Designed to Fail: How the Financial System Leaves Low-Income Families Behind
In our work with low-income and immigrant communities, we see a persistent and harsh reality: our clients are often treated like second-class citizens in the financial world. They’re forced to use products and services designed for much wealthier people, which simply don’t meet their needs. Most banks develop products for the “average” consumer who doesn’t face the same barriers our clients do every day. When products don’t fit, harm follows. And it’s low-income families who bear the cost—through fees, high interest rates, and limited options.
At MAF, we do things differently. We place our clients at the very center of everything we create—how we design products, develop technology, and deliver services. Our community- centered approach works. For over 18 years, our Lending Circles program has supported more than 11,000 clients through nearly 15,000 loans, with a loan volume exceeding $14M and a default rate under 1%, which is much lower than any other small-dollar, credit-building program.
But even with thoughtful design, affordability remains a significant challenge we cannot ignore. Low-income families are struggling to make ends meet. Grocery costs are rising, commuting expenses are higher, and they are maxing out their credit to cover the gap. Today, credit card utilization is at its highest level in over a decade, and for borrowers with the lowest credit scores, utilization rates exceed 90%, meaning many are effectively maxed out. These households are getting by with very expensive debt, paying interest rates ranging from 24% to 36% APR or higher.
In California, finances are reaching a breaking point for low-income borrowers. Since 2021, credit balances for borrowers with low credit scores have increased nearly 55%, from $3,700 to $5,900 in 2025. Meanwhile, actual income has remained flat. Any wage gains have been erased by inflation, rising rents, and high interest rates, making it almost impossible for low-income families to keep up with payments. Delinquency rates for deep subprime borrowers surged from 32% to over 50% during this same period. Families earning $50,000 are spending 10% to 14% of their income just on finance charges.
It’s alarming to see debt accumulating with no easy way out. Many of our clients are caught in the high-cost debt trap, barely able to make the minimum monthly payments, and never reducing their balances. Without some form of relief from financial institutions or government programs, this cycle will continue.
Low-income families will continue to struggle with stagnant wages that fail to keep pace with rising living costs and will be forced to depend on unaffordable, high-interest credit. They should not have to rely on unaffordable credit to survive. They deserve financial solutions designed for their realities, that support their goals, and that create real pathways to stability.
At MAF, we remain committed to building that future—one where dignity and opportunity are not the exception, but the standard.
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