Bill Introduced to Create Statewide Financial Empowerment Office
By Robert Davis
State lawmakers introduced a bill to create a statewide financial empowerment office (OFE) that will help address systemic barriers to community wealth and homeownership.
SB21-148 would empower the OFE to partner with organizations that help increase access to affordable financial products, educate Coloradans on financial management, develop community-informed paths to homeownership, and promote financial stability.
Sponsored by Senator Julie Gonzalez (D-Denver), and Representatives Daneya Esgar (D-Pueblo) and Kerry Tipper (D-Jefferson), the bill has earned the support of The Bell Policy Center (BPC), a local economic research firm. According to BPC, SB-148 would help provide access to capital, bank accounts, non-predatory credit, and financial counseling for Colorado’s BIPOC communities.
“Long before the pandemic, Colorado needed a statewide financial empowerment strategy,” BPC said in a statement of support for the legislation. “With a statewide OFE, we can leverage the power of the state, adopt a proven model, and create systemic change that grows financial resilience throughout Colorado.”
BPC acknowledged that Colorado has already made significant strides to improve the financial health of its residents. In 2019, voters approved Proposition 111, which restricted how much interest payday loan lender can charge.
The Colorado Legislative Council Staff, a nonpartisan arm of the General Assembly, found the average interest rate of a payday loan in Colorado was 129 percent before the law was passed.
SB-148 would build on this progress by allowing OFE to examine local financial products and make recommendations to encourage access to products that are safe and affordable. OFE would also be responsible for tracking and addressing consumer protection complaints, especially from immigrants, communities of color, and low-income households.
BPC points to Denver’s OFE as a model agency, saying it helps lower personal debt, increase savings, and reduce the risk of foreclosures and evictions for people who use its service.
In total, Denver’s OFE is credited with reducing its client’s indebtedness by $6 million; increased their credit scores by an average of 50 points, and prevented nearly 40 foreclosures, according to research by BPC.
The statewide model would share several characteristics with Denver’s agency if SB-148 becomes law. Some examples include providing annual updates on implementing the office’s aims and providing free financial coaching or service navigation resources, according to the bill’s text.
The bill identifies one primary means for OFE to achieve its aims – improving access to banking for low-to-no-income Coloradans. According to BPC, Colorado’s unbanked rate –the number of people who do not use or have access to a bank – sits at 22 percent. This is four-times greater than the national unbanked rate average of 5.4 percent, according to the Federal Deposit Insurance Commission.
Meanwhile, households of color in Colorado are either unbanked or under-banked, placing them at higher incidences of utilizing high-risk financial services. COVID-19 made this situation much worse for many families as communities of color faced unemployment rates nearly double that of their White counterparts, according to the Bureau of Labor Statistics.
“While our state’s made progress in regulating existing predatory products like payday loans, we still lack the proactive infrastructure needed to prevent other equally or more harmful financial practices from expanding in Colorado,” BPC said.
SB-148 is expected to increase General Fund expenditures by $279,728 for FY 2021-22. Next fiscal year, that total is expected to increase to $286,136, according to the bill’s fiscal note. It will make its first public appearance before the Senate Finance Committee on March 22.