State lawmakers want to help improve the financial literacy of residents in some of New Jersey’s most economically challenged cites. Their plan: Establish new “financial empowerment centers” that would offer coaching and other services to the community.

 

Legislation that passed a key Senate committee with bipartisan support earlier this month calls for the state to create a pilot program to establish financial empowerment centers in the cities of Camden, Newark and Paterson.

 

Under the proposed pilot, the Department of Community Affairs would partner with local officials and nonprofits to use the centers to offer forums, programs, financial coaching and other services. Officials would also be asked to track the results of their work with residents in economically vulnerable communities, who often don’t have access to basic financial services.

Profiting from a data breach

Funding for the pilot would come from the money New Jersey is receiving from a major settlement that was reached last year with credit-reporting firm Equifax to settle claims stemming from a 2017 data breach.

 

The legislation would also build on other efforts lawmakers have launched in recent years to improve financial literacy, including among New Jersey’s middle school and high school students. It is already drawing praise from leading advocates for New Jersey’s low-income residents, who say similar efforts have already helped hundreds of other people improve their personal balance sheets.

 

More than 100 million people across the country have been identified as “economically vulnerable” by the federal Consumer Financial Protection Bureau, which was founded in 2011 in the wake of the Great Recession. In New Jersey, Camden, Newark and Paterson all ranked among the state’s most distressed cities in a 2017 analysis published by the DCA. In fact, Camden was ranked as the state’s most distressed city in that analysis, which considered factors like the rates of poverty and unemployment, and overall per-capita income.

 

To help address concerns about poverty and income inequality, including in communities of color, experts generally point to improving financial literacy skills as one of several key goals. Removing obstacles to basic financial services is another.

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Location, location, location

The legislation that was approved earlier this month by the Senate Commerce Committee calls for “financial empowerment centers” to be established where they would be “easily accessible to the residents” of the three communities chosen to participate in the pilot.

 

Those who visit the centers would receive instruction on opening an affordable bank account, establishing a good credit score and improving their personal savings, according to the legislation. Instructors would also help residents learn about ways to reduce their household debt, the bill says.

 

The pilot program would operate for three years, and a report detailing its operations and success would have to be submitted to the governor and Legislature for review. The report would also make recommendations about continuing the program and expanding it to more communities.

 

Paula Mirk from New Jersey Citizen Action, a nonprofit group that provides services to the state’s low-income residents, including tax-preparation assistance in Newark, said financial coaching “can make a difference” for residents of the state’s vulnerable communities.

 

“We’ve helped hundreds of individuals increase savings, cashflow, credit scores, and to decrease debt,” said Mirk, the NJCA education fund’s director of financial coaching.

 

“The need for financial empowerment is real,” Mirk said during testimony before the Senate committee. “New Jersey families need this help now.”

 

The current draft of the bill calls for funding for the proposed pilot program to come from any monies that are received by the state as a result of last year’s settlement of complaints lodged against Equifax following the September 2017 data breach that affected more than 147 million Americans, including 4 million New Jersey residents.

 

According to the state attorney general’s office, which helped lead investigations into the data breach, Equifax failed to establish an adequate security program despite knowing about a “critical vulnerability” that exposed highly sensitive personal information, including names, dates of birth, addresses, and Social Security and credit card numbers. Four members of the Chinese military were charged earlier this month by the U.S. Department of Justice with carrying out a cyberattack on Equifax’s networks.

 

New Jersey is receiving $6.36 million in civil penalties from Equifax as part of a broader, $600 million settlement, the attorney general’s office announced last summer.