Living Outside the Financial Mainstream: Alternative Financial Serve Use Among People with Disabilities

Background and Purpose

The 12 Grand Challenges call on social work researchers to work toward building financial capability for all. A major component of financial capability is financial access. When individuals have less financial access, they use non-bank financial services, or alternative financial services. Alternative financial services (AFS) are typically not federally insured and charge much higher rates and fees than traditional banks. Such services include money orders, check cashing services, international remittances, payday loans, refund anticipation loans, rent-to-own services, pawn shop loans, and auto title loans.

Because people with disabilities (PWDs) are significantly less likely than people without disabilities to have access to checking accounts, savings accounts, and positive credit ratings, they are at a much greater risk of seeking out AFS. Additionally, because this population experiences poverty at much higher rates than the general population, the potential of increased predation via non-traditional financial services can be much more problematic. Despite this, there has been very little—if any—research on the determinants of alternative financial service use among people with disabilities

Methods

This study used logistic regression to explore factors related to the use of AFS between a nationally representative sample of U.S. adults (N₁ = 27,564), and a sub-sample of PWDs (N₂ = 1,232). Using secondary data from the Financial Industry Regulation Authority’s 2015 National Financial Capabilities Study (NFCS), two separate logistic regression models revealed several significant individual and institutional level factors that predicted alternative financial service use between both samples.

Results

The full-sample model was found to be significant, χ2(10) = 3,917.22, p < .001, as was the sub-sample model, χ2(10) = 193.43, p < .001. Most notably, it was found that PWDs were twice as likely to use AFS than PWDs. Additionally, this study found age (ß = .86, p<.05), race/ethnicity (ß = 1.93, p<.001), checking account access (ß = 1.75, p<.05), savings account access (ß = 1.51, p<.05), credit rating (ß = .60, p<.001), and level of financial literacy (ß = .88, p<.001) to all be significant determinants of AFS use.

Conclusions and Implications

This study has implications for many different stakeholder groups within social work and across related disciplines, including policy makers seeking more effective ways to further advance the financial well-being of PWDs, case managers who work with PWDs to navigate the various systems of care and financial interventions, and poverty researchers.

This study also adds further knowledge to the current literature base in this under-researched area of AFS use among U.S. PWDs. Unfortunately, this sub-population has the potential to continue to be increasingly marginalized as they experience higher rates of individual and institutional level barriers. Because of the increased risks associated with this population, and the limited number of empirical studies in this area, additional research is greatly needed. Future research should be directed toward exploring the outcomes of such AFS use within the disability population, as well as qualitatively examining the reasons why PWDs use AFS.