Coronavirus pushes up demand for financial literacy, but money to pay for it is tight
Coronavirus pushes up demand for financial literacy, but money to pay for it is tight
This is a tough time for small nonprofits. Donations were declining even before the coronavirus. Now they fear it could get even worse. With rising unemployment, financial literacy groups are seeing more demand for their services, and they’re looking for funding from new sources — including the Consumer Financial Protection Bureau.
Joseph Leitmann-Santa Cruz is working 10-hour days right now. He’s the executive director of Capital Area Asset Builders, a Washington, D.C., nonprofit that offers low-income residents free financial coaching. They’ve seen a 25% increase in phone calls and emails from laid-off restaurant workers and construction workers.
They’re asking for advice on what should be paid first, what can be put on hold and what can be negotiated.
“And what kind of conversations our clients need to have either with landlords or with debt collectors,” Leitmann-Santa Cruz said.
Leitmann-Santa Cruz has nine employees, but he’s the only Spanish speaker. He’d like to hire more bilingual financial coaches, but he doesn’t have the money. So he joined more than 200 other nonprofits focused on financial literacy who sent a letter to the federal Consumer Financial Protection Bureau asking for help. Dara Duguay, CEO of the nonprofit Credit Builders Alliance, is spearheading the letter campaign.
“This is the solution — at least to the immediate crisis that nonprofits are experiencing,” Duguay said.
The nonprofits want the CFPB to dip into its $1.2 billion Civil Penalty Fund and pay for some financial literacy work. The fund comes from fines companies pay after the CFPB penalizes them for defrauding consumers. Former CFPB Director Richard Cordray said that money is intended for victims of financial fraud. And the CFPB is still tracking victims down for payment.
“If you take money out of the fund for this purpose, you’re taking it away from victims,” Cordray said. “That would be the issue.”
The CFPB didn’t respond to our request for comment. On its website, the agency says it can use leftover money for financial literacy if it can’t find victims. Cordray said the CFPB did contract with one nonprofit for financial counseling for veterans.
But he said the billion-dollar fund shouldn’t be drained for programs like that, otherwise, there may not be enough for future victims — if, for example, a company defrauds consumers, then goes bankrupt and can’t pay fines. Cordray said financial literacy work is important, but shouldn’t use CFPB money.
“They should be funded by the federal government, by the state government and by the local government,” Cordray said.
But the federal paycheck protection loan program for small businesses —including nonprofits — is out of money. And state and local governments are strapped for cash because revenue from sales and income taxes has plummeted. Duguay still hasn’t heard back from the CFPB. She said nonprofits are stuck.
“Many of them, if they don’t get additional funds, are not going to be able to quite literally exist anymore,” Duguay said. “And the services that they provide will disappear.”
Or be cut back dramatically by those who survive.
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