Press
The Trust Card debt reduction program enters accessible financial services incubator
MADISON, WI (January 30, 2014) – Filene Research Institute selected The Trust Card, a debt management program pioneered by Neighborhood Trust Federal Credit Union (NTFCU) and Neighborhood Trust Financial Partners, as the fifth and final product for its accessible financial services incubator. The Trust Card Program combines NTFCU’s signature Financial Counseling Services with a credit card that enables better debt management through behavioral economic design principles.
“We searched nationwide to find innovative financial products that benefit low-and-moderate-income US consumers,” said Cynthia Campbell, director of innovation labs at Filene. “The Trust Card joins four other products to be tested in areas like non-prime auto loans, small dollar loans and employer-based loans.”
Filene is looking for credit unions to test The Trust Card, Pay Yourself Back and Employer Sponsored Income Advance Loan. Contact Cynthia at cynthiac@filene.org or 608.661.3755 for more information.
Predatory consumer debt is perhaps the greatest barrier to converting wages into assets for low-and-moderate-income Americans. According to the Federal Reserve Bank of New York, national consumer credit card debt totaled roughly $750 billion in 2013. The Trust Card, designed in conjunction with Innovations for Poverty Action and with major funding from the Citi Foundation, is a credit card that consolidates existing unsecured debt, offers a fair interest rate and sets a fixed monthly payment that is affordable within a consumer’s budget. Unlike most credit cards, The Trust Card comes with a financial counselor who guides the client to reduce their debt as part of a comprehensive planning process.
Since its trial rollout 18 months ago, NTFCU consolidated approximately $300,000 of debt for 45 Trust Card users, saving borrowers tens of thousands of dollars in interest payments and generating substantial revenue with zero charge-offs.
The other products to be tested in the incubator include:
- Pay Yourself Back by Innovations in Poverty Action. As an add-on to any loan type, this product seamlessly converts borrowers into savers. Leveraging the habits formed by regularly making loan payments, it encourages consumers to keep making regular payments (or a portion of it) to themselves after the loan is paid off.
- Employer Sponsored Income Advance Loan by NorthCountry Federal Credit Union. This small dollar loan program is offered to employees of the Select Employer Groups (SEGs) partnered with credit unions. Loan payments are auto-deducted from direct deposited paychecks. Once the loan is paid, employees may continue making payments into savings accounts.
- Non-Prime Auto Lending by the National Credit Union Foundation. Access to reliable transportation allows for increased access to jobs, housing, schools and activities. But many credit-challenged consumers lack reliable transportation. This program helps lenders fairly price and manage non-prime auto loans, incorporating the LIFT idea introduced by Filene i3.
- Borrow and Save by the National Federation of Community Development Credit Unions. This product increases consumers’ economic security by providing an affordable small dollar loan with payment terms that makes sense for them. A built-in savings component also enables consumers to self-fund their emergencies instead of borrowing money to handle them.
About Filene
Filene Research Institute is an independent, consumer finance think and do tank dedicated to scientific and thoughtful analysis about issues affecting the future of credit unions, retail banking and cooperative finance. Found 25 years ago, Filene is a 501(c)(3) nonprofit organization. Nearly 1,000 members make the nonprofit’s research, innovation and impact programs possible.