Boston Builds Credit...

Boston Builds Credit creates innovative standards for credit-building products to close racial wealth gap, help residents improve credit scores

Jun 29, 2022

Boston Builds Credit awards its first seal of approval to the credit-building loan FAIR Credit Builder

As part of its mission to help Bostonians build prime credit scores and achieve financial well-being, the collaborative citywide initiative Boston Builds Credit has developed new standards for credit-building products that can help residents establish or improve their credit. These new standards – now a model for consumer protection partners nationwide – have led Boston Builds Credit to award its first seal of approval to the FAIR Credit Builder, a special low-risk loan designed to help users demonstrate a positive payment history and build good credit.

While a poor credit can make it difficult to rent an apartment, buy a car, or even secure a job, a good credit score can help individuals access lower interest rates and beneficial savings and investment opportunities. This makes credit building a powerful tool for shrinking the racial wealth gap, as many of the nearly 200,000 Bostonians with poor or no credit hail from neighborhoods that are predominantly communities of color, such as Roxbury, Dorchester, and Mattapan.

“Boston Builds Credit is doing critical work to address systemic racial inequities and help all Bostonians have the ability to build wealth,” said Mayor Michelle Wu. “This is especially important for our recovery from the pandemic, as residents need the skills to build strong credit for their financial stability.”

The FAIR Credit Builder is a product offered by nonprofit Prepare + Prosper and backed by Sunrise Banks. With no money needed upfront, the loan offers an accessible and affordable way to start building credit.

“FAIR is excited to be a part of Boston Builds Credit, because we both envision a future where underserved communities have access to wealth-building financial services, reduced reliance on wealth-stripping financial products, and more confidence in the day-to-day management of their financial lives,” said Kim Hover, financial inclusion manager at Prepare + Prosper. “With the values of trust, transparency, and partnership as our foundation, this future is well within our grasp.”

Boston Builds Credit developed its standards for credit-building products in collaboration with Bank On Boston, a City-led initiative that connects residents with reliable financial products and services. The new standards apply to both credit-building loans and secured credit cards. In both instances, the standards vet products for such features as affordable annual percentage rates, no or low fees, no or low barriers to entry, and easy online access. Products must also report to all three credit bureaus to ensure a positive impact on a user’s credit score.

“The FAIR Credit Builder offers Boston residents who are looking to improve their credit score a safe, affordable, and truly useful credit building loan product,” said Michael D. Andelman, Bank On Boston program manager and staff lead for Boston Builds Credit. “We thank and congratulate Prepare + Prosper for offering this terrific product, receiving the first Boston Builds Credit seal of approval, and leading credit building access efforts nationwide.”

Boston Builds Credit – a program created by the City of Boston, United Way of Massachusetts Bay and Merrimack Valley, and LISC Boston – connects residents to free resources such as financial coaching, credit workshops, community resource nights, and online comparison tables for both credit-building loans and secured credit cards. This spring, the program launched an advertising campaign, “Hey Boston! Let’s Talk About Credit,” throughout the city to get residents talking about and working on improving their credit.

“Black and Latinx Bostonians have been denied opportunities to build wealth and accumulate assets for generations due to a credit system with predatory and discriminatory practices,” said Bob Giannino, President and CEO at United Way of Massachusetts Bay and Merrimack Valley. “Through providing financial health resources and developing standards for credit-building products, Boston Builds Credit works to close the racial wealth gap and provide members of our community with a foundation to improve their financial health.”

About the Mayor’s Office of Financial Empowerment

The Office of Financial Empowerment (OFE) was created in 2014 to address racial wealth disparities and connect City residents with access to credit building programs, financial education, individualized financial coaching, and income support. Residents who seek to improve their financial stability can use these free programs to achieve economic well-being and pursue financial prosperity. OFE is also a lead partner on Boston Builds Credit, the first municipal credit building program in the United States. OFE is an affiliate of the Mayor's Office of Workforce Development and the Boston Planning & Development Agency. Boston Builds Credit and Bank On Boston are both programs of the Mayor’s Office of Financial Empowerment.

About United Way of Massachusetts Bay and Merrimack Valley

United Way of Massachusetts Bay and Merrimack Valley is a leading civic engagement organization dedicated to responding to our region’s most pressing issues like housing stability, economic mobility, healthy child development and educational success. We listen and work with communities to identify areas of greatest need and innovative approaches to address them, and then mobilize donors and corporate partners to provide resources to create positive lasting change. We have a vision and a mandate to empower stronger, more equitable communities, and we have the scale and reach to help. Our deep partnerships with hundreds of nonprofit organizations, state and municipal leaders, and businesses make us the region's go-to mobilizer to address urgent needs and activate comprehensive, long-term solutions. More information is available at Follow us @unitedwaymabay and #LiveUnited.

Original Article:

Jeffrey's story.

People want and need access to a financial system that works for them now more than ever—a pathway to financial security and wealth-building opportunities for their families and future. Learn more about Jeffrey’s story and his role as a FAIR Distribution partner at Build Wealth MN.

Tynaia's story.

People want and need access to a financial system that works for them now more than ever—a pathway to financial security and wealth-building opportunities for their families and future. Learn more about Tynaia’s story. Tynaia is both a FAIR customer and a distribution partner, who enrolls customers directly into FAIR at Twin Cities R!SE.

Introducing FAIR.

Introducing FAIR: Economic Opportunity for Everyone

People want and need access to a financial system that works for them now more than ever—a pathway to financial security and wealth-building opportunities for their families and future. Watch the video below to learn more about FAIR, our partners, and our impact.

Peter's FAIR story

Peter likes being creative and discovering new ways of doing things in science. That’s why he studied engineering and applied physics at Morehouse College in Atlanta, Georgia. Like most college graduates, his scholarships and work study didn’t cover all of his costs so he took out a student loan.

But confusion with his loan and a few missed payments ruined his credit score and he needed help.

“The FAIR Financial Solution interested me because it was transparent. With the majority of financial products and services, there’s a lot of small print. That’s not the case with FAIR. I knew exactly what was involved with the credit builder tool, checking, and savings accounts. For example, I found it very helpful that I could not overdraft with FAIR, which saves me from paying the expensive overdraft fees.

FAIR has given me the opportunity to think differently about savings. I’ve been able to save more than $500 in my FAIR savings account, which I’m using to save for a down payment on a reliable car once my credit score improves.

Since using FAIR, my credit score has improved. As a result of my improving credit score, I am more confident than ever before about purchasing a car and eventually a house.

One of the most important aspects about the FAIR Financial Solution for me was trust in Prepare + Prosper. Since I’ve had problems with financial institutions in the past, I knew I could rely on Prepare + Prosper because I trusted them to file my taxes and in their financial coaching program. Moreover, I’ve started to give back to them by becoming a volunteer as a tax preparer.

The FAIR Financial Solution has given me a new sense of freedom and confidence. I’m no longer tied down to a bad credit score or overdraft fees. I can manage my money and begin on the road to a better financial future.”

Building Prosperity for Future Generations

Thandisizwe Jackson-Nisan was 14 years old when the bank foreclosed on the home she’d grown up in. The foreclosure—and her family’s subsequent relocation to a shelter—was part of the fallout from that difficult time. “For 21 years I was a proud homeowner,” says Ms. Jackson. “But just like that, we lost everything.”

Mother and daughter found housing in a development where they quickly became its de facto social coordinators. “My mom and I were the ones hosting ‘conscious dinners’ and inviting the neighbors over for holidays,” says Thandisizwe. “We were always building community. That’s just who we are. We believe prosperity is a mindset, and we’ve always kept that mindset no matter what we’re up against.”

Unfortunately, she adds, financial security requires more than a mindset: “Even a good income only gets you so far. You need assets that can be handed down to future generations. If you don’t have that access, you’ll always be vulnerable even when things feel like they’re going well.”

Black households have only 10 cents in wealth for every dollar held by white households, according to 2016 Federal Reserve data. With the median black family having a total net worth (or what a family owns minus what a family owes) of roughly $16,000—compared to about $163,000 for whites—it’s more challenging, if not impossible, to realize economic resilience and security, as well as achieve upward economic mobility. The lack of assets among Black households sits at the intersection of historic and systematic racism. This story runs deep. It’s tied to slavery, wealth extraction, redlining, and discrimination: in its foundation, the financial system was not built to benefit Black people and people of color.

“This mess started with the era of chattel slavery,” says Jeremie Greer, Co-Founder and Co-Executive Director at Liberation in a Generation and a Prepare + Prosper Board member. Not only were white plantation owners able to build wealth based on a system of enslaved labor, but “insurance companies and banks were financing plantations in the south.”

And though more overt practices of redlining and discriminatory lending have become illegal and socially unacceptable, what many see as the root problem has not yet been consigned to history and disparities persist. “The mainstream financial system has rarely viewed poor people of color as a legitimate customer base,” says Jeremie. “It sees them as a community from which it can extract resources whenever it suits.” In fact, nearly half of black households compared to 17% of white households are considered unbanked or underbanked — a disparity that, over the course of a financial lifetime, can cost nearly $40,000 in fees.

The executive director of Build Wealth MN, Inc. David McGee has watched extractive financing (financial tools and services that leave a person worse off than when they found them) play out time and again over the course of his career. “Banks often justify their exclusionary behavior by arguing they’re protecting themselves from ‘risky’ customers,” he says.

One of these exclusionary practices entails charging Black, Indigenous, and other customers of color higher minimum balances to open and higher fees to maintain basic checking and savings accounts. According to a New America report on the racialized cost of banking, average costs and fees for basic, entry-level checking accounts are $190.09 higher for Black customers, $25.53 higher for Asian customers, and $262.09 higher for Latinx customers, compared to their White counterparts.

The excuses too many banks use to justify their exclusionary practices are baseless, says Jeremie. “What they do have is years of racism and bias guiding their decisions.”

The disinvestment of banks and credit unions in marginalized communities compounds the problem, as check cashers and payday lenders move into the “bank deserts” created when banks move out of the neighborhood. According to a Prosperity Now, in majority white counties, there are 41 banks per 100,000 people, compared to just 27 in majority BIPOC neighborhoods.  Even though the services offered by the alternative financial market fill a gap, they continue to extract wealth from the communities in these areas.

“The system was built to benefit exactly who it is benefiting and leave out exactly who is left behind,” said Jeremie. “Change needs to happen and FAIR’s work with a bank to shift the products, the practices, and the intended audience is an important start.”

How the FAIR banking solution creates access to intergenerational wealth-building

According to the Zero Wealth study, it’s all about the access with which you’re born. “By far, the largest factors explaining these differences in wealth are gifts and inheritances from older generations: a down payment on a first home, a debt-free college education, or a bequest from a parent … Black families have never had comparable resources to pass down to succeeding generations.”

Without those resources, says Ms. Jackson, life is always going to be a game of catch-up unless something changes. “Geoffrey Canada’s critique of our country’s education system sums it up: ‘If a train left Penn Station at 10 a.m. and it was traveling west at 30mph, and another train left Penn Station at noon and it’s traveling west at 30mph, when will train B catch train A? Never! It’s never going to happen. The delay on this train was intentional. It was deliberate and it continues to this day,’” Ms. Jackson shared.

Prepare + Prosper has worked with at least two generations of customers since 1971, when it launched its free tax program for taxpayers who have low- to moderate-incomes. Over the years, the organization has partnered with banks and credit unions to reach people who are financially underserved.

Because banks have yet to more fully meet communities’ needs,  customers still need ways to cash their paychecks and pay bills. Many turn to nonbank products and services in the so-called “fringe” financial market. Here, they encounter steep fees for everything from cashing a check to buying a money order to paying a bill. They also forego the benefit of keeping their money safe in an insured institution.

Starting in 2016, Prepare + Prosper started holding regular listening sessions, asking more than 200 customers to weigh in on what they would need from a bank to start (or continue) building and protecting wealth.

Based on input from these listening sessions, Prepare + Prosper partnered with Sunrise Banks and built accounts with the fees, features, and access they heard their customers wanted and couldn’t find anywhere.

“FAIR reaches a segment of the community the banks aren’t fully serving,” says Jeremie. “Until now, it has been the predatory lenders and check cashing places that have stepped up to fill that gap. FAIR brings competition into that segment. It says to the banks, ‘You don’t want to serve this customer base? That’s fine — we have a product and a partner that will.’”

Community distribution partners: The heart of the FAIR Financial Solution

FAIR doesn’t just offer products that help customers build (or rebuild) and maintain their financial security, it also unlocks future opportunities to build wealth. FAIR brings the entire customer experience to the community. Customers encounter FAIR products and services in non-bank touch points throughout the local area, where they live, work, gather, and worship.

This decentralized community distribution model — plus a digital platform featuring a full-service mobile app — gives FAIR the ability to expand beyond its pilot partners to reach customers the banking sector isn’t reaching.

The shift from products to partnerships and wealth-building possibilities  

“The loans, the investments, the savings, the modeling of healthy money habits for kids … these are the things that start to close the racial wealth gap,” David continues. “But you can’t do those things if you can’t get your credit where it needs to be. The FAIR products get things moving in the right direction.”

FAIR also proves the viability of a sustainable model that benefits the customer, the institution, and the community partners, he says.

“There’s never been any reason why everyone can’t succeed together. There’s a major revenue stream here with customers the banks have ignored. Banks can still be profitable without charging excessive fees.”

Hope for the future, and a new legacy of trust

“Part of parenting,” says Ms. Jackson, “is wanting more for your children than what you had. I’ve witnessed the impact of generational poverty and the reliance on check cashers and payday lenders. Because of my experience [with FAIR], I believe we have the opportunity to change that by building wealth and prosperity for future generations.”

“I’m up next,” says Thandisizwe. “I’m the future of my family. And I feel hopeful. I have big plans for my business. Part of what makes these plans feel accessible is having financial tools I can count on to help me build wealth, managed by people we can trust.”



A Radical Inversion of Trust

“I’ve always been a good saver,” says Stevenson. “I’ve never understood it when people say, ‘I can’t save any money because I don’t make a certain amount of money.’ No, you set aside a little bit. And you just keep doing it. Period.”

Stevenson shares this philosophy with the men he coaches at Ujamaa Place in his role as employment counselor. He also happens to share with many of them a lack of trust in the mainstream financial system.

Years ago, Stevenson walked into his bank looking to make a routine withdrawal. Instead of fulfilling his request, the teller told him he’d need to speak with a personal banker: His account had been seized. “There was no explanation,” says Stevenson. “No phone number to call, no way to get more information. My money was just gone. All of it.” He was left to navigate the situation on his own, with no support in which to turn.

Shaken and discouraged by the loss of his entire savings, Stevenson decided to step away from mainstream banking altogether. By the time he felt ready to give banking another try four years later, he again hit a snag: Stevenson learned that due to his banking history, he had been blacklisted by ChexSystems, a national consumer reporting agency. As a result, he couldn’t open an account at all.

“That was the end of me and banking,” says Stevenson. “I got a Walmart Money Card, went home, and put all my money back in my shoebox.” In turning to the alternative financial services - or “fringe” - market, Stevenson ensured he’d at least have a way to cash his paychecks and pay his bills. But he quickly ran into the downsides of those “conveniences.”

“You pay to put money on your card,” he says. “You pay to withdraw money. You pay for money orders to pay your bills. Nothing is free.”

Stevenson estimates he’s spent $5,000 in fees to access his money over the past three years. Yet despite his frequent repeat business, he says the Walmart MoneyCenter won’t even cash his check if it doesn’t look a certain way.

“I realize this isn’t an actual bank,” he says. “But I miss the days when the people who handled your money were people you saw out in the community. They knew you and did what they could to help you.”

The bigger picture: How banks shift the burden to low-income individuals

Stevenson’s experience of getting caught between the mainstream and the “fringe” financial market is not unique. Nor is the amount of money he spends to access his own funds. “Unfortunately, people have figured out ways to extract massive amounts of money from very poor individuals,” says Jen Alstad, Founder of bswing and consultant to Prepare + Prosper. “Big capitalism—which is our system in the US—centers everything around what works best for the bank.”

Years ago, Prepare + Prosper—along with a leadership team that spanned leaders from nonprofits, government, banks, and start-ups—envisioned a new financial services model that could center and support customers regardless of their income or banking history. They saw that offering as a cross-sector effort shared by banks, nonprofits, and community access points (including government and employers) — all coming together to create a new way of banking. With her expertise in human-centered design, Alstad helped Prepare + Prosper organize and facilitate listening and co-design sessions with community members.

The members of this focus group qualified as either “unbanked” (someone who has no access to federally insured accounts) or “underbanked” (someone who has access to mainstream banking but who still must turn to “fringe” financial services to meet financial needs).

Prepare + Prosper had been listening to their customers for many years, incorporating real-life insights into services and partnerships with banks and credit unions. The goal of these specific listening sessions was to learn 1) what it would take to restore the customers’ trust in a banking relationship and 2) what kind of features, products, and fees customers would want in a community bank.

FAIR gives underserved customers a voice — and a choice

“Every aspect of the FAIR products and services grew out of these listening sessions,” says Alstad. “Prepare + Prosper heard that the most important things to customers are transparency and predictability — both of which are in short supply in mainstream banking.”

That lack of transparency can be the hardest part to navigate, says Julia Sisson, former Financial Wellness Coordinator at EMERGE Community Development, a FAIR distribution location. And especially for individuals who are already marginalized due to institutional racism, poverty, and/or bigotry, it adds another level of exclusion.

“I think many people have a built-in trauma response to money going anywhere other than right into their hands,” says Julia. “Maybe they’ve had their account seized. Or they’ve watched the credit union across the street close its doors and just disappear. In every case the message is, ‘You’re on your own.’”

Julia has observed a major disconnect between mainstream financial institutions and the people EMERGE serves. “There used to be a credit union across the street from us, but they left. That flight doesn’t surprise me, given the lack of willingness to reach out and listen to the people who live here.

“And so why do those financial institutions even deserve these individuals’ money?” she wonders. “They don’t.”

Rethinking banking for the underserved customer

Across income levels, traditional banks have proven themselves out of touch with customer needs, charging $30 billion a year in overdraft fees, according to a Moebs Services, a research firm focused on financial institutions. Banks have also demonstrated little appetite for investing in the underserved market, whose customers spend $189 billion in fees each year in the alternative financial services marketplace according to the Financial Health Network.

“The great thing,” says Julia, “is that we don’t actually have to fix the old way. We can create a new way, and let people decide what works for them. FAIR is paving that way forward.”

Once a new FAIR customer receives their initial coaching session and onboarding with a community partner (such as EMERGE or Prepare + Prosper), account management happens almost exclusively online. The emphasis on digital access lets FAIR serve community members who live in “financial deserts.” Such areas get created when traditional banks either avoid the neighborhoods, or close their doors to move across town, stripping wealth as they go.

The digital approach also enables scaling within FAIR’s unique distribution model, which features a decentralized network of community partners customers already know and trust.

A radical inversion of trust

“No matter what your banking history looks like, FAIR wants you as a customer,” says Jen. “Behind that business decision is a belief that people are creative and resourceful, and that they always make the right choice based on their understanding of their available options."

“That’s a very different approach from the one most mainstream banks take. But despite the way traditional banks often treat people on the lower end of the economic spectrum, it’s not that these customers don’t know what they’re doing. It’s that the old system hasn’t worked for them.

“FAIR breaks the mold in a number of ways,” Jen continues. “One way is by setting up as equal stakeholders the consumer, the organization (FAIR), and the bank. This shared responsibility really is a radical inversion.”

Trusted distribution partners throughout the community

One way FAIR demonstrates its relationship-centered approach is by taking the customer experience out into community. Customers encounter FAIR products and services in familiar places where they already receive services, go to work, or gather for worship.

“Most banks have a take-it-or-leave-it attitude. It’s disrespectful, and it makes no business sense,” says Alstad. “We would never tell a customer to ‘just trust us.’ We embed our services in the places where trust already exists, and we go from there.”

“That community aspect is what made me want to give FAIR a shot,” says Stevenson. “And I think it’s going to go over well with Ujamaa participants. They will be able to sign up right here, in the same place where they come to class and receive services. It means a lot that they came to me—I didn’t have to go looking.”

With his strong commitment to saving, Stevenson appreciates that FAIR offers a savings account and a credit builder loan in addition to checking. “We expect our participants to complete certain milestones before we consider them alumni,” he says. “And at least on the financial front, FAIR has everything a person needs to start building wealth and working their way back to the mainstream financial market.

“I believe we all need to be engaged in traditional banking,” he adds. “For better or worse, your opportunities are limited if you aren’t playing in that league. Being able to walk into a traditional bank gives you confidence and courage.”

The future of FAIR

FAIR is already thinking about the future, says Alstad. “In the state of Minnesota alone, there are around 256,000 unbanked or underbanked households. That’s a pretty ripe growth path. Our aspiration is to show this is a better way to manage your money than going through the fringe market financial services industry.”

Though new to the FAIR products and services, Stevenson already notices a difference in his outlook. “I think the word ‘fair’ gets tossed around a lot,” he says. “I’ll admit I was skeptical at first. But these products and services actually mean what they say."

"To me, this is an example of the way ‘fair’ should look.”

A Tale of Two Financial Worlds

Place yourself in the following scenario: You’re a working parent struggling to make ends meet. You’re looking forward to tax time, because you know you’ll be getting a sizable tax refund from the Earned Income Tax Credit (EITC).

But there’s a catch. You don’t have a checking or a savings account. And yet you know you need to find a safe, secure place to save the refund when it comes through. Your cousin recommends a bank across town. It takes some doing, but you finally get yourself to the bank to open an account.

As you approach the counter, you feel a sense of intimidation and dread from past experiences you’ve had with banks.

Focused on your mission, you take a deep breath and shake it off. You calmly explain you’re here to open a checking and savings account. After reviewing your information, the banker frowns and tells you that you don’t qualify because of your ChexSystems record. You have to ask them to explain and they say you owe another bank money. It amounts to a couple unpaid fees at another bank that were snowballed when you were in between jobs and couldn’t keep a high enough balance in your account to avoid fees; nothing outrageous but you walked away because you could no longer afford your bank account.

Still, your request is denied.

Or imagine that you’re Julie Stelzer, a Minneapolis woman working to put things back together after struggling with addiction, who ran into a different but similarly frustrating scenario. “I’m rebuilding my life,” Julie says. “I went to treatment. I went to school. And I started working.” But she had no bank account, and no reliable, affordable way to cash her paychecks. When Julie received a $25 check for one of her first paying gigs after treatment, she hit a wall as she tried to access that money.

“At all the places where you can get a check cashed, there’s a large percentage they cut out,” she says. “I went to cash it at the bank and they were still going to charge me $7 of the $25. I needed the $25. I couldn’t afford the $7 to be taken out,” she says.

“I felt angry. I felt ‘less than.’ Just because I didn’t have a bank account.”

The complexities of saving in an extractive financial system

Eva Song Margolis, previously the economic empowerment & employment services director at Lutheran Social Service of Minnesota (LSS of MN) and now with Greater Twin Cities United Way, has worked with countless people who find themselves in scenarios similar to the ones just described.

“It’s a really tough spot to be in,” says Margolis.

“You have this sum of money. You want to put it toward your kids’ future, but you can’t access a product that will let you do so safely. You have very few options.”

It gets more complex, she explains, if your family also happens to be on a cash assistance program like Minnesota Family Investment Program (MFIP). In such cases, there are limits on how much money you can keep in a savings account without reducing your monthly benefit.

Barriers to mainstream banking: A history of exclusion and extraction in U.S. financial markets

For people who grew up in a household that participated in the traditional banking model, a scenario of exclusion like the one described above can seem quite abstract. It can be tempting to assume everyone enjoys the privilege of a working relationship with a traditional bank and that everyone has the financial cushion to keep in their accounts to avoid monthly maintenance and overdraft fees but that’s not the reality for a large portion of the U.S. population, says Margolis.

“It never has been,” she says. “In the United States, financially poor people and people of color have historically been excluded from financial systems and markets. These same people are the ones whose labor, whose land, whose very bodies provided the backbone of the systems and markets they could neither access nor participate in."

“The exclusion goes back hundreds and hundreds of years, and it's an important context to consider. From the very beginning, only certain people could get a loan, or count on a secure place to store their money. Ours is a banking system of selective inclusion and purposeful exclusion.”

For those who find themselves on the outside of the mainstream banking system looking in, the mechanisms of exclusion are glaring. Equally glaring are the mechanisms of financial extraction.

“Even today, some folks are able to access basic financial products such as checking and savings accounts without getting gouged for them, while others simply cannot,” she says. “And then we see these sub-tier products emerge. I don’t believe the introduction of any of these products was roundabout or coincidence.”

People rightly wonder why they’re getting blocked at every turn, says Margolis. “I see people struggling to access a system engineered to exclude them. They think, ‘I’m just trying to do well for myself and right by my kids; why can’t I get the accounts and features I need? Why all the limitations on how much I can save without putting my income in jeopardy?’ People are smart. They know the model is flawed, but they can’t do anything about it. Their options are incredibly limited.”

The benefits and drawbacks of the “alternative financial market”

The mainstream financial market isn’t the only outlet for accessing funds or paying bills. Check cashing and payday lending establishments, as well as post office’s with money orders, fill in where banks won’t by offering their services to people who can’t meet the eligibility requirements of traditional financial institutions. “People need a way to access their own money,” says Margolis. “It’s as simple as that.”

To understand how the check-cashing process works, imagine your employer cuts you a $1,000 payroll check. There’s nothing you can do with a check until you can cash it. So you take it to your neighborhood check cashing place. You can count on them for their friendly service and to get your cash quickly. While transparent, the service costs between 2% - 4% of your income.

You still have $960 cash left from which to pay your monthly rent of $500. But your landlord doesn’t take cash. So you spend $10 on money orders to pay rent and bills. Now you’re out $50 for these two services. That’s 10% of your paycheck.

You’ve got other bills, too. Utility payments, maybe car payments … medical expenses. And what about emergencies? If your car breaks down, you might not have the funds to cover the repair — especially if you don’t have a savings account or strong credit score to draw from.

“A lot of folks can’t access a traditional loan or credit card,” says Margolis.

“They don’t have the option to walk into a bank and ask to borrow $500 - $2,000. Payday lenders fill a huge need in terms of creating access so people can pay bills and take care of their basic needs.”

Still, she says, the steep fees and interest rates that accompany payday loans often make them a last resort. According to the Consumer Financial Protection Bureau (CFPB), a typical two-week payday loan with a $15 per $100 fee equates to an annual percentage rate (APR) of almost 400%.

“We see people getting stuck in a cycle of loans that flip multiple times,” says Margolis. “Check cashing and payday lending services can be convenient and friendly. But the potential consequences of not meeting the payment schedules can also be crippling.”

A better path forward with FAIR

Years ago, Prepare + Prosper (P+P) envisioned a financial services model that could sustainably serve customers who found themselves shut out of the mainstream financial markets — while keeping them out of the piecemeal solutions and the cycle of high fees that characterizes the nonbank markets. P+P wanted to create access to federally backed checking and savings products, as well as credit building instruments, which will position them to access affordable credit, lessening their reliance on predatory lending.

P+P imagined a new model for the financial markets; a cross-sector effort shared by banks, nonprofits and community access points, including employers and government agencies. But first, they wanted to know what their customers would like to see from a community bank. With the help of experts and leaders like Margolis, P+P organized and facilitated listening sessions with community members to learn what kinds of features, products and fees to incorporate.

From these listening sessions, the blueprint for the FAIR Solution emerged. P+P partnered with Sunrise Banks to create checking, savings, and credit building accounts with the fees, features, and access their customers said would serve their needs.

FAIR delivers the convenience and safety customers seek

After experiencing so many roadblocks while working toward a brighter future, Julie found a new path in FAIR. “My coach told me about FAIR. I said: ‘That sounds great!’” She was excited by the opportunity to set up an account with low fees, and easier access to her new income. “ I am too stingy to go to a check cashing place and have them take 10%,” she says.

“When you already have little money, you don’t want to give it away.”

“With the FAIR checking and savings accounts, customers save time, money, and worry,” says Margolis, who formerly served as financial manager for P+P.

“If I’ve been excluded from the traditional banking system and relying on predatory ‘fringe’ products, the FAIR model changes so much for me. Now I can direct deposit my paycheck; no fees for cashing. I can tell my employer I want $10 from every pay period to go to my savings account. I can pay my bills online for free; no money orders to mess with. And no more looking over my shoulder as I leave the check-cashing place with $1,000 in my pocket, worrying if I’ll get robbed.”

Unlike banks and credit unions, which typically aren’t willing to work with customers with less-than-great credit or who walked away from other banks because of fees, “FAIR wants to serve these customers, and to help them create healthy financial practices. That’s why FAIR checking was designed with no overdraft capability or minimum balance requirement. Customers pay one predictable, flat, low monthly fee that never changes.”

Community relationships form the foundation of the FAIR financial solution

With her long history of leadership and innovation in nonprofit organizations, Margolis views the community distribution model as the secret sauce of the FAIR suite of products and services.

“Whether it’s LSS of MN, EMERGE, or BuildWealth MN, these distribution partners are well-known organizations with deep ties to neighborhoods and communities,” she says. “People already have relationships with them, or know someone who does. At LSS of MN, for example, a client can access or apply for these products right with their employment coach. They don’t ever have to walk into a situation or environment that feels unfamiliar or biased against them.”

The relationship-centered model also gives customers access to financial coaching opportunities. “We want people to have success using the FAIR products. We also want them to create sustainable financial habits that will serve them for a lifetime, no matter where they choose to keep their money.”

Finally, the FAIR model lets a customer address important financial considerations in context. “As we help folks access training and get placed into employment here at LSS of MN, we can have conversations such as, ‘Ok, you’ve got this new job. Should we open a FAIR checking account and set up your direct deposit while we’re at it?’”

The future of FAIR and a new way of banking

Margolis imagines a world in which the FAIR model is the norm, instead of the exception. “I would love to see employers at some point making FAIR-style products available to their part- and full-time employees,” she says.

In the meantime, she celebrates the progress already underway.

“FAIR serves a very unique function in making these products and services available. It gives people the chance to make smart, safe decisions with their money that will help them support themselves and their families — now and into the future.”

Julie Stelzer has her eyes firmly set on that future with FAIR. “They’re helping me build back into a responsible life,” she says. “I really like that.”

Decorative image for Fair Manifesto post

A FAIR Movement for Economic Justice

People want and need access to a financial system that works for them now more than ever—a pathway to financial security and wealth-building opportunities for their family and future.

Unfortunately, too many people—one in four people nationally according to the FDIC—are living outside the financial mainstream because they simply can’t afford bank accounts or don’t trust banks. When you break it down by race, it’s one in five white households compared to an alarming almost one out of every two Black households.

Banking is a system designed around privilege, seldom focused on building financial health and wealth for low-income or Black, Indigenous, or communities of color. Instead, their wealth is often stripped through product features like overdraft and minimum balance requirements that really only work for people with financial stability—steady and sufficient income and a good financial track record. Banks’ systems of rules and practices that surround their products are exclusionary and opaque, and many of them are grounded in historical (redlining) and current (unequal access to credit) discriminatory practices.

All of these barriers form a perception—and a reality—that bank accounts are not accessible to or built for low-income people and/or Black, Indigenous, and people of color. And it doesn’t have to be this way.

Prepare + Prosper is reimagining the banking experience with FAIR, in partnership with a bank whose mission overlaps with ours, Sunrise Banks. We’re not just designing financial products, we designed an entirely new model—built from the ground up on a foundation of trust, transparency, inclusion, access, and partnership. It’s a blueprint that emerged from a group of leaders from multiple sectors—including banks and nonprofits who have spent years working with banks—who wanted a solution. It was, and continues to be, informed by listening to the communities and individuals who have been left out of the banking ecosystem to create the kinds of products for which they asked.

With Sunrise Banks, we’re building products that work for people, regardless of their income, cash flow, or past experience with banks. We’re talking about the products and features in ways that are jargon-free and easy to follow. We offer coaching to help people understand and use their accounts to reach their financial goals. And we’re bringing these accounts to communities in new ways, working with partners who are trusted by community members and share our vision.

We are part of a movement to change an industry that needs to change. It needs new systems, a more racially equitable paradigm, and more inclusive ways of doing business. Simply put: we’re demanding an financial system centered on economic and racial justice. And we’re calling for a system that centers this essential truth: everyone deserves access to safe, affordable financial services, and opportunities to build wealth—no matter our race, income, or geography. To get there, we need everyone to join us: banks, non-profits, innovators, community leaders, legislators, and customers.

We’ve already seen innovators that have started us on this path—like SaverLife, Mission Asset Fund, and MoCaFi—who have paved the way for FAIR to help take the movement forward. The next steps are ones we must take together—banks, community organizations, and government—all collaborating to build a new system that works for the people, and yes, turn a profit in a FAIR way. According to the Financial Health Network, financially underserved consumers currently spend $189 billion on fees and interest—imagine if that was redirected toward individual and community wealth?

While FAIR pushes for radical change, it also strives to be a true partner for people and their money, offering tools and support to help individuals and families spend less money on accessing their own money and get on the pathway to financial success. We envision a future in which underserved communities have access to wealth-building financial services, reduced reliance on wealth-stripping financial products, and more confidence and control in the day-to-day management of their financial lives. With the values of trust, transparency, and partnership as our North Star, this future is well within our grasp.