Transcript Making Sense of Cents: A Debtor Education Program

Making Sense of Cents: A Debtor
Education Program:
Portugal
Contact::
Prof. Karen Gross
New York Law School
57 Worth Street
New York, NY 10013
F :212-431-2154
Fax :212-431-1864
E: [email protected]
Prof. Susan Block-Lieb
Fordham University School of Law
140 W.62nd Street
New York, NY 10023
F: 212-636-6782
Fax: 212-636-6899
E:[email protected]
Is debtor education a good idea?
• Growth in consumer credit has been astronomical
over the past twenty years.
• Increasing competition within consumer finance
industry has pushed lenders to seek out new
markets – including sizable increases in the
subprime lending market.
– Subprime lending is disproportionately concentrated in
minority and low-income neighborhoods;
– Some subprime lenders have employed predatory
practices to induce growth in this market.
Is debtor education a good idea?
• Consumers regularly are exposed to a
complex array of credit products.
• Consumer protection regulation requires
lenders to provide disclosure, but how
effective are disclosure regimes in the
absence of financial literacy training?
Is debtor education a good thing?
• Many would argue that it is too late to provide
financial literacy training to debtors in bankruptcy.
• We don’t disagree that elementary, middle and
high schools, colleges and community centers
should be teaching our children and young adults
how to balance check books, devise spending
plans, and distinguish between credit and debit
cards . . .but. . .
Is debtor education a good thing?
• Bankruptcy (“over-indebtedness”) provides
a “teachable moment.”
• We think that debtors are ready to hear and
learn about personal financial management
upon the filing of a bankruptcy petition.
• Debtors can benefit from a financial literacy
course, no matter why they filed.
Is debtor education a good thing?
• In our credit economy, debtors cannot obtain a
“fresh start” following bankruptcy armed with
simply a discharge.
• Financial literacy training renders debtors’ fresh
starts meaningful.
• Debtor education empowers consumer debtors to
re-enter the consumer finance market after
bankruptcy.
– Credit is not just a luxury and privilege for the chosen
few.
– Diminished access to credit creates a type of aphasia.
Financial education is most needed by those who
are financially vulnerable.
Financial education is an important
tool for all consumers, but it is
indispensable for consumer debtors
looking for a fresh start after
bankruptcy.
Pilot Project:
Making Sense of Cents
Coalition for Consumer Bankruptcy
Debtor Education;
Eastern District of New York
The Classroom Component
Teaching Financial Literacy:
• All consumer debtors who file either a chapter 7
or chapter 13 bankruptcy petition in the EDNY
(Brooklyn, Queens, Staten Island, Long Island)
can volunteer to take a three-hour long personal
financial management course taught free of charge
through the Coalition.
• The Coalition anticipates educating up to 1,200
individuals between September 2001 through
January 2003.
Curriculum:
• The Coalition has developed a curriculum to be
used in these training sessions called “Making
Sense of Cents.”
• The curriculum addresses both the substance and
psychodynamics of borrowing,
• It has four goals:
–
–
–
–
Assist debtors in becoming more financially literate;
Alert debtors to uses and misuses of credit;
Help debtors develop savings and spending plans;
Provide debtors with a vocabulary for discussing
financial issues.
Teachers:
• The Pilot Project relies on volunteer teachers:
bankruptcy lawyers; bankers; social workers;
educators.
• The Coalition has conducted three “train the
trainer” sessions, and trained approximately 50
teachers.
• The “train the trainer” sessions combine:
– Substantive information about credit and bankruptcy;
– Material on the psychology of money and debt; and
– Adult learning techniques.
Community Development:
• Currently, the curriculum is written in
English, but the Coalition plans to translate
the materials into Spanish and Chinese.
• The Coalition also plans to train teachers
who can conduct classes in Spanish and
Chinese, and then reach out to the Hispanic
and Asian debtors in EDNY.
Website:
• Good pedagogical techniques anticipate the
provision of continuing educational opportunities.
• The Coalition also plans to develop a website
where debtors will be able to interact with their
instructor and fellow classmates – post questions
and supplement the course.
• We do not propose that the website substitute for a
live classroom setting.
The Empirical Study:
Questionnaire:
• Developed by Dr. Richard L. Wiener, Chair
and Professor of Psychology, Baruch
College, City University of New York.
• Employs sophisticated survey methods to
compare and determine changes in attitudes
and behavior about money, credit,
borrowing, and spending habits.
Short term longitudinal study:
• Two sets of questionnaires:
– Once near time of filing of bankruptcy petition;
– Again after some debtors have had a chance to
take the class and reflect on the material
covered in that setting.
• Separated by three-month period.
Four respondent groups:
• Primary: debtors in EDNY who volunteer and take
financial literacy course offered by the Coalition
• Control: debtors in EDNY who volunteer but do
not take financial literacy course
• Control: debtors in EDNY who do not volunteer
for financial literacy course
• Control: “debtors” who have not filed for
bankruptcy in EDNY or anywhere else
Information sought in questionnaire:
• Demographic information;
• Questions to elicit information about
respondents’
– Attitudes about borrowing and spending;
– Money behavior;
– Substantive knowledge about basic financial
information.
Attitude Question
• Attitudes toward irresponsible spending
• Theory of Reasoned Action:
• Behavior = Intentions X Control
• Intentions = Attitudes X Subjective Norms
•
Four scenarios:
(scenario #1)
1. Imagine that you live in an apartment filled with second-hand
furniture. You learn about a store that will furnish your whole
apartment for $600 per month. They can deliver the furniture
within 24 hours.
Attitude Question
•
Questions for each of the 4 Scenarios:
1. Valence of one’s own feelings to rent the
furniture (displeased to pleased)
2. Importance of feeling to rent for decision
(unimportant to important)
3. Valence of the feelings of family and friends
(displeased to pleased)
Attitude Question
•
Questions for each of the 4 Scenarios:
4. Importance of others’ feeling for
decision(unimportant to important)
5. How much control do you have over the
decision (no control to complete control)
6. How likely are you to rent
(unlikely to very likely)
Behavior Measure
•
Participants are asked to identify and then
describe a series of economic actions that they
have taken within a set period of time before
bankruptcy and a set period of time after debtor
education
EXAMPLE:
1.
Have you made a deposit into your checking account in the
last month? (circle one)
Yes
No
a. If yes, approximately how much were your total deposits? _____
Behavior Measure
EXAMPLE:
2. Did you have any unpaid bills at the end of last
month? (circle one)
Yes
No
a. If yes, approximately what is the total amount that you left
unpaid? ? _____
Knowledge Question
Example Question:
If you make only the minimum monthly payment on your
credit card bill each month, the amount of interest
you will pay will be
a. more than if you had made larger (greater than
minimum) payments each month.
b. less than if you had made larger (greater than
minimum) payments each month.
c. the same no matter what the size of your monthly
payment.
d. zero, because credit cards don’t charge interest.
What do we hope to learn?
• Does financial management education increase
participating debtors’ knowledge base at a greater
rate than any of the control groups?
• Does it alter debtors’ attitudes about spending and
borrowing?
• Does it affect their spending and saving behavior?
• If so, does this correlate to a debtor’s age,
education, ethnicity or gender?
Expected Results: Positive
Attitude, Knowledge, and
Behavior Scores
100
90
80
70
60
50
40
30
20
10
0
Completers
Volunteers
Controls
Consumers
Pretest
Posttest
What we’ve learned so far:
• Think BIG – start small.
• Consensus is great, but it takes time, effort
and patience.
• When in doubt, don’t wait; call in the
experts.
• Grant writing is an art and we are not
artists.
• Remember to remember.
What we’ve learned so far:
• When puzzled, move outside academia and
brainstorm.
• Politics is inevitable, even on a seemingly
apolitical topic.
• Watch out – success breeds more obligations.
• Develop a thick skin; even the best projects have
detractors.
• Building a pilot project is like building a house.