Having scraped out the bottom of the home owner barrel, America’s banks and financial companies now turn truly desperate….
After years of watching check-cashing stores and payday lenders steal potential customers, banks and credit unions are beginning to offer the same services and products, but in more affordable and responsible ways.
The movement comes as federal bank regulators focus their attention on the estimated 73 million Americans who are underserved by the nation’s banking industry.
The hope is that mainstream financial institutions can convert the check-cashing customers and payday loan-seekers of today into the sought-after depositors and low-risk borrowers of tomorrow.
“A large number of banks and financial industry players are going after this market because they do think this is a growth opportunity. They can make money on these consumers and they can do it in ways that are mutually beneficial for them and the customer,” said Kimberly Gartner, associate director of the Chicago-based Center for Financial Services Innovation.
The dynamic growth of the alternative finance industry, which includes car title lenders, has proved the dire need among many Americans for convenient small-dollar loans and immediate check cashing without bank delays.
About $10 billion in fees are collected each year on these services from some 47 million households, or roughly 81 million people, said H. Leon Majors III, the president of ESP Payments Research Group in Salisbury, Md.
While the alternative finance industry provides a valuable service, it’s drawn the ire of consumer advocates and lawmakers because of its high fees and sometimes predatory nature. Those who cash checks, pay bills and borrow money through these channels often have bank accounts but typically pay the higher costs for fast access to cash.
Next year, the Federal Deposit Insurance Corp. will launch a two-year study in which nearly 40 banks will offer small-dollar loans of up to $1,000 as an alternative to payday loans.
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