The Battle Against High Interest Loans

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I’m just now learning about the legislation mentioned in this article (I follow a relatively low information diet for my own sanity).

This seems like good news to me in terms of consumer protections – I’ve long wanted a limit on interest rates, and anything that kills off predatory payday lenders seems like a good thing to me overall (even if there are a few folks out there that have genuinely benefited from a payday loan).

I’m curious to hear others’ opinions, especially if anyone has worries about the legislation.

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My neighbourhood was full of payday lenders. There were some laws passed and a bunch of them shut down. People turned to illegal loan sharks and things got uglier.

Then a credit union opened a branch in my part of the hood. People suddenly had a place to cash cheques that didn’t cost bus fare to get to.

Now things are better than they were in the beginning.

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It definitely seems like there needs to be some sort of alternate method for check cashing offered for this to work well.

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Bank deserts are like food deserts. They keep people with few resources from being able to make good choices.

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I don’t want to sound ignorant (even though I am ignorant of this issue) hence me asking…
Isn’t it possible for most people to deposit checks through mobile banking apps? Both banks I use have this feature, money is usually available same day although sometimes they randomly hold it for 1-2 days for verification measures. (yes, I know one to two days makes or breaks your financial situation when you’re living paycheck to paycheck and need to pay bills) I know that many won’t have smartphones, but many (or even most I’m guessing?) do as a cellphone is a near necessity for working and surviving in today’s America. Is it hard to find a pay by minute or pay by gig cellphone that’s compatible with these apps? I can imagine that many older people won’t know how to access this kind of service which would be a big roadblock.

One of my institutions is a credit union. It is awesome. No fees ever, reimbursement for any incurred atm withdrawal fees, and I even get 5% cash back on checking. Their banking app and their website are great. (access to this credit union is restricted to certain employees and their families, i get it because of my dad’s job)
The other institution is a bank. It’s also great. No fees. Mobile banking app with check deposit. (Capital One).
I know there can be roadblocks for lower income people to even use banks at all, but I’m pretty certain Capital One’s initial deposit is zero dollars or like $5. No minimum to keep the account (i use this account less and most of the time there’s under $100 in there, often hovering around $5 if I forget about it for a while).https://www.capitalone.com/bank/checking-accounts/online-checking-account/

I realize it’s a privilege to even know about these banking options (if you don’t have a bank account and most of the people you know don’t either, you might not hear about Capital One’s fee free checking.) Also, I know that capital one is not available in all areas. When I go to my hometown it’s harder to bank with this account.

It’s kind of unbelievable that in a first world country like the US so many people cannot access banking services. ( I mean, ditto for healthcare though, sigh …)

I think the onus for solving this should be on employers as well. Check cashing places may be less necessary if more people had direct deposit. Plenty of low income workers are employed by very large and massively profitable companies that certainly have the means to provide direct deposit.

I second support for credit unions. I think the government/public schooling/employers need to offer more information and benefits.

Also, if I was in need of this kind of information or support, the first place I would go would be my public library. I think that if libraries aren’t offering educational services like this they should be!!! (in my city a quick search shows personal finance seminars, but seems focused on stuff like retirement savings vs basic financial services to combat poverty and help working class/paycheck to paycheck people)

to add:
it seems some states allow employers to require that employees provide banking info for direct deposit of paychecks http://www.hrknowledge.com/wp-content/uploads/2018/04/Direct-Deposit-State-Law-Guidelines.pdf , although I’m not seeing anything about the other way around: employees required to give out direct deposit paychecks or offer the option.

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I guess I should add that I know most if not all people being preyed upon by payday lenders and check cashers KNOW they are being taken advantage of by predatory institutions and being shut out from other institutions. I realize they can know this and still proceed knowing it is truly the only option. sorry if that wall of text sounded condescending.

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The people in my area don’t often have bank accounts. They don’t have ID, and don’t have legitimate work. A bank account requires visiting a bank (very poor-looking people aren’t welcome in banks. They are assumed to be homeless) having ID, knowing what to ask for, etc. Lots of people I know had a bank account, but there was no money coming in and fees being charged every month so now they owe the bank for something they could never really use. Disenfranchisement is a bitch.

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People definitely know they’re being ripped off, but the alternatives are worse.

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This happens a lot where I live, too. Lots of homeless people (no address to set up a bank account) and lots of undocumented people (often paid in cash or otherwise not inclined to set up a bank account). And if you don’t get regular, sufficiently large direct deposits, the fees are nasty!

Smacky, do you know what pulled the credit union into your neighborhood? (Like, if this legislation passed, what would be things that communities could do to prevent loan sharking?)

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The credit union had a mission statement that included social responsibility. Community nonprofits basically shamed them into putting their money where their mouth is. Now they trot out the existence of this branch whenever they want a pat on the back for being such good people.

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Excuse my ignorant question I am an Aussie but just wondering how often Americans use checks? Either to receive or pay for things?

Wouldn’t most of the people who are doing illegal work or not have bank accounts be doing cash in hand work?

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Many Americans – especially younger Americans – use checks very infrequently as a way to pay bills. I use checks solely to pay taxes/government fees and to pay rent. However, the vast majority of Americans still using checking accounts very, very actively, even if they mostly use their debit cards. Most people are paid by their workplaces directly into their checking accounts, for example.

Many people working under the table are paid in cash. However, there’s a non-negligible number of Americans with legitimately taxed work who don’t have bank accounts, mostly for reasons of access. Those people can’t be paid in direct deposit, which means they’re paid with paper checks. Since they don’t have bank accounts, they have to pay to cash the checks wherever they can. Payday lenders often do business in check cashing as well, which is one reason why the demise of payday lenders can affect people without bank accounts.

(And, of course, if you have difficulty accessing banks, you may have other financial difficulties which make taking out a risky payday loan more likely.)

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Thanks for explaining :slight_smile:

I am 31 and I think I have used checks about 4 times in my whole life, my pay is deposited straight into my bank account, and then rent/bills are paid either by direct transfer, I dont think more companies would even accept checks.

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Do you not have any fee free accounts in the USA? Are you able to sign up to banks online?

It seems really unfair that people may live in areas with no access to banking and then be financially penalised for not having access to banks

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Those exist in some places, but how would you access an online bank without access to the internet? Throwback to when I was poor.

I would leave my bouncing shift and walk down to the docks and load trucks for another 8 hours. I’d then walk into town to grab a day labor gig, either construction or landscaping. Most of it paid cash, but sometimes we’d get a check. Zero banks where I lived, but I could have used one of the ones in town. But when on earth are they going to let someone covered in dirt and sweat hang out in a pretty bank with all the pretty rich people?

I had no computer, no internet. “Use the library” Lol nope. Great way to get your accounts stolen, using public computers. I had to go to a 24 hour copy shop and pay $1.50 per 5 minutes to use a computer that wasn’t a complete travesty.

So, when I did get a check, I had to pay 3-5% to get it cashed. Here’s the kicker. My rent couldn’t be paid in cash. So I lost another 3% buying a goddamn money-order to pay the man.

Some of the most brutal fights I’ve been in were leaving a check cashing place. Folks would follow you until there weren’t people around and jump you. The advice to just give them your wallet doesn’t work so well when you have no accounts, no insurance, nothing. What’s yours is only yours if you can keep it. Life sucks when you’re proper poor.

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I am sorry that sounds like a horrible situation.

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Thanks for sharing!

There are a couple of things to consider before you decide to commit.
Payday loans are not a problem.
Poor financial skills are a problem.
If you’re over spending month after month and keep borrowing, then yes, you’re going to be in trouble no matter how you’re borrowing money. Hopefully you never need to do so, but that is their place in our financial system.

MaybeLoan do fair and fast loans. Hope that makes sense.

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That’s truly horrible. I hope that they’re doing a lot better now.

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