What You Need to Know About Debt to Protect Black Consumers Against Predatory Financial Practices
At Prosperity Now, we recognize that debt and the racial wealth divide are inextricably linked. Low wealth has communities of color more vulnerable to troublesome debt and, in today’s economy, debt is exacerbating the racial wealth divide. That’s why practitioners and policymakers interested in the financial well-being of Americans are increasingly concerned about consumer debt, the subject of a recent study by Prosperity Now.
Our initial analysis reveals that while many Americans are encumbered by debt, Black Americans are most likely to struggle, especially when it comes to managing payments. Though social narratives often assume that problems managing debt come from poor choices or individual behavior, we argue that our country’s troublesome consumer debt is a symptom of growing wealth inequality. With support from Metlife Foundation, we collaborated with historian Devin Fergus to examine how the origins of exclusion from asset-building opportunities, unequal returns on “good” debt and disparate impacts of a destabilizing debt limit perpetuate troublesome debt in Black communities. Today, we release our white paper: Forced to Walk a Dangerous Line: The Causes and Consequences of Debt in Black Communities.
Understanding this context is just the first step in our work to explore the link between debt and the racial wealth divide. Later this year, we look forward to sharing findings from our related research project exploring individual experiences with debt and reactions to debt management and relief services in three low- and moderate-income African-American communities across the US. These insights will help those offering advice, developing financial technology or providing other debt services. We’re also starting an innovation cohort with credit counseling agencies to explore the question, “How might we help consumers identify warning signs of troublesome debt before it’s too late?” Finally, our Savings and Financial Capability team is working to support five organizations that serve youth transition from foster care in integrating credit-building services as a preventative measure for young people.
Want to get engaged to address debt and the racial wealth divide? Join us in our advocacy effort to protect consumers against predatory financial practices and sign up for our Racial Wealth Equity Network for updates on practices and policies that bridge the wealth gap.