Just the financial facts, please!
2010: The "Just the financial facts, please!" report uncovers the costs and dynamics of borrowing $1,000 in the Mission District, a historic immigrant gateway community in San Francisco. In the summer of 2010, the Mission Asset Fund’s (MAF) research team conducted an analysis of the 57 different financial service providers in the 94110 zip code. Team members visited the majority of those establishments as secret shoppers to survey and gather information about small consumer loan products offered in the neighborhood.
The survey resulted in the creation of two innovative tools to increase the financial capability of borrowers in the Mission: Financial Facts labels, which help consumers make healthy financial decisions, and the Responsible Lending and Borrowing Checklist, which helps consumers identify responsible lenders while also evaluating their own accountability as borrowers.
The Financial Facts labels highlight important loan information in a clear, transparent, and easy to understand format so that borrowers can make healthy financial decisions. MAF introduces the “% of Monthly Debt Budget” metric to help borrowers quickly evaluate their ability to afford a loan by connecting income, debt, and cash flow into a single figure. Borrowers will be able to use the “% of Monthly Debt Budget” metric to compare across different types of loans and determine which is most affordable – and responsible for them to take. Consumers will be able to quickly review critical loan data, including APRs, interest rates, costs, ect. while also comparing how loan payments will affect their budget and cash flow.
The report concludes by arguing that the newly created Consumer Financial Protection Bureau (CFPB) should require Financial Facts labels on all consumer loan products. The Financial Facts labels are modeled after the Nutritional Facts labels, which the Food and Drug Administration (FDA) developed to inform consumers about the nutritional content in the food that we consume. By creating a standardized, recognizable label that measures the true cost of a loan, borrowers will be better equipped to compare loan products.
The same way that Nutritional Facts label revolutionized nutrition awareness across the country, Financial Facts label can be seminal a tool in changing the consumer-lending experience for millions of Americans.