Today's NSaFI: Getting people out from under the thumb of those nasty payday lenders and check cashers, co-authored by the Governator and President Bill. The check-cashing firms charge fees to turn paychecks into cash, and the payday lenders charge confiscatory interest rates for short-term loans. These are apparently profitable businesses, because there are a lot of them, and therefore they must be destroyed. (Although I do have to give Bill Clinton credit -- he's proposing incentives to get people to use banks, rather than just outlawing the paycheck firms. Hillary would just try to take 'em out with legislation.)
The article cites lots of studies that make ridiculous assumptions -- here's a howler:
And consider that, according to a new Brookings Institution report, as much as $360,000 in pre-tax wealth could be created if the average, full-time unbanked worker invested in the stock market what he will spend over his lifetime paying to cash his paychecks. That would allow one of those workers to finance about 25 years of retirement at his current standard of living.
Yeah, like that's going to happen. That $360,000 will never see the stock market -- it'll go for cigarettes, beer, and lottery tickets. (Not all bad, as the cigarette and beer manufacturers, distributors, and convenience-store clerks need income too. The lottery is just a tax on the poor, which goes into the state treasury to be mostly wasted, but that's another post.)
These businesses serve several legitimate purposes, other than just fleecing the poor as the article contends:
- The presence of a lot of check cashers and payday loan places means that you're probably in a bad neighborhood, and should not stick around, nor even consider living there. They are everywhere, of course, but they seem to be much more numerous in crime-ridden neighborhoods. If you can see inside the store, and the cashiers are protected by bulletproof glass, then you're probably in a really bad neighborhood.
- Banks and other financial institutions require lots of steps to open accounts (due, in part, to the post-9/11 USA Patriot rules to prevent money laundering). It's a hassle. There's something to be said for paying the check-cashers' fees just to avoid that hassle. Give the people what they want, and all that.
- Financial institutions also require valid photo IDs for cash transactions, new accounts, etc. Those who don't have photo IDs which would pass inspection at a bank (hint,
illegal aliensundocumented-Americans) have to use the check cashers, who are in effect levying a fee for not having a valid ID. Seems like a win-win situation to me.
Edit: El Rushbo talked about this issue in the first hour of the program today, and he got a call from a gentleman who has apparently been blacklisted for 10 years from opening accounts banks, because his ex-wife had bounced too many checks on their (presumably) joint account before his divorce. I'd read about this before, but forgot until I heard this call on the Rush 24-7 podcast. Apparently there is an organization called ChexSystems that acts as a clearinghouse for serial bank-account abusers -- but according to this page, which has information on ChexSystems, the lockout period is supposed to be only five years from the last incident. (In fairness to Rush's caller, if banks told me to FOAD when trying to open an account, I probably wouldn't go back again either.)