What banks can do when disaster strikes

The visual images of natural disasters tend to highlight damage to property, but the real lasting damage is done to people.

Kate Bulger from Money Management International joins us to talk about their BAI Global Innovation Award-winning program to help low and moderate income people deal with their finances after a disaster.

A few takeaways from the conversation:

• Project Porchlight’s target audience is moderate income households with the goal of focusing people on their financial next steps as they recover from a disaster.
• Without assistance, disaster-affected consumers lose about 25 points on their credit score; with assistance, on-time payments resume faster and credit scores rise.
• A valuable thing banks can do is help people prepare for the next disaster by providing basic financial education and helping them develop a financial plan.

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INTERVIEW TRANSCRIPT

Kate Bulger, senior director of Business Development at Money Management International, welcome to the BAI Banking Strategies podcast.

Thank you so much for having me, happy to be here.

Kate, first of all, congratulations on Money Management International being one of the winners in the 2022 BAI Global Innovation Awards. This conversation is going to focus on your product in that competition, which is called Project Porchlight. Please give us, if you could, an overview of what Project Porchlight is and include why you call it what you call it.

Absolutely. Project Porchlight is a program that’s designed to help people financially recover after a disaster. We help with everything from applying for aid to working through insurance and really touching on all parts of their financial life. And we called it Project Porchlight because our ideal for this program is to help people really turn their porchlights back on and get to that pre-disaster, normal state as quickly as we can.

When there’s a hurricane or a wildfire or other natural disaster, pretty much everyone in the affected area has needs. And in populated areas, that can be tens or even hundreds of thousands of people. So, what subset of those affected by the disaster are you targeting with Project Porchlight?

When we think about the consumers that we’re really serving with Project Porchlight, they tend to be folks who need a little bit more help recovering. They tend to be folks who aren’t super affluent. They tend to be folks who are kind of your day-to-day, Main Street people. Recovering from a disaster is really difficult and it’s not like anything else that people have gone through before. From the actual disaster piece, that is a unique experience, right through to how you work with your insurance company. So if folks don’t have experience working in those kinds of systems, those are the people that we’re really looking to help.

What kinds of products and services do you provide, and how do you connect with people who may find themselves in need of those products or services?

We offer help really with the financial piece of recovery. So it’s everything from helping people put in applications for FEMA, helping appeal those applications. It’s a really bureaucratic process, and some people are denied when they really do qualify for funds. So we help with those appeals. We help people apply for things like the Small Business Administration loans. Then we also help people really focus on what are the financial next steps they need to take to get through their recovery. So, helping people make choices about where to focus their funds, about how much to borrow, making sure people don’t accidentally overborrow or put their money in places that aren’t going to really serve them in their recovery. It’s a great program. We stick with people for more than a year after the disaster to help them out. Every financial aspect of recovery we can help with.

So this is a really interesting idea, really important idea. No doubt it fills a vital need. Tell us where this idea came from. And because I’m assuming that the people you serve do not pay for the service, where does the financial support for Project Porchlight come from?

We got the idea for the project after Hurricane Harvey in Houston. So we are headquartered in that area. We had our own employees who were impact. We had consumers who were coming to us who needed help recovering that were impact. And we were hearing stories from folks who came to us for other services that we provide who were telling us that their real financial problems started with a disaster and mistakes they made in that recovery. And since then, what we really found is, COVID has significantly increased how difficult it is to recover from disasters and became a financial disaster all on its own. We first thought about the pandemic very early days, we weren’t sure that Project Porchlight would be a good fit for folks. But by the time we hit mid-March and all of a sudden there were lockdowns and this big financial impact for people, we realized that Project Porchlight could help people find the aid they need, can help people work with their creditors, their financial institutions, and give them that financial space that they needed to fully recover. You’re also right. We do not have consumers who pay for this service, and the service is always free to affected consumers. Instead, we have financial institutions that will work with us, and grant funders who work with us, and foundations who help provide that support.

So COVID-19 certainly falls under the heading of a natural disaster. Is there still a pandemic-related aspect to what you’re doing three years after the sudden shock of it all?

Absolutely. We are still helping people apply for aid. We’re still seeing folks who haven’t fully recovered. And really we’re in kind of, from our perspective, a very K-shaped recovery. For a lot of people, the COVID disaster happened and they have been able to really improve their financial situations. But for a lot of people, the folks that we work with primarily, that setback hasn’t been something they could recover from yet. Their industry might not have come back, they might not have been able to find work, and so suddenly they are significantly more in debt. They may not have known about aid programs that were available, so they weren’t able to take advantage of them and sort of locked out on those needed resources. But we’re absolutely seeing people and getting calls every day, continually, from folks who feel the impact of COVID-19.

Following up on that, you are in the people support business, but you don’t provide direct financial support to people who may be temporarily out of work due to a natural disaster or dealing with a damaged home or some other major setback, COVID-19 being example of that. So, where, if anywhere, does the banking industry fit into the services that you provide?

We do not provide direct financial support to consumers, but we do rely on our financial-institution partners to help us identify the folks who need help. That can be referring somebody who reaches out for assistance, that can be sending letters or helping us reach the consumers who are affected. But also, our financial-institution partners have really recognized that getting people back to that financial normal as quickly as possible really benefits them as well, right? You want a consumer who’s in a healthy place, and that consumer wants to be in a financially-healthy place, and Porchlight is a way to get them there.

According to your literature, Kate, you’ve been through about four dozen disaster incidents. So you’re probably seeing patterns emerging in how people and their finances are affected and what their priorities are in the event of fire or flood or destructive wind storms. Talk a bit about that and walk us through what happens on the Money Management International side when a disaster occurs. For starters, do you send your people to the physical scene?

We do not send people out to the physical scene. What we find is that after a disaster, especially in a really critical response period, the people that you want on the ground are people who are going to help preserve life. They are doing rescue work, they are providing shelter, they are providing water and tarps. And those are amazing things and things we don’t want to get in the way of in any way. So our services are predominantly provided by phone. But we’ve absolutely seen quite a bit of patterns here. After a disaster, what we’ve seen is that without assistance, the typical consumer loses about 25 points on their credit score in that year following a disaster, and in the years after that, it continues to fall. With Project Porchlight on the other hand, if they’ve had that Project Porchlight assistance, we find that they stay the same in the year following a disaster. And normally, no change doesn’t necessarily sound like a great thing, but that is a huge difference between staying where they are and losing, potentially, 25 points on their credit score. And once we look out three years, what we see is consumers have improved their credit score by more than 29 points in that period after disaster, which is incredible. 90% of the folks we work with are back to making full on-time bill payments for 12 months. And then 98% resume their payments to creditors within a year, which is an incredible number. It is showing that people are getting to a place where they no longer need those long-term aid programs. They’re getting really back to that financial normal that they had beforehand.

I’d also imagine that patterns are developing regarding the demographics of disaster victims who benefit from your services. You touched on it a little bit earlier in the conversation, but what can you tell us, in greater detail, about notable breakdowns so far as demographic or economic distinctions of those who’ve emerged as your key constituencies, and what do you think might account for that?

We definitely see some really strong patterns there. More than 60% of the folks that we serve are female, more than 20% are affiliated with the military. They tend to be part of minority groups. So about 45% of the folks we serve are Black, about 10% are Hispanic. And when we look at the financial piece, we also see a pattern there. We’ve got about… 37% are homeowners and about 63% are renting. They tend to be folks who are low to moderate income, so they’re making less than 80% of the median income for their area before the disaster strikes. And most of the folks we get are working on a budget deficit when they get to us. So they’re spending, at that time, about $505 more every month than they have coming in, in that immediate aftermath of the disaster. So these are folks who, in general, sort of doing okay before the disaster, but they’re also groups that are underserved by a lot of other programs and that are frequently left behind in recovery progress.

The breadth of individual financial issues that rise in the chaotic aftermath of a disaster, that would present a challenge to anyone trying to step in and provide assistance. You need red-tape cutters, you need bureaucratic navigators, you need the right people with the right skill sets to be able to do this. So, what kind of people are you looking for at MMI? Where do you find them? And how do you train them to be most effective?

We are incredibly fortunate we have some incredible counselors, but for this program in particular, we are only using HUD-certified housing counselors. These are counselors who have passed the rigorous exams to become a counselor, and then in addition, passed special HUD exams to make sure that they really understand housing and financial issues in a deep way. Additionally, we don’t just let any counselor participate in this program. This is really for counselors who’ve got experience working with folks already. They have, like I said, that deep financial understanding and that long experience of working with distressed consumers. But also, the core of our group are folks who themselves have recovered from a disaster. So they have that firsthand experience. They’ve worked with FEMA. They have been through that incredibly-traumatic experience of losing their home or having their home severely damaged by storms or flooding or tornadoes. And that makes a big difference in connecting with consumers. And then on top of all that, we require more than 120 hours of additional training on disaster-specific topics and how to provide trauma-informed counseling to help really prepare these counselors for Project Porchlight.

What have you learned about the particular trouble spots that these groups face when they’re trying to work within the system we have now? And maybe, could you talk about what banks and credit unions might be able to do to address those trouble spots and make them less problematic for these folks?

Disaster is an incredibly bureaucratic process to recover from. There’s a lot of forms, there’s a lot of jargon that’s used, and consumers just don’t always have experience working through highly-bureaucratic processes. So that’s really where we can come in and help out. So, it is absolutely working to cut through red tape, it is helping consumers just understand what the forms are asking for and why it’s worthwhile to go ahead and fill them out. We often compare trying to fill out those applications for aid to the first time that someone had to do taxes on their own. You probably didn’t fill out those tax forms by hand. Manually, most people use some kind of tax professional or tax software to help them get through it. That’s basically what Project Porchlight is doing, but in person, as a human-to-human experience. So we’re helping people really understand that process, really move through that process. And banks and financial institutions can help out in a number of ways. First off, always encouraging your consumers to be prepared for a disaster is a big deal, but also helping your consumers connect with people who can help them through that process and helping make that connection really early on is key. It is tough for consumers to ask for help or to admit that there’s something about their finances that they don’t know or that they’re struggling with. So offering something like Project Porchlight proactively makes it much more likely that those consumers will take up that service, and then much more likely that they’ll recover quickly and get back to that financial normal.

Sort of on the same idea, you’ve, no doubt, seen ways to make your program better in the years that you’ve had it out in the field. So let me ask you to look out into the future, Kate. What are you seeing regarding needs that maybe aren’t being met very well right now, that may be a future opportunity for you, and particularly something that banking institutions may be good partners for you to address?

We’ve got a number of consumers that we work with right now who are being hit by sort of double-dip or back-to-back disasters, where they haven’t had the opportunity to fully recover from a prior disaster before they are being threatened by a new disaster. So helping those folks, really focusing on helping those folks move through their recovery as quickly as possible is critical. Because if they haven’t recovered from the previous one, then the likelihood of being able to recover from the next one is significantly smaller. And beyond that, helping people really be prepared for the next disaster. Consumers frequently don’t have a plan. Disasters are difficult to think about. It’s hard for them to be prepared for a disaster and be actively preparing for it financially when there’s so many other things that are taking their attention away from day-to-day. So helping encourage consumers to start thinking about it early makes a big difference. And beyond that, helping consumers particularly for insurance companies, helping make sure consumers understand their insurance and how they’re covered is another big one. What we see is that a lot of folks don’t pay close attention to their insurance once they have it. They relearn about their coverage in a lot of cases after the disaster, which is the worst time for someone to find that out. Helping really educate folks and putting back in front of them “Here’s what you’re covered for, here’s what you’re not,” particularly when it comes to things like flood insurance or special fire insurance, that can be a real game changer for folks in helping get them prepared early.

Kate Bulger from Money Management International and winner of one of the 2022 BAI Global Innovation Awards, many thanks again for being with us on the BAI Banking Strategies podcast.

Thank you so much for having me. So much fun.