The Land of Opportunity
This week we celebrated the Fourth of July. Hot dogs, swimming pools, fireworks – how better to ring in this annual occasion and take a few days to remember our country’s history? As I sat along Boston’s Charles River banks this Sunday evening, I couldn’t help but reflect on our country’s core principles of freedom, opportunity, and equality.
Moreover, my thoughts centered on those who come to the U.S. every day to realize the “American dream.” But we all know that U.S. soil doesn’t guarantee a life free of struggle.
Imagine two scenarios. In one, a Venezuelan women moves to Miami with her husband. She has limited English fluency and little personal savings, as her husband handles their finances. But she wants to begin a small sewing business to keep herself busy and contribute to the household income. In the second scenario, a young man comes to the United States from Ecuador. He has his Masters degree, nearly twenty years of business experience, perfect English fluency, and a hefty savings. He hopes to open a leather importing business in Boston.
Despite their many differences, these two individuals have two things in common: their lack of credit history and knowledge of the U.S. financial system. And because of these key similarities, neither can get an affordable loan.
These descriptions detail the experiences of two ACCION USA clients. Lack of credit history is only one of many challenges immigrants face when trying to access financing. Language barriers are also great, as detailed by the U.S. Government Accountability Office’s recent report, entitled Factors Affecting the Financial Literacy of Individuals with Limited English Proficiency. The report explains that language barriers can prevent individuals from understanding financial products’ terms, disputing charges or fees, managing accounts, and simply accessing financial education opportunities. Furthermore, many immigrants carry a negative correlation with financial institutions, due to prior experiences or institutional fraud and instability in their countries.
ACCION USA has many programs and services in place to address these challenges. For example, our small credit builder loans are specifically designed to help individuals with no credit history begin to build one. Our financial education workshops help immigrants understand not only how to build credit but also why building credit is important in the United States. And we continue to work closely with groups such as the Massachusetts Refugee Enterprise Achievement Program to establish ACCION USA as a trusted and reliable name among immigrant communities.
Through these programs and relationships, ACCION USA continues to help immigrants achieve the full “American dream.”
Tags: accion usa, english, Financial Education, fourth of july, immigrant, literacy, massachusetts, miami, report
The Incredible, Shrinking Tax Refund!
ACCION USA provides taxpayers with the financial education and resources they need to make smart, informed decisions about RALs.
And so it begins. Tax season. The time of year when tax prep software commercials sandwich prime time TV shows and your friends in the tax prep industry sleep on office couches. For many like myself, it’s another opportunity to procrastinate for four months and then spend my entire refund on priority mail.
Unfortunately, this time of year is also notorious for coercion and scheming, and the latest trend is in refund anticipation loans (RALs). A tax preparer may advertise these loans as “instant loans” or “instant refunds” – in reality, the only instant thing about them is the speed with which your real refund will shrink.
Here’s how it works: your tax preparer offers you a RAL; you accept the offer and sign a document, which is essentially a loan agreement authorizing the preparer to use your refund as a guarantee, with interest rates as high as 50-500% a year; the loan is (instantly!) approved; you walk away with fast cash but actually receive a significantly smaller refund; and the tax preparer makes one hefty profit.
Certainly, the tax prep industry provides a highly-demanded service for many, many people. But according to the Woodstock Institute, 8.67 million taxpayers received RALs in 2007. A RAL may very well have been an appropriate solution for some of these individuals, but I will venture to guess that they comprise only a small portion of that 8.67 million. What about the millions who are essentially handing over their hard-earned money? I believe the answer lies in education and empowerment.
ACCION USA’s financial education team is on top of this. We have already distributed an article addressing RALs, and we are featuring RALs in our online tip of the month. In addition to educating clients on the implications of refund anticipation loans, we also provide them with valuable resources, including smart alternatives to RALs, lists of free tax preparation locations (including our Miami, FL office), and helpful websites. These resources not only have the power to produce more informed taxpayers; but they also have the potential to mold a new generation of educated, responsible, and empowered consumers.
This type of generational change may not be instant – but in terms of the return, the investment is surely worth the wait.
Tags: accion, accion usa, anticipation, education, eitc, financial, Financial Education, literacy, loan, microfinance, prep, preparation, RAL, refund, tax, tax season