University of Michigan Gateway Ford School

Detroit Area Study: Financial Services for the Poor

Michael Barr, Law School
Phoebe Ellsworth, Department of Psychology and Law School

Professor Barr and Professor Ellsworth received funding through CLOSUP's Major Projects Program (FY 2005) to support this project on financial services for the poor.

Low-income individuals often lack access to financial services from banks and thrifts, and turn to alternative financial service providers such as check cashers, payday lenders, and money transmitters. Low-income households face high costs for these services and often find it more difficult to save and to plan financially for the future. Living paycheck to paycheck leaves them vulnerable to emergencies that may endanger their financial stability, and lack of longer-term savings undermines their ability to improve skills, become a homeowner, and build assets. High cost financial services reduce the value of government income transfer programs and also may diminsh the effectiveness of welfare-to-work strategies and the Earned Income Tax Credit. This study will analyze (1) how and why low- and moderate-income people in the Detroit metropolitan area use certain types of financial services; (2) the costs and benefits of such services; and (3) how such persons indicate that they would respond to new types of financial products tailored to their needs.  | 
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