Low-income households struggle to access credit

Low-income households continue to rely on credit to meet their obligations, but access to that credit waned in the first quarter, according to a study from the Federal Reserve Bank of Philadelphia. The Philly Fed surveyed 82 financial service providers in its district on the financial well-being of their clients. For households with low income, 59% of the respondents said access to credit slipped from the previous quarter. Almost half of respondents said funding for these services dropped in the quarter with more drops to come. “Respondents reported that the financial well-being of [low-income] households continued to decline,” said Brian Tyson, research analyst at the Philly Fed. “Organizations providing services to these households have seen significant increases in demand, while simultaneously facing decreases in their funding and capacity to meet this demand.” Of the respondents, 76% said demand for services increased in the first quarter, and 68% said this need will continue to grow over the next three months. Roughly one-third of those surveyed said the availability of affordable housing decreased. Over the coming months, access to credit is not expected to change. More than half of the service providers surveyed said there would probably be no change into their client’s access to credit over the next three months, according to the report. Other regional Federal Reserve banks are attempting to address the problem. The Federal Reserve Bank of Cleveland will hold a summit on the blight of low-income families June 9-10. “Income inequality in this country is at an all–time high, and is among the highest in the developed world,” the Cleveland Fed said. “In this environment, it is critical to revisit education and asset building policies, through the lenses of research and practice, that will support stability and upward mobility in poor communities.” Write to Jon Prior. Follow him on Twitter @JonAPrior.