020 $3,245 $4,775 Saved
on Interest Payments
Total Savings Created $0 $10,688 $10,688
TOTAL SAVED