These three reports, focused on Addressing Debt in Black/African American communities, represent the culmination of a multi-year, applied research, racial wealth divide initiative and savings and financial capability effort funded by MetLife Foundation. Over the past 18 months, Prosperity Now worked in partnership with Black/African American-led community-based organizations, using a human-centered design and insights approach, to analyze debt as a feature of racial economic inequity and as a lens through which to explore the effectiveness of programs, products and services in addressing the socioeconomic status of Black/African American clients.

Employing an equity approach, the Addressing Debt in Black/African American Communities project used data to drive our focus to center this demographic because research shows that Black/African American people are more adversely affected by debt than any other group because of racial economic and wealth inequity.

By framing this issue as a “design challenge,” our multi-stakeholder collaborative was able to look at debt through all project components – financial coaching, fintech and debt consolidation – while seeking to understand how the causes and consequences of disproportionate debt can be navigated or negotiated and the people protected. We sought to answer this question: How might we support Black/African American community members in optimizing debt management and repayment strategies so that they don’t stand in the way of achieving greater financial goals?

Each report includes lessons learned and emerging practices gleaned from the people most affected by debt and  the practitioners who serve them, as well as from primary research from client data collection and national surveys. They also reveal the potential and limitations of the tested strategies and solutions to address the complex and profound debt issues facing low- and moderate-income Black/African American people.

1. Addressing Debt in Black Communities: A Comprehensive Report Exploring the Potential and Limitations of Services in the Realm of Financial Coaching
   • Provides analysis on how financial coaching programs might meet the expectations for guidance on debt and past-due bill issues.
   • Helps stakeholders better understand how predominately Black/African American-led organizations that primarily serve Black/African American individuals are helping clients to strategically manage and repay debt and past-due bills.
   • Explores responses that frontline nonprofit financial coaches and counselors are utilizing to address the causes and consequences of debt challenges faced by clients.
   • Includes an analysis of promising program design and an overview of the limitations of individual-level services in solving debt challenges.
   • Acknowledges that disproportionate debt in the Black/African American community is the result of racial economic inequity created and perpetuated by institutions, structural inequality and systemic racism – not by individual-level knowledge or behavior deficits.
2. In Search of FinTech for Debt Management Brief 
   • Provides insights and results from qualitative user tests to assess the potential of two financial technology tools (Albert & Pefin) to provide advice to our target audience on how to manage or reduce debt.
   • Shares our assessment of these tools’ strengths and weaknesses at supporting low- and moderate-income Black/African American clients to manage or repay debt or past-due bills.
   • Offers deeper insights into what is available and potentially applicable for the socioeconomic reality of this population, what adaptations could be made to increase options and what still needs refinement or innovation.
3. Navigating the Promise and Pitfalls of Debt Consolidation Brief 
   • Describes debt consolidation products and strategies.
   • Shares insights from conversations with lenders as they reacted to client financial profiles developed with our partners to bring greater clarity about products for debt consolidation.
   • Proposes initial assessment criteria, developed with Community Financial Resources (CFR), to help financial coaches vet debt consolidation products and includes highlights from a national field scan of products.
   • Links to a prototyped tool to help financial coaching practitioners better support their clients as they navigate options.  

Through this work, we learned racial economic inequities in debt and past-due bill experiences – created by institutions, systems and structures - are unlikely to be substantively changed through financial coaching, financial advice apps or consolidation loans. However, we saw and heard the power of designing, developing and testing strategies and solutions alongside the people most impacted by the issue. Because structural inequality results in real challenges for people trying to achieve financial goals, individual-level programs, products and services can be adapted to protect clients and help them navigate and negotiate solutions and strategies. Financial coaching programs centered in the socioeconomic realities of clients not only expand what the field commonly understands financial coaching to be, but also provide tailored, detailed guidance, approaches and tools to help clients. Most promising, exploring our partners’ innovations revealed that client-level assistance. paired with tools to negotiate with creditors while also leveraging consumer protections, works well to help disparately impacted clients reach their financial goals.