It’s pricey to be poor.

Tracy Fischman, executive director of the St. Paul-based nonprofit Prepare + Prosper, points out that low incomes and poor credit will net higher interest rates on home, car and business loans, and can even complicate a job search. Many employers won’t hire an applicant with a troubled financial history. Even home and auto insurance in urban, low-income areas may be more expensive, if the traditional market serves the area at all.

“The better off you are financially, the better rates and terms you get,” Fischman said. “It’s sort of this inverse dynamic that happens. If you’re poor, it’s more expensive.”

Prepare + Prosper, which is based on University Avenue near the city border with Minneapolis, already serves 13,000 low-income clients per year, preparing tax returns and helping them access savings accounts and other financial products during tax season. Some 200 clients receive more intensive financial coaching.

Working with Sunrise Banks, Fischman’s organization now plans to create an added focus called FAIR — Financial Access in Reach — that serves the “unbanked.” These are the individuals who, for a variety of reasons, won’t or can’t access traditional bank services. They’re also the households most likely to rely on payday lenders and check cashing stores to cash their paychecks or obtain high-interest loans to pay for everyday services.

Through the FAIR pilot program, Fischman’s goal is to sign up 100 households in the Twin Cities for checking accounts, no-fee savings accounts and “credit builder” services aimed at repairing their credit history. Things really get rolling early next year, when Fischman hopes to sign up another 500 households, in part through community partners.

250,000 UNBANKED

Prepare + Prosper believes that 250,000 financially-underserved households in the Twin Cities have no relationship with a bank or credit union and get by using payday lenders. That breaks down to 15 percent of the area’s white population and 55 percent of people of color.

Nationally, Pew Charitable Trusts finds that one in three Americans has no savings, with reasons ranging from the lack of sufficient funds to maintain an account to a general distrust of banks and the perception that financial services aren’t aimed at people like them.

“(FAIR) is designed for and with low- to moderate(-income) consumers, and financially underserved consumers who have either been shut out of the financial mainstream, or have had bad experiences with traditional banks, where they’ve been priced out or feed out,” Fischman said. “You can be middle income and have bad credit and still be shut out of the financial mainstream.”

“Out of the 13,000 people we work with … the vast majority of people have nothing in savings, and if they do have something in savings, it’s less than $500,” she added. “What do you do if your car breaks down? You may turn to a payday lender. And that’s problematic because you’ll have trouble paying off the principal, let alone the interest. We really want to put more of that income into people’s pockets.”

Sunrise Banks CEO David Reiling said in a statement, “We’re setting an example for many financial institutions to follow, and working to change the way they do business.”

Residents who are averse to walking into banking institutions need not worry. Through the partnership with Sunrise, they never have to meet with a banker to open an account.

“We’ve been working to build out the partnership for many, many months to get it right,” Fischman said. “You don’t have to go into one of their branches, a brick and mortar. You’d open it up remotely. People can come through our doors at Prepare + Prosper and we’ll sign them up for these products.” Related Articles Metro Transit workers reject contract offer, vote to authorize strike

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The target market is broad, ranging from young adults to seniors. The 2018 pilot program, which will start quietly in July before its official launch in August, works in partnership with the East Side Financial Center in St. Paul, Build Wealth Minnesota in Minneapolis and New Horizon Academy childcare centers. New Horizon plans to steer eligible employees at one or two sites toward FAIR services.

In 2013, the Northwest Area Foundation called on leaders from various industries — banking, nonprofits, city and county government — to do more for the financially underserved. FAIR receives funding from NWAF and The McKnight Foundation, The Minneapolis Foundation, JPMorgan Chase Foundation, Otto Bremer Trust and the Minnesota Department of Commerce.

More information is online at FairFinancial.org.