TrustPlus’ data suggest an association among being lower income (especially very low income), being Black or African American, and having collections debt.
As Black History Month 2023 comes to a close, we are inspired to year-round celebration, reflection, and action. Smart business leaders are acting too, increasingly investing in debt and credit benefits which boost wellness and productivity, and economic equity.
All debt is not created equal nor distributed equally.
Chances are a decent chunk of your workforce is struggling with debt: “71 million US adults have debt in collections” according to the Urban Institute. But all debt is not created equal nor distributed equally. Racial disparities in debt are harming your workers and preventing your business from reaching its full potential.
TrustPlus’ data suggest an association among being lower income (especially very low income), being Black or African American, and having collections debt. Our data echo Aspen Institute’s influential Disparities In Debt: Why Debt Is A Driver In The Racial Wealth Gap, which found racial disparities in debt to be pervasive, destructive, and systemic.
Among TrustPlus clients, from 2021 through 2022, 46 percent overall had at least one debt in collections. During the same period, 53 percent of TrustPlus clients who identified as Black or African American had collections debt, more than any other group. Collections are considered “seriously delinquent” by credit rating agencies and have a major impact on an individual’s credit score, and by extension their ability to access credit, for up to seven years.
High levels of debt are associated with increasing risk of stress, depression, and elevated risk of high blood pressure. Contemporary debt collection methods including aggressive phone calls, texts, and social media messages don’t help. Yet they have their own economic logic in the sector in which debt collection agencies in the United States generated $12.7 billion in revenue annually. We leave ideas for reform for another day.
Debt and credit benefits boost productivity, wellness, and equity.
TrustPlus Personal Finance Coaches support employees of businesses nationwide to reduce debt, strengthen credit, and build savings. The benefits of doing so span the financial, mental, and physical health of our clients and the recruiting, retention, and productivity metrics of our customers’ businesses and organizations.
Our friends at the Financial Health Network recently put together a brief for employers thinking about introducing or expanding credit and debt benefits. Workplace Financial Health Innovation: Rolling Out Credit- and Debt-Related Benefits for Your Employees is a treasure trove for employers looking to maximize the recruiting, retention, wellness, and productivity benefits of a financially healthy workforce.
Considerations for employers rolling out debt and credit benefits:
Keep Equity Front and Center
Employees with high levels of debt and low incomes are less likely to have access to employer-offered debt-related benefits.
Ensure Clear Communication, Confidentiality, and Ease of Access
Nearly half of employees (42%) say they’re not adequately informed about the financial wellness benefits their employer offers. Ease of access, confidentiality, and availability of personalized help are challenges to uptake (that TrustPlus is designed to overcome).
Minimize Costs to Employees
The brief includes examples of fee structures and costs for benefits including financial planning and counseling services, emergency grant funds, and personal loans paid back via payroll.
