''Bank Fees Are a Credit Union's Best Friend''
"Something is wrong when keeping cash in the kitchen cookie jar seems a reasonable substitute for your bank.''
More info"The lobby of the Nix Check Cashing outlet on South Figueroa and West Imperial, in the Watts neighborhood of south Los Angeles, was bright and loose. Twenty or so people, black and Latino, dressed in jeans and T-shirts or sport jerseys or work uniforms, stood in a line that snaked back from a long row of bulletproof cashiers’ windows all the way to the front door. The room was loud, in a friendly way; everyone seemed to be talking with everyone else. Every once in a while, all together, the line would erupt into raucous laughter.
“Next customer,” said a cashier, Joseph, a young black guy with a sweet, quiet manner. He wore black sneakers, black Dickies and a white polo shirt with a Nix logo — a retail uniform.
The customer at the window next to Joseph’s looked over her shoulder. “Sister!” she yelled. “Next in line!”
It didn’t feel like a bank.
Twenty or thirty years ago, traditional financial institutions fled neighborhoods like Watts, and guys like Tom Nix, co-founder of the biggest chain of check cashers and payday lenders in Southern California, rushed into the vacuum. They built a whole new financial subculture, which now includes regional giants like Nix, national brands like Ace Cash Express, Advance America and Check ’n Go and thousands of local chains and anonymous corner stores — more outlets, in total, than all the McDonald’s restaurants in the United States plus all the Starbucks coffee shops. Inside, it’s like banking turned upside down. Poor customers are commodities, deposits are irrelevant, bad credit makes for a good loan candidate and recessions can be boom times. Add up all those small transactions and throw in businesses like pawnshops and auto-title lenders, and you’ve got a big industry — $100 billion annually and growing. Nix alone pulled in $28 million in fees last year.
Today’s financial crisis has many origins. But here’s one cause that is often overlooked: Traditional bankers badly misread the market for financial services in low-to-moderate-income communities. “Banks have been approaching these customers purely from a short-term-gain perspective, and they’ve missed opportunities,” Matt Fellowes, director of the Pew Safe Banking Opportunities Project, told me. Banks declined to offer small, simple lines of credit to poor and blue-collar customers, leaving them to payday lenders, while they pushed high-limit, high-interest credit cards on everyone and acquired hundreds of billions in subprime debt. They undervalued the hundreds of billions a year in modest paychecks that pass through a place like Nix and ended up short on cash. Now that the economy has turned ugly, these poor and blue-collar customers are the hardest-squeezed. Payday loans are up, Nix told me when I spoke to him recently, and check-cashing revenue is down."
- Date added:
- Nov 7, 2008
- Project:
- Safe Banking Opportunities Project
Related Resources
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