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GAO: Non-English speakers have it rougher financially

Speakers of other languages find it harder to manage money

By Marcia Frellick

Your chances of successfully conducting everyday financial transactions in the United States are directly tied to how well you speak English, a new government report confirms.

GAO: Non-English speakers have it rougher financially

But other factors can affect financial literacy for non-English speakers, including lack of familiarity with the American financial system, cultural differences in views on debt, lower levels of education and lack of trust in financial institutions.

These are among conclusions of a U.S. Government Accountability Office report on financial literacy released May 21. The report was requested amid concern in Congress that in this era of major financial reforms, including the Credit CARD Act of 2009, a growing segment of people with limited English proficiency -- now 12 million adults, or 5.5 percent of the U.S. population, according to Census data -- are struggling just to complete forms and open accounts. There were also concerns that people with limited English proficiency (LEP) were increasingly targets of fraud.

So members included a provision in the Credit CARD Act of 2009  that required the GAO's Comptroller General to examine whether there is a relationship between English proficiency and financial literacy and, if so, how non-English speakers in the United States are affected by that in carrying out financial transactions.

From August 2009 through mid-May, staff reviewed studies, interviewed leaders who work with LEP populations and conducted focus groups with LEP consumers to hear their perspective.

"The report puts a premium on increasingly ensuring that the financial literacy efforts here in the U.S. are targeted toward people with limited English proficiency," said Richard Hillman, managing director of the GAO team that developed the report.

And that population is steadily growing. According to Census data, the number of people who speak a language other than English at home grew by 38 percent in the '80s and 47 percent in the '90s. Numbers are expected to balloon again when 2010 figures are reported for non-English speakers, the vast majority of whom are Hispanic.

The report found specific areas where language skills can be a barrier to success:

  • Managing bank accounts: People who can't write in English find it difficult to write checks, which requires spelling out a dollar amount. For this reason, debit card use has become much more popular among LEP populations.
  • Resolving problems: Limited English skills can keep consumers from asking questions about their accounts, such as inquiring about additional fees or other erroneous or suspicious-looking information on credit card statements.
  • Accessing financial education: Although there is a multitude of financial information provided by government, nonprofit and private sources, these resources are not always available in languages other than English.

Aracely Panameño, director, Latino Affairs for the Center for Responsible Lending in Washington, D.C., says the report confirms a shortfall the center confronts every day.

"We have not made significant progress in providing competent financial services to non-English speakers, and limited English speakers find themselves more vulnerable to predatory practices with significantly less protection under the law," she says.

Non-English speaking more vulnerable to fraud, translation confusion
It's not the first time the federal government has looked at the relationship between English proficiency and financial fraud. A Federal Trade Commission report, "Consumer Fraud in the United States: An FTC Survey (2004)," found that 14.3 percent of Hispanics are victims of fraud, compared to 6.4% of non-Hispanic whites.

Panameño noted that while some financial service providers offer websites or products in languages other than English, contracts and documents -- including credit reports -- are traditionally in English.

Translating educational materials is not enough, Panameño says. "Service providers must provide competent services and extend product offerings that match the needs of these consumers at fair prices and under good terms."

What we get from this report is a renewed sense of importance that families need to have clear and accurate information about financial products.

-- Janis Bowler
National Council of La Raza

Translations can offer their own set of problems. The GAO report found that many English financial terms have no equivalent in Spanish, such as "401(k)," "balloon payment" and "subprime." Translating them literally can be misleading. Some financial institutions are reluctant to offer translations because of liability concerns.

"What we get from this report is a renewed sense of importance that families need to have clear and accurate information about financial products," says Janis Bowdler, a deputy director of the civil rights and advocacy group National Council of La Raza. "You need to have someone translating who lives in both worlds so the messages are clear."

Sometimes financial terms are different even among Spanish variants. For that reason, at InCharge Debt Solutions in Orlando, Fla., translated materials are checked by Spanish speakers from Colombia, Puerto Rico, Cuba and Mexico, says Hubert Rivera, vice president of consumer outreach at InCharge.

The report noted that many immigrants rely on relatives already in the United States to explain the financial system to them, even though their family members may not have complete or accurate information themselves.

Hispanics' need for access to accurate information in their preferred language led InCharge to hire 12 bilingual debt counselors in January in the bankruptcy division who work exclusively with Spanish-speaking clients. That changed the English-to-Spanish speaking ratio for debt counselors in that division from 80/20 to 60/40.

Maximizing the trust factor
Rivera says trust is a huge factor among Hispanics in financial matters and the trust factor goes way up when they can do business with someone who both speaks their language and understands cultural differences.

"In the Spanish community ... it's very embarrassing to admit that you're having financial problems," he says. "To take that first step is huge."

Lack of trust in mainstream financial institutions has led many Hispanics to choose alternative banking services such as check-cashing services and payday lenders with exorbitant interest rates and unfavorable terms, a concern noted by the report.

Now the report is in the hands of the Senate's Committee on Banking, Housing, and Urban Affairs and the House of Representatives' Committee on Financial Services.

No recommendations
The GAO report did not include recommendations. But Bowdler says she is hoping for at least two specific actions after this report:

One is to mandate that credit reports be available in other languages. The report breaks out the major languages spoken by those with limited English proficiency. After Spanish (74 percent), the most common were Chinese (5.4 percent), Vietnamese (3 percent) and Korean (2.3 percent).

"When it comes to something as serious a buying a house, people may always be more comfortable in their first language," Bowdler says. "They need to see the documents in that language."

The other is for Congress to fund a national counseling and education program that would link LEP families with financial planners through credit unions and community-based nonprofits as part of the Community Development Financial Institutions (CDFI) Fund, under the U.S. Treasury Department. A proposal to expand the program beyond a pilot phase is currently part of the financial reform bill that passed the Senate Thursday after approval in the House in December. Funding would have to come from a future appropriation.

Educating the whole family in Spanish-dominant households is important as Hispanics -- hit disproportionately hard in the recession by job losses in construction and manufacturing -- find their way back, says Leylha Ahuile, senior multicultural analyst for market research company Mintel International Group. Hispanic children who have seen what their parents have gone through in the recession want the tools for better futures, she says.

"Spanish-dominant households tend to have lower education levels and probably haven't put money away for a rainy day, and at the same time they tend to have more children, so they have more at stake," she says. "But they also have the least amount of understanding of services that could help their families."

See related: Wall Street reform bill taking shape for consumers, Guide to the Credit CARD Act of 2009

Published: May 25, 2010


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