Bill Clinton and Arnold Schwarzenegger are teaming up to help poor Californians open starter bank and checking accounts so they don’t have to turn to cash checking and payday loan places with usurious fees. [WSJ]

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  1. humphrmi says:

    Good news – death of a thousand cuts for the payday loan and other usury leaches. The payday bloodsuckers won’t go down without a fight though. I fear what their next move will be – sue the state for trying to put them out of business?

  2. ceejeemcbeegee is not here says:

    People who can’t get checking accounts usually are on Checksystems or some other ‘bad check’ list. Problem is, ONE mistake can get you banned from every bank for up to 7 years. There are plenty of deadbeats on Checksystems, but a lot of folks are paying a high price for being young and stupid.

  3. lesbiansayswhat says:

    Finally! Now make it a federal program. I can’t tell you how many people I know making very low wages for very hard work that can’t open checking accounts for minor infractions. And people without checking accounts who attempt to own something like a car legitimately pay huge amounts of interest partly based on their not having a simple checking account. The effects of the way the credit system works is especially life sucking for those stuck in that class.

    Wasn’t California also the state that restricted usury fees recently?

  4. speedwell (propagandist and secular snarkist) says:

    People who get payday loans already have checking accounts at a bank. The payday loan places operate by accepting a postdated check. So helping the “unbanked” should have no particular effect on payday loans. Meh.

  5. goodkitty says:

    @ceejeemcbeegee: Yep. I almost got ‘blacklisted’ because I had closed an old bank account that never had more than $30 in it, and it got hit by a company for auto-debit without my knowledge. Ca-ching. Not only was it a grand overdraft adventure, but since I wasn’t getting statements anymore (they had an old address), I didn’t realize they were seriously pissed about what was a $4 overdraft (which eventually was over $120 due to their “in-convenience” fees), and were about 3 days away from blacklisting me for being something like 90 days overdue. Doh.

    Should I have been on top of that account? Sure. I should have been extremely proactive and closed it when I knew I hadn’t used it in months. And should I have never made the fatal mistake of allowing a company to auto-debit my account? Absolutely. But to be blacklisted for 7 years, and rack up over a hundred twenty bucks of overdraft fees because I was short by less than the amount of change in my purse? That honestly should be criminal. I know it probably would be if it were me holding someone up for that kind of fee between private parties.

    And no, they never once actually tried out this new technology called THE PHONE. Jeez. At least if they had sold the debt I’d have known about it.

  6. HooFoot says:

    @speedwell: As someone who helps low income clients receive cash assistance, I know for a fact that most of them do NOT have any kind of checking or savings accounts. In fact, many of them have never even stepped foot into a bank.

    And as much as I applaud California’s efforts, they have a LOT of obstacles to overcome. “Bad credit” isn’t the only reason the don’t use banks. Far from it, really. From my experience, the #1 reason is that many poor folks simply don’t trust banks. It’s partly about being afraid of getting screwed over, partly lack of education about basic financial terms and mechanics. It’s less intimidating to cash a check at a payday lender than it is to decipher an application for a checking account.

    Another big reason, and one why I believe this program will ultimately fail, is because very few banks set up shop in low-income areas. Drive around the ghetto and count the number of banks you see–I’ll be amazed if you find two in the same neighborhood. If you’re on a tight budget, you’re not going to spend money on gas or bus fare just to deposit a check when you can walk a few blocks to the payday lender.

  7. Snowblind says:

    Buried in the article is this little nugget:

    “And we will build on work already being done in San Francisco, where city officials, working with banks and credit unions, have already signed up 11,000 individuals who previously had no checking or savings account.”

    Ah, that program was giving “Municipal ID’s” to anyone who asked for them, including illegal immigrants. They also worked to get the banks to accept these cards:

    [www.sfgate.com]

    Sorry, I am a little leary about letting people open Federally Insured bank accounts to people who are here breaking the law, earned from companies that are also breaking the law. (Who I hold more responsible than the poor souls who came here. Throw employers in jail first)
    How does all this impact consumers? Well, for one how trustworthy/ethical is a company who breaks federal law to hire cheap labor? Not very I think.

  8. speedwell (propagandist and secular snarkist) says:

    @HooFoot: I did not say anything about YOUR clients. I said that people who get payday loans provide a postdated check as collateral. If you think about it real, real hard, you might realize that they require a checking account to provide the loan company with a check. If it still doesn’t come clear in another hour or so, check back with me and I’ll explain it again using smaller words. (I’m used to that; I work in tech support.)

  9. trollkiller says:

    A lot of people don’t have a checking account because they are afraid of NSF fees. When you run pay check to pay check it does not take much to overturn the apple cart.

    I can hear it now, those of you that have never had to live pay check to pay check are saying “You should have been more responsible and had enough money to cover everything”, well I did. The only problem is the bank moved up the date it took maitenance fees out by a week.

    So the bank takes its $12, then runs the checks for the day making me short by 80 cents. Then they run the $900 dollar deposit and take out the $40 NSF. The merchant then dinks the account for their $20 bad check fee and the check is deposited. So now I am out $72 unexpectedly. In fact the only reason I caught it before bouncing more checks is I pulled $20 from the ATM the next day and read my balance.

    As you can imagine losing $72 can really hurt you if you are living tight to the bone. That was a week’s worth of gas, meds for a month or groceries.

  10. Ben Popken says:

    @speedwell: Not true in all cases.

  11. speedwell (propagandist and secular snarkist) says:

    @Ben Popken: Really? OK, did not know. It seems to be invariably the case here in Houston, and in the part of Los Angeles where the rest of my family lives. Thanks.

  12. ogman says:

    @snowblind: Excellent point!

  13. JeffCarr says:

    @goodkitty: I had much the same problem myself. Not only did the bank not call or email me, but I was actually working for them at the time. This was about 18 months ago, and I’m still dealing with the fallout and *still* don’t have a checking account.

    Getting back on your feet financially is almost impossible when you’re in CheckSystems.

  14. jbho says:

    Right now, payday loans are a cheaper alternative to bounced checks, and restart fees on utility bills. If a business can provide cash advances to high risk consumers at lower rates, then those new businesses should try to compete in the market. Price fixing and usury limits do not have the intended effect of forcing legal lenders to lower their fees. Instead, legislating price caps simply forces legal lenders to stop offering loans to certain consumers.

    In other words, if legislators cap the fees on short term loans or bounced check fees, then lenders and banks simply stop offering credit to a large segment of the market. This is not a solution, as persons living paycheck to paycheck will resort to “unregulated” lenders. Prohibition failed in other arenas, driving people to unscrupulous providers, and the same occurs when legislators outlaw payday loans. Typically, when states eliminate payday lending, the consumers turn to unregulated foreign based Internet payday lenders.

    See the following article from the Federal Reserve Board regarding How Households Fare after Payday Credit Bans, for more information: [www.newyorkfed.org]
    It would be far better to regulate and monitor short term loans, and to find ways to encourage competition, then to simply legislate these consumers into the hands of unregulated lenders.