McGray on Payday Cash Advance Loans
Douglas McGray of New York Times Magazine
Douglas McGray’s November 7 New York Times feature article “Check Cashers, Redeemed” gives readers a glimpse into a world that the media drones on about when they’re in a “who will pull them up by their bootstraps” monotone diatribe when it comes to payday cash advance loans. The reality isn’t biased one way or the other. McGray calls check cashing and payday cash advance loans for what they are: popular businesses for consumers in need, from Watts to Boca Raton and beyond.
Look through the lens of everyday business at Tom Nix’s check cashing outlet
A look at the Nix Check Cashing outlet on South Figueroa and West Imperial in the Watts neighborhood of south Los Angeles, California says a lot about how many people are not sufficiently represented by traditional banking services. Business is steady.
Traditional bankers didn’t read the market for financial services in communities like Watts properly. “Banks have been approaching these customers purely from a short-term-gain perspective, and they’ve missed opportunities,” said Matt Fellowes, director of the Pew Safe Banking Opportunities Project. Instead of choosing to serve such customers, banks pushed high-limit, high-interest credit cards and home loans.
And what did the banks receive in return? Billions in subprime debt!
Customers with less than perfect credit, no credit or less than the required amount of income to keep banks from charging penalties for not maintaining a minimum balance in checking turn to payday cash advance loans. In McGray’s estimation, the service these businesses provide for such customers is well-received and useful when compared with banks. According to Robert Gnaizda of the nonprofit financial services organization the Greenlining Institute:
If they’re properly regulated and scrutinized, there’s nothing wrong with check cashing as a concept and there’s nothing wrong with payday loans as a concept … there’s nothing automatically good about free checking accounts if you have multiple fees whenever you make the most minor mistake.
Some of the services Nix’s business offers are pricey – as McGray points out – but they are never deceptive or confusing. This goes for a quick payday advance as well. Signs and tellers make this clear. Sure, a customer might pay $22.50 to borrow $150 for just two weeks at one of Nix’s establishments, but there are no surprises or hidden fees. That can still be much less expensive than the alternative of bouncing a check or racking up penalty or reconnect fees.
Government hasn’t been a fan of payday cash advance loans. Well, that’s not entirely true…
California Gov. Arnold Schwarzenegger
Despite government opposition to serving communities like Watts, there have been signs that the payday advance is catching on. Lawmakers have indeed tried to cajole banks toward low-income customers. California Gov. Arnold Schwarzenegger plans to announce “Bank on California” which is intended to help working families in financial hardship who had not been properly served by banks in the past. John Hope Bryant, founder of “Operation Hope,” had this to say about Schwarzenegger’s plan:
These communities spend about $11 billion a year on ghettoized financial services, about the same as what Wall Street spends on mergers-and-acquisitions fees … We’re not talking about small change. But there’s no competition for these dollars.
Nix is aiming to give banks a serious run for their money. “We’re going to be a tough competitor. We’re going to get a lot of business, and that’s going to force the rest of the industry to take a look at their prices, to be able to compete.” Payday cash advance loans are viable, and it is serving the people. I’d love to see the battle.
Good! It’s great to see someone try to go out and compete against the banking industry, especially while providing services that benefit the lower income classes more than the incredibly rich bank owning class. Mr. Nix, I salute you, sir. No hidden fees? You can’t get that at Bank of America.
It’s obvious that banks and credit unions are not able to provide the financial help many average citizens need from time to time. Most banks won’t even look twice at you if you have a credit history that’s less than perfect. Low-income families also have a hard time obtaining a little help to cover unexpected expenses, such as car repairs, utility bills, etc. There’s no doubt that payday lenders are definitely a tough competitor, providing consumers, from all walks of life, the financial assistance many are desperately in need of.