How do you apply for a job? Or rent an apartment? When do you get your paycheck and what do you do with it? What is credit and how do you apply? What is this about a credit rating? There may be apps to answer these questions, but which ones should you trust? There are live people to talk to at your local bank, but can you trust them?
Social workers interact with many individuals who do not know the answers to these questions and who are thus vulnerable — to banks, lenders, credit card companies, developers of fintech (financial technology) apps and products and to all those who are constantly looking for ways to monetize our need to use money. Often, our own money.
Social workers studying finance are still few, and the funders to whom social workers typically apply are not always interested in economic matters. Nonetheless, the intersection of finance, race, class and gender has become a critical area in social work, and for Associate Professor Terri Friedline’s research in particular.
Racial Capitalism
What keeps marginalized peoples from navigating the economy with dignity? And what gives well-to-do white people so many advantages? “Capitalism requires profit,” Friedline explains, “and this economic system creates categories of difference, such as race, gender and class, in order to generate profit.” Friedline says that capitalism shifts responsibility away from society and onto individuals. “Most bank tellers earn less than $15 per hour, while their CEO may make 1,000 times that. Bank tellers are also disproportionately racially marginalized women while bank CEOs are almost exclusively white men. The labor of workers doing crucial frontline and customer service work is valued less in the hierarchy of payment and compensation than that of their executives. But the frontline worker is deemed responsible for their poverty instead of the employer that fails to pay a living wage.”
Friedline and her students speak of “racial capitalism” — capitalism’s creation of racial categories, which, combined with a profit motive, affects customer service in finance. If you want to apply for a mortgage or have a fee waived, how do bank employees make the decision? They look for you to display “personal responsibility” and other ways to show that you deserve a better interest rate or fee waiver. “That is a real thing bank employees say,” Friedline remarks, “when people are trying to use their own money.” Banks create and perpetuate inequalities, consistent with racial, gender and class categories. “Personal responsibility,” needless to say, probably looks white and male. Such discrimination may be challenging to measure, but that has not stopped Friedline and a cadre of interested students.
Credit Scores and Fintech
Friedline is currently working with students on two projects: a study of credit scoring, and a study of the daunting growth of fintech (financial technology) products and services.
Regarding credit scoring, MSW student Carson Bolinger explains: “We are reviewing articles and data that correlate credit scores with consumers’ ability to repay and their ability to cope with burdensome lending practices. Financial institutions increase interest rates for certain people based on their credit scores and so make it harder for those people to repay loans. We want to hold financial systems and corporations accountable. They should be working for the people, rather than perpetuating cycles of economic inequality.” Bolinger finds a connection to his own life: “I am a young adult, so my credit history is short and my score low. I pay higher interest rates than those with longer histories.”
MSW student Kimberlee Hall, who also works with Friedline, has her own personal connection to the work. “My mom dealt with credit scoring issues,” says Hall. “Seeing how hard it was for her to rebuild her credit after filing for bankruptcy made me want to look into finance in social work school.”
PhD candidate So’Phelia Morrow took a different path to her work with Friedline. Morrow was earning a master’s of public health, but found that field “rooted in a biomedical model lacking empathy.” She came to our School for an MSW, because “social work is where we address systemic issues, including the root issue: racism.” Morrow examines social determinants of Black women’s health, including racism, sexism and financial inequality. With Friedline, she is studying debt and Black, Indigenous and Latina mental health.
In 2020, Friedline published Banking on a Revolution: Why Financial Technology Won’t Save a Broken System (Oxford University Press). “When I got my PhD,” Friedline says, “so many people were saying that financial technology — fintech — would expand access to the financial system, reduce poverty and close the racial wealth gap. Those are massive and deeply rooted social problems! And people are still making those promises. But we have no evidence that technology is closing the racial wealth divide. Banks have discriminated for centuries. They helped facilitate the slave trade. And they are still discriminating. Some aspects of technology may actually be making these problems worse.”
The themes Hall and Bolinger identify in the credit scoring study also echo in the study of fintech. Fintech comprises the exploding universe of financial products and service that includes lending technologies, wealth management technologies, cryptocurrencies and payment apps. Says Hall, “We look at how finance companies and social media market these fintech products. The company might claim they are putting a product out there to be more inclusive of underserved individuals, granting them greater access. But what are they really doing? What profit are they making? For example, think of the fee charged by PayPal for you to collect your own money immediately, as opposed to waiting a day or two. Poor and marginalized individuals may, of course, be more likely to need money right away and thus more likely to let PayPal take a little bit of it. Or think of banks reducing fees (again, charged to you for using your own money), while at the same time collecting your personal data and selling it for a profit. “We look at fintech through a social justice lens,” says Hall. “We don’t just accept what the companies tell people.”
Friedline explains how banks and fintech companies may harm the very students SSW works with: “Fintech lenders have been found to discriminate in how they charge interest rates on student loans,” she says. “Students may not realize that lenders rely on algorithms and inaccurate data to automate decisions about creditworthiness. Maybe the lender or whoever creates the algorithm decides that a student who attends a community college is less creditworthy, even when this isn’t actually true. Since a borrower’s race and class can’t be overtly considered in lending decisions, the algorithm is trying to use community college attendance as a proxy. So the student gets charged a higher interest rate, which makes it harder for them to pay off their loans.
“I want all of us to question why systems are set up the way they are to begin with. We can change those systems. We can reduce the scope of these systems and their harms so that they aren’t so punitive.”
Cryptocurrencies are also supposed to be helping people use money without the same problems as the financial system. These are decentralized digital currencies, not backed by material assets and thus lacking intrinsic value. This makes cryptocurrency investment a form of speculation. The first widely used cryptocurrency, Bitcoin, came online in 2008, the creation of a still-unidentified entity using the name “Satoshi Nakamoto.” With its anonymity, volatility and need for users to possess financial and technological savvy, Bitcoin—though touted as a secure, decentralized technology—mostly favors a few insiders.
Implications for Social Work
Banks also directly fund the fossil fuel industry and many construction projects harmful to the environment. “It is important for social workers’ professional futures to build capacities in both finance and climate change and study the connections between them,” Friedline says. “One promising area for social workers is Modern Monetary Theory [MMT], which is a framework for understanding government spending. MMT has implications for addressing climate change, but also for things social workers traditionally care about like funding for the social safety net and mental health services.”
Fortunately, Friedline has found many social work students who are excited about these topics, and who want to learn more and plan careers in these areas. Social work must be wary, though, of being co-opted by business and finance. Friedline has presented at industry conferences and business schools and found “well-meaning people who want to know a little about poor people so they can better develop their new fintech product. They use the language of helping low-income people, then they start to turn a profit. Social work must be really careful not to betray its commitments to social justice by helping for-profit companies to better exploit their customers.”
Friedline served as a volunteer on the influential Biden-Harris Economic Policy Council, in the process making certain that her research is policy relevant. “It was an amazing experience,” she reports. “I was able to bring my research and practice expertise to bear on issues related to fintech, debt, the racial wealth divide and consumer protections. We helped to develop policy proposals related to what federal agencies could do, and we offered the administration guidance on implementing just and equitable policies.” Friedline is also a member of the Academic Research Council for the Consumer Financial Protection Bureau, advising mostly on research related to consumer protection. Here on campus, she is an affiliate with U-M Poverty Solutions, the U-M Center on Finance, Law & Policy and the Center on Assets, Education, and Inclusion.
Public Banking
Friedline has researched postal banking, a public alternative to private, for-profit banks. In an article dated April 24, 2022, the Boston Globe noted that 60 million Americans live far from banks and may be dependent on check-cashing companies, payday lenders and currency exchanges, all of which, of course, charge high fees. Banking at local post offices, says the Globe, “might be the fix for the racial gap in managing our hard-earned cash.” Postal banking might help close other gaps as well.
“There are lots of models like this for public banking,” Friedline says, “and public banking has implications for clinical work.” Social workers today may have clients looking to open bank accounts, get lines of credit or participate in the financial system in other ways. In addition to helping these individuals, social workers must also take an interest in how the cities and communities they serve fund projects and how public banks have the potential to keep money in local communities. “Instead of having a city bank with Wells Fargo — where Wells Fargo holds the tax money or pension funds and the profits go elsewhere in the world — public banks can keep that money local,” says Friedline. “Research from the Action Center on Race and the Economy finds that local governments in the United States spend about $160 billion on annual interest payments to banks like Wells Fargo. That’s money for affordable housing, mental health services and education.”
“It opened my eyes,” Kimberlee Hall says of Friedline’s work. “I think if more social workers understood how their discipline is connected to finance, we could help inform the communities and the people we are working with. Then maybe we could pass federal and state legislation to protect people from the duplicity and injustices of big institutions.”