Indiana Assets & Opportunity Network 2016 Policy Priorities
The Network has identified our top three policy priorities:
Eliminate Asset Limits
The Supplemental Nutrition Assistance Program (SNAP) is the new name for The Food Stamp Program. To be eligible for SNAP, a household's monthly income must not exceed 130 percent of the poverty line or $2,177 for a three-person family in fiscal year 2015, and; a household may not exceed $2,250 in countable resources such as a bank account, or $3,250 in countable resources if at least one person is age 60 or older, or is disabled. Asset limits send a message that saving is a behavior that warrants punishment by forcing families to spend down longer-term savings in order tocontinue to receive SNAP benefits, which creates a cycle of reliance on those benefits. By eliminating the asset limit, we are better able to help families develop good savings behaviors. And it is not as if eliminating SNAP asset limits will swell the rolls. According to Indiana's Legislative Service Agency, only 0.23% of SNAP applications -897 out of 382,000 applications - were denied due to assets in excess of state limits between December 2013 and November 2014. Eliminating asset limits will reduce the administrative burden of verifying reported assets, allowing case workers to pay greater attention to other aspects of their job. States that have eliminated asset limit tests have seen improved administrative efficiency post elimination.
Indiana would not be alone if it eliminated the SNAP asset limit test. In fact, Indiana would join the majority of the country. Forty-two states (including Washington D.C.) have raised or eliminated the SNAP asset limit, and 37 states have eliminated SNAP asset tests altogether. States and the federal government share authority to set or eliminate SNAP asset limits, making it possible for the Indiana General Assembly to pass legislation eliminating the administratively burdensome and costly asset limit tests.
Reform Predatory Lending
Payday loans are small dollar loans that are generally repaid as a lump sum within a short period of time, typically on the borrower’s next payday. To secure collateral, lenders require borrowers to provide either a post-dated check for the principal and finance charges or authorize lenders to withdraw the amount due directly from the borrower’s bank account. Payday loans provide a service for underqualified borrowers at a steep cost. On the one hand, payday lending provides a credit market for people in need of immediate funds, thereby serving a segment of the population that would otherwise be shut out of mainstream financial institutions. On the other hand, research consistently shows payday lending leads to debt traps, where borrowers are unable to repay their initial loan and re-borrow to service their debt.
The Indiana General Assembly should require additional truth-in-lending disclosures. For financial markets to function fairly and efficiently, consumers must have adequate information about loan products. Payday loans are marketed as short-term alternatives to tide people over until their next payday but often end up being longer-term commitments. Prospective borrowers should have access to information about the borrowing trends of customers at the lender from which they intend to borrow. By seeing that repeat and longer term borrowing is prevalent, prospective borrowers will better understand that they may also fall into the debt trap. To make loan repayment more feasible, borrowers taking out an initial loan should have the option to make installment payments of no more than $100 per month, without extra service fees. The $100 monthly limit is supported by typical borrowers’ stated ability to repay and survey research. According to a Pew survey, 49% of respondents said they could not afford to pay more than $100 per month. A different Pew survey found that Americans believed a four-to-six-month repayment period is reasonable for a $500 loan, which equates to about $100 per month.
Preserve and Expand EITC