Asset-Building Strategies: Ramp Up Account Program

Global Community Relations, Southwest Region

Victor Ramirez, Community Relations Officer

Citi’s Role in Community Impact 

Developed Products and Services

CitiEscrow IDA Accounts

Access Accounts

Provided Citi Financial Education Program

Collaborated with United Way in Development  of Ramp Up Program

Supported Community Organizations that Effected Change

Provided Financial Resources

Provided Human Resources: Technical Assistance / Training, Program Development, Board Service

Provided Intermediary Resources: Capacity Building

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Copyright © 2009 Citigroup Inc.

Copyright © 2009 Citigroup Inc.

1. Savings

2. Asset 

Building

3. Building 

Equity

VITA Programs

Marketing Campaigns

IDA Programs

Banking Services

Financial Education

Programs

Creating Linkages Between the Silos

Need a Continuum of Services

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Copyright © 2009 Citigroup Inc.

Examples of Citi Partnering with United Way (UW)

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2007 – 2008 Projects:
        -  “The Unbanked Problem in Los Angeles (LA)” Report 
        -  Asset Building Collaborative with Federal Reserve
        -  Online Asset Building Directory
        -  Greater LA EITC Campaign Partnership 
        -  Ramp Up Pilot Programs –  IDA Partners & VITA Site

Future Projects / Opportunities :
        -  Bank on LA Campaign  – City of LA 
        -  Asset Building Specialist Certification Program
        -  Replicate Ramp Up in other Citi and UW markets

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CSIP Report Outcomes: place-based strategy

Saving for the American Dream IDA Program

Part of UW of America Financial Stability Partnership focusing on Asset Building

EITC, VITA, Credit Building, Savings Programs, IDAs, Financial Ed, Access to Public Benefits, Workforce Development

UW of Greater Los Angeles -  Saving for the American Dream IDA Program 

Launched in 2001; one of nation’s largest IDA programs with nearly 1,700 accounts

Only active IDA Collaborative in Los Angeles

18 Countywide Partners focused on Homeownership, Micro-enterprise, Post-Secondary Education

Program and financial support, compliance monitoring for Federal grants, data collection, quality assurance, capacity building

Used as a national model by other United Ways

Outcomes: 85 Homeowners; 373 Business Owners; 20 Educational Investments

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Copyright © 2009 Citigroup Inc.

Citi holds 20% of UW’s Accounts (300)

Addressing Challenges of Savings Programs

General Savings Programs

Ineffective incentives for opening new accounts (ie, upfront cash bonus)

Unfunded or inactive savings accounts

Inconsistent savings patterns (ie, short term vs. long term savings)

Individual Development Accounts

High cost / High touch / Low tech IDA structure

Discouragement factor when unable to acquire asset goal (ie, home purchase)

Unused Federal and non-Federal match dollars (lost community equity)

Restrictive eligibility guidelines for Federally-funded programs (ie. earned income, asset test limitations, etc.)

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Copyright © 2009 Citigroup Inc.

Copyright © 2009 Citigroup Inc.

          - Cost effectiveness of having Citi staff at VITA sites has been questioned
          -  Current Citi Systems and controls prohibit pregeneration of accounts

Ramp-Up Savings Account Features

RAMP Up Pilot Program:  Low-cost, flexible, “no-strings” savings program that provides higher subsidized interest rates as high as 21% APY as an incentive for consistent, long-term savings  
        -  15-month saving cycle (extendable)
        -  No minimum balance requirement
        -  No minimum monthly deposit requirement
        -  15% to 21% APY subsidized interest rate on deposits with maximum incentive limits (tax-free)
        -  Can withdraw full savings at any time for any reason with no penalty
        -  Purchases not limited to asset-specific purchases
        -  Transferable to other savings / investment products
        -  Financial education is offered, but not required
        -  Uses CitiEscrow Account platform to open accounts online

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Copyright © 2009 Citigroup Inc.

          - Ramp Up is considered an IDA account in all respects, but not an AFIA IDA because not qualified asset purchases
          - Pilot program promoted at 4 agency partners (JobStarts, MHDC, MALDEF, PACE)

Ramp Up Account Incentives at VITA Sites

Interest Incentive Based on Initial Deposit and Monthly Savings Deposit

Example:

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| Initial Deposit Amount | Monthly Savings Contribution | Annual Percentage Yield | Total Savings + Interest (15 mos.) |
|------------------------|------------------------------|-------------------------|------------------------------------|
| $500                   | $40                          | 19.35%                  | $1312                              |
| $700                   | $50                          | 15.1%                   | $1659                              |

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Product Comparison

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| Ramp Up                     | IDAs                         |
|-----------------------------|------------------------------|
| Savings Period Goal         | Up to 15 months (Extendable) | 6 months to 5 years |
| Minimum Deposit Requirement | None                         | Min. Quarterly Deposit |
| Withdrawal Restrictions     | None                         | Forfeits match if withdrawn before 6 months, or used for non-qualified purchase |
| Qualified Purchases         | No Restrictions              | First home, business, higher education |
| Financial Education         | Encouraged, but not required | Required 10 hours training |

Copyright © 2009 Citigroup Inc.

UW trained by Citi on CitiEscrow product

UW keeps track of principal and interest in a spreadsheet that calculates interest earned

Product Comparison    continued...

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Copyright © 2009 Citigroup Inc.
| Ramp Up                     | IDAs                        |
|-----------------------------|-----------------------------|
| Subsidized Incentive        | 15% to 21% APY on savings   | 1:1 to 8:1 Match on invested savings |
| Maximum Incentive Cap       | $250                        | $6,000 per account (based on asset type) |
| Benefit Payout Restrictions | No Restrictions             | Match only offered if savings invested in qualified asset purchase |
| Case Management             | Low Touch                   | High Touch |
| Cost Factor                 | Low Cost ($300 per account) | High Cost ($1500 per account) |

Copyright © 2009 Citigroup Inc.

UW trained by Citi on CitiEscrow product

UW keeps track of principal and interest in a spreadsheet that calculates interest earned

Variations in Ramp Up Structure

Hybrid Ramp-Up / IDA Model

High interest on deposits and match on asset purchase

Terminated / closed accounts still receive interest subsidy

Partial use of original match to finance interest subsidy

Flexible Program Design Based on Need and Population Served

Flexible eligibility criteria (AMI vs. Federal poverty guidelines)

Flexible opening balance and deposit amounts

Flexible purchase requirements

Extendable savings periods

Flexible Incentive Design

Interest subsidy only

Interest subsidy combined with other incentives

Scaling match on 1st deposit only, plus interest subsidy

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Copyright © 2009 Citigroup Inc.

Copyright © 2009 Citigroup Inc.

          - Cost effectiveness of having Citi staff at VITA sites has been questioned
          -  Current Citi Systems and controls prohibit pregeneration of accounts

Ramp Up Pilot Outcomes 

Pilot Project in 2007 : June 2007 – June 2008

42 accounts opened in first 2 months

Participants co-enrolled in IDA Program

$12,000 in total deposits in first 90 days (average $300 / acct.)

$23,970 in total deposits in 180 days (average $600 / acct.)

80% made regular monthly deposits

28% more savings than IDA savers during same time and similar group

9% Attrition rate vs. 26% Attrition for IDA savers

Phase 2 in 2008 Tax Season at 1 VITA Site

29 accounts opened at VITA / IDA site

Average $500 from tax refund used for opening balance through direct deposit ($300 is opened with stimulus checks)

Did not offer to co-enroll in IDA Program, but many are interested

$10,427 in total deposits in 90 days (average $417 / acct.)

Current total deposits: $29, 610

2 homeownership purchases using savings

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Copyright © 2009 Citigroup Inc.

Copyright © 2009 Citigroup Inc.

          - Cost effectiveness of having Citi staff at VITA sites has been questioned
          -  Current Citi Systems and controls prohibit pregeneration of accounts

2009 Ramp Up Expansion 

Phase 3 Expansion

4 new sites at VITA locations + 1 existing site

Countywide outreach to 5 communities  that now include Boyle Heights, East LA, Pacoima, Koreatown, Pasadena

Increased Goal of 175 new accounts opened by June 2009

$500 Opening deposit using Split Tax Refund

Next Steps

Statewide expansion

National Demonstration Project 

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Copyright © 2009 Citigroup Inc.

Copyright © 2009 Citigroup Inc.

          - Cost effectiveness of having Citi staff at VITA sites has been questioned
          -  Current Citi Systems and controls prohibit pregeneration of accounts

Endnotes

Citi (NYSE: C), the leading global financial services company, has some 200 million customer accounts and does business in more than 100 countries, providing consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, and wealth management. Citi’s major brand names include Citibank, CitiFinancial, Primerica, Smith Barney, Banamex, and Nikko. Additional information may be found at www.citigroup.com or www.citi.com.

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Citi and arc design is a registered service mark of Citigroup Inc.

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