Financial literacy 101 for NJ adults? Lawmakers want to start with these cities

Residents could get counseling on the basics, including how to open a secure, low-cost bank account and the importance of good credit
Credit: Chronis Yan on Unsplash
The first “financial empowerment centers” would be set up in Camden, New Brunswick, Newark, Paterson and Trenton.

After working to boost financial literacy among New Jersey students, lawmakers have turned their attention to adults, including those in some of the state’s most economically distressed cities.

A measure that has received bipartisan support from lawmakers in both houses of the Legislature calls for the establishment of “financial empowerment centers” where residents could get counseled on everything from how to open a secure, low-cost bank account to the importance of establishing and maintaining good credit.

The first centers would be in Camden, New Brunswick, Newark, Paterson and Trenton, according to the latest draft of the bill. The financial-literacy effort would also be established as a pilot program, meaning it could eventually be expanded to reach residents of other communities if it proves successful.

The push to improve the financial literacy of New Jersey’s most economically vulnerable residents began earlier this year, before the coronavirus pandemic. But it has gained steam as the health crisis has triggered new economic hardships for many residents who’ve lost their jobs or other sources of income in recent months.

“Too many families in New Jersey are living paycheck to paycheck, struggling to pay the bills,” said Assemblywoman Eliana Pintor Marin (D-Essex), after a key Assembly committee advanced the bill.

“What this legislation would do is improve the accessibility of resources, so that more people are armed with the tools they need for financial success,” said Pintor Marin, a primary sponsor of the bill.

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 after the Great Recession.

Starting in distressed cities

In New Jersey, the cities of New Brunswick, Newark, Paterson and Trenton were all ranked among the state’s most distressed in a 2017 analysis published by the Department of Community Affairs. 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.

While it’s not a panacea, studies have shown that improving financial literacy in low-income communities can be a useful tool for combating income inequality. The legislation, which cleared the Assembly Appropriations Committee late last month, calls for the community affairs department to partner with municipal officials and nonprofit organizations to establish the “financial empowerment centers” in each of the five communities chosen for the pilot program.

Those who visit the centers would receive instruction on things like opening an affordable bank account, establishing or maintaining a good credit score and improving their personal savings, according to the legislation.

Instructors would also help residents learn how to manage their personal debt, including non-mortgage debts like student loans, the bill says.

The centers would have to be established where they could be “easily accessible to the residents,” and the pilot program would be in place for three years.

A report detailing the program’s operations and success would have to be submitted to the governor and Legislature for review upon its conclusion, according to the bill. The report would also make recommendations about continuing the program and expanding it to more communities.

A first draft of the bill easily won approval in a Senate committee earlier this year, but that was before amendments were appended by the Assembly to add New Brunswick and Trenton to the list of cities in the pilot program. The amended version of the bill has yet to be put up for a vote in the full Assembly or Senate, but legislative aides have indicated that could come soon.

‘Crucial for economic prosperity’

Sponsors of the legislation say establishing the pilot program would 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. Those have come, in part, in response to the rising cost of tuition at both public and private colleges and universities, which in turn, has led to higher rates of student debt.

“Addressing gaps in financial literacy for residents of all ages and stages through public education initiatives is crucial for economic prosperity,” Pintor Marin said.

“This pilot is going to be tremendously important in evaluating how state programs and partnerships could work to boost financial literacy among our most vulnerable residents,” said Assemblywoman Verlina Reynolds-Jackson (D-Mercer).

The current draft of the bill calls for funding for the program to come from monies the state receives as a result of last year’s settlement of complaints against the consumer credit reporting agency Equifax following a 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 to investigate the data breach, Equifax failed to establish adequate security despite knowing that a “critical vulnerability” had 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 year.