In the United States, over 50 million low- and moderate-income (LMI) households 1 make daily financial decisions that determine how purchases are made, bills get paid, money is borrowed, and savings set aside. However, the approach LMI households take when making financial choices is far from clear. To explore this topic, the Payment Cards Center and the Community Affairs Department of the Federal Reserve Bank of Philadelphia invited Professor Michael Barr, of the University of Michigan Law School, to collaborate in organizing a conference titled “Payments, Credit, and Savings: The Experience for LMI Households,” which was held May 1- , 007.
In 005, Barr made the keynote remarks at a Payment Cards Center conference examining the role of payment cards in serving the financial needs of unbanked and underserved consumers. At the time, he was just beginning work on survey research in the Detroit metropolitan area. He had been selected to serve as faculty investigator for the 005- 006 Detroit Area Household Financial Services Study, more simply called the Detroit Area Study (DAS). The DAS has been conducted for over 50 years under the auspices of the University of Michigan’s Institute for Social Research, Survey Research Center. Each year survey researchers explore a different topic. The 005- 006 study was designed to gain a better understanding of 1) how and why LMI households use a wide array of financial services as well as the costs and benefits of such services and ) how LMI households would respond to new types of cost-effective financial products specifically tailored to their needs. Through this survey, Barr and his fellow researchers hoped to develop a more complete understanding of the financial behaviors and motivations of LMI households and the related constraints on their use of traditional and emerging financial products and services.
As Barr and his colleagues began to analyze the survey data and to organize their findings, it seemed like an opportune time to gather a group of subject matter experts from the financial services industry, academic community, consumer and community development organizations, and federal and state regulatory agencies to share experiences and insights using Barr’s research as a platform for discussion. To this end, conference discussion was organized into three main sessions that focused on financial activities addressed in the survey: making payments, accessing credit, and accumulating savings. To introduce these sessions, Barr provided participants with a sense of the 005- 006 research objectives and methodology. Then, in each area — payments, credit, and savings — Barr or one of his co-authors shared data and preliminary findings from the 005- 006 DAS, after which panelists with varied expertise on the topics added their reactions and comments.
CONTENTS
I. Introduction
II. Banking into the Financial Mainstream: Barriers Faced by the Underserved
III. Conference Sessions
- a. Setting the Stage: 005- 006 DAS: Methodology and Objectives
b. Driving Payment and Transactional Banking Choices: Product Attributes Valued by LMI Households
c. Access to Credit: Payday Lending and Alternative Credit Products
d. Encouraging Personal Savings: Challenges and Opportunities
IV. Conclusion
Exhibit 1: Conference Agenda
Exhibit 2: Institutions Represented at the Conference
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Payments, Credit, and Savings: The Experience for LMI Households
