Capital & Main: Several years ago when my wife Susan and I traveled across Ireland by local bus, we headed toward a national cultural site a few miles beyond the nearest town. The route the bus took crossed a rural peninsula, and finally to the little community. As we wound through the country roads, old people climbed aboard, and when we arrived at the end of the line, still some miles from our destination, they all disembarked for the post office. We needed some stamps, so we followed.
But at the post office, no one did much postal business. Instead, they picked up their monthly retirement checks – then cashed them, before returning to their homes on the next bus. Of course, in between, there was time for a short stop at the pub and maybe the grocery store.
As tourists, we seemed to be the only people interested in the local church. Post offices once offered savings accounts that immigrants found especially useful. I had not thought about this scenario much until I saw a piece in The Atlantic magazine in which a successful American writer realized that in a crisis he couldn’t come up with $400. Neither could 47 percent of the respondents in a recent poll by the Federal Reserve Board. People said they would either borrow the money or sell something. Which must be why people borrow from check cashing stores, paying exorbitant interest rates above 300 percent. However, in most instances, I’ve learned, it doesn’t take a crisis.
Most pay check loans cover monthly bills – rent, utilities and basic living expenses. Sadly, the customer base for these financial services involves a huge percentage of working America. Some 19 million households use payday lenders, nearly one in six, according to the Community Financial Services Association of America, which represents storefront lenders. Furthermore their director told Congress in February that “as many as 76 percent of Americans are living paycheck to paycheck.” That’s a huge potential market for customers who either do not or cannot use banks for their financial services. Read more.