Supporting the non-prime in the near- and long-term

These are unprecedented times, and I hope you and your loved ones are staying safe and healthy. As I have been working from home and reflecting on the ramifications of this crisis, I have thought a lot about the non-prime, those Americans with credit scores below 700 who are often un- or underbanked.

Even before COVID-19 swept the globe, taking lives and devastating livelihoods, millions of Americans were living in a time of nearly unparalleled financial instability. For those who struggled to make ends meet, dealing with income volatility or perhaps still recovering from credit shocks in their past, the current crisis presents an insurmountable challenge with repercussions that will last far into the future. Congress and the Administration are currently working on an economic package that will provide some help, including direct cash payments for many non-prime Americans.

For an idea of the needs facing non-prime consumers now, we can look back on their experience in 2008. While not an exact parallel, I regularly come across people who say that they never recovered from the Great Recession. Some of them lost jobs just when no one was hiring. Others found their mortgages were a millstone dragging the rest of their finances down. Almost all found that once they fell out of prime credit status, they struggled to regain their financial equilibrium.

As for the ongoing efforts to boost the economy and provide relief to those who need it most, the government is clearly trying to head off the worst of the damage. Direct payments will help in the short-term, provided they reach people quickly enough to pay their bills on time, though choices will undoubtedly need to be made: Rent or health insurance premium? Credit card bill or utility bill? These efforts will hopefully ease that burden with immediate relief.

Longer-term consideration will be critical for reducing the impact of this crisis on credit scores and future access to funds, and it is a need that I believe must become a much greater part of the current conversation. There is no band-aid fix, but now is the time to begin these conversations.

These Americans are the backbone of our services and local economy. They are the nurses, teachers, restaurant workers, bank tellers, small business owners, and retail employees. Despite historically low pre-crisis unemployment, many consumers were living on the edge before this pandemic hit, and they will feel the repercussions from this most harshly for years to come. We need to make sure these Americans have options in the near- and long-term, and policies must come from a place of understanding of the challenges they face.