On the surface, this sounds like it might be a good program, but I have my doubts. Yesterday, about 65 bankers met with Houston city officials. The reason for the meeting was to figure out how to bring the poor into mainstream financial programs. The idea is to reach out to poorer families "who rely on check cashers and pawnshops for their financial transactions".
According to a recent survey of five minority neighborhoods in Houston, it was learned that as many as 51% of the households did not use a regular bank. The participating banks would create something called a "Houston account" that would have no minimum balance requirement and would accept alternative identification such as consular cards.
Cliff Johnson of the National League of Cities pointed to the high fees charged by the check cashers and payday loan givers. He said, "We have to pay...attention to how families hold on to their assets, so their hard-earned dollars don't just go back out the door."
That all sounds good, but I guess I'm just a cynic. I have a hard time believing the banks are suddenly going to go out and help poor people out of the goodness of their corporate hearts. It's far more likely that they looked at the big dollars the pawn shops, check cashers and payday lenders were making, and wanted in on the action. They had never realized all the money that could be made off the poor.
I have to ask, are the poor going to be offered low rates like the rich? Are they going to be offered overdraft protection? Are they going to be paid interest on their checking accounts? Probably not.
I think it far more likely these accounts will turn out to be like the credit cards offered to the poorer families, that charge higher rates and higher penalties. The banks are just starting to realize what the credit card companies already know -- the poor are easy targets for exorbitant profits.
I hope I'm wrong about all this, but I doubt it.
My guess is that you're right about the banks just wanting a piece of the action - they'll probably end up offering checking accounts with higher monthly fees, higher transaction fees, and a bigger fee if you bounce a check. In the absence of evidence to the contrary, it's always safe to assume that a bank is being motivated by greed rather than a sense of civic responsibility.
ReplyDeleteYes, you are a cynic. Might it actually encourage these people to save? Without the temptation of cash in their pockets, they might decide to leave their money in the bank and build a nest egg.
ReplyDeleteGet real rufus! You're talking like these people actually might have something left at the end of the week. These are the working poor we're talking about. They're lucky just to make it thru the week without having to pawn something. Even if they were able to save a bit, one trip to the doctor when a kid got sick would wipe it out and put them back in debt.
ReplyDeleteYou should check out Bank on San Francisco, which the Bank on Houston is modeled after:
ReplyDeletehttp://www.sfgov.org/site/bankonsf_index.asp
It's a public/private partnership that actually waives a lot of the fees and requirements for lower income individuals. To be part of the partnership, banks had to create products that met Bank on San Francisco's requirements to help lower income individuals.
I also don't think the banks just figured out about predatory lending and wanted to jump in on the action, rather, they get government incentives (federally) for their community involvement.