Dream 2015 is a shocking new report describing the systematic impoverishment of people of color. By denying them access to banking services (eg checking accounts to cash their pay checks), Wall Street forces them to rely on fringe financial services, such as check cashing outlets, payday loans and auto title lenders. As Robert Manning writes in Credit Card Nation, many of these predatory outlets are owned by the big banks. Charting interest rates as high as 730% a year, they siphon off $103 billion annually from desperately poor communities.
In 2014, 16.7 million Americans were “unbanked,” ie had no access whatsoever to banking services. Another 50.9 million were “underbanked.” The “underbanked” typically have a checking account but lack access to small dollar loans and other banking services.
A total of 53.6% of black households and a total of 46.4% of Latino households are unbanked or underbanked. The most common reasons given are the absence of full service banks in communities of color and insufficient income to meet minimum balance requirements and overdraft fees. Ninety-three percent of all bank branch closings in 2008 were in zip codes with below median income.
Dream 2015 proposes a number of practical solutions to a problem that clearly plays a major role in growing poverty and income inequality. Among other potential solutions, they propose
• Enacting federal legislation capping interest and limiting the size and length of payday loans. Seventeen states have anti-usury laws, but according to Manning, fringe financial companies evade these laws by incorporating in states that don’t have caps. An existing federal law prohibits lenders from charging military personnel more than 36% annual interest – this protection needs to be extended to all Americans.
• Strengthening the Community Reinvestment Act to require all banks to provide small dollar loans to the communities they serve.
• Strengthening the Consumer Financing Protection Bureau.
• Strengthening public-private partnerships such as Bank On and Lending Circles that provide microlending* services to communities of color.
• Modernizing US electronic payment technology. In the US electronic transfers take three to five business days to be credited to the recipient bank account. In most other countries (including New Zealand and Mexico), electronic transfers take at most a few hours.
• Expanding financial services at all 36,000 US post office branches to include checking, debt, savings and small loan services.
In my view, the latter is the most practical and easily implemented. Last year Senator Elizabeth Warren argued eloquently argued for it in the Huffington Post. There are post offices in most communities, regardless of income level, postal workers already get financial services training (because they sell money orders), and it would provide a new source of income now that digital communications are eroding the demand for snail mail service.
The US post office used to offer postal savings accounts between 1911 and 1917. They were phased out because they couldn’t compete with the higher interest rates banks offered (no longer an issue now that US banks pay less than 1% interest on savings).
Presently France, Germany, Japan, China, Brazil, India and New Zealand offer banking services in their post offices. New Zealand’s Kiwibank is a full service bank offering low cost credit and debit cards and mortgage loans in addition to checking and savings accounts. They also have some really clever TV ads.**
*Microlending or microcredit is the extension of small loans to enterpreneurs too poor to qualify for traditional bank loans.
**The surly looking suits represent the Australian banks that own all but one of our private banks.
Having post office banking will be fought tooth and nail here because it would take billions out of the coffers of those that have preyed on the abject, disenfranchised, people of color for decades. They know who is impacted by these schemes of payday loans and title loans and so no problem is perceived. Ripping off people of color has always been the status quo all the while denigrating them for their poverty and stripping them even more of their hard earned money. It is all done by design and it will continue because the poor do not have a real, true champion in their corner. We all know this and I have blogged on this myself. And the SSA has made it difficult for the abject poor to not pay outrageous fees since they decided to do away with printing checks and instead made everyone receiving benefits open some sort of an account or get a prepaid debit card where fees are taken out on a monthly basis for usage and anything else they can tack on. Again, all done by design.
I have seen people lose their only vehicle by taking the title and hand it over to a title loan company and then not be able to come up with the interest and the payment on its due date. Companies like Rent-A-Center make a killing off poor people because a TV that would cost maybe $300.00 at Kmart, costs $2,000.00 by the time the customer has finished making the monthly payments and outrageous interest.
And as you can see, it should not take 3-5 business days for banking transactions to post. When a transaction occurs, the money is taken out of the account in a nanosecond, but when a transaction is reversed and the account is owed money, why that takes 3-5 business days to post. No it doesn’t. But it does because they can get away with it. Like I’ve stated many times before Dr. Bramhall, our situation in America is hopeless and beyond fixable. We just keep taking the blows and therefore, they’ll keep them coming.
Excellent blog! Thank you for posting this!
LikeLiked by 1 person
Obviously our elected leaders are hopeless. The next logical step in my view is to formulate a least of clear and concrete demands that can unite the 50% of the population that lives at or near poverty. In my mind requiring the post office to offer financial services should be at the very top of that list. It’s a plus or minus action that doesn’t require increments or compromise, something that can be easily measured once it’s achieved.
As you point out frequently in your own blog, more and more poor whites are joining minorities in the underclass. I’m presently reading The New Jim Cros by Michelle Alexander (a real page turner) and something she repeatedly emphasizes are the strategies the ruling elite employ to stir up racist enmity in poor peoples’ coalitions – mainly because, though rare, they are incredibly powerful.
” …strategies the ruling elite employ to stir up racist enmity in poor peoples’ coalitions – mainly because, though rare, they are incredibly powerful…”
That goes to show you just what we are up against. Many of us are aware that there are steps that can be taken to at the very least, flail against the status quo but the problem is the powerful have all the tools and hate is such a strong weapon in their arsenal. We refuse to look beyond skin complexion even at the cost to our very own lives! This is all so tragic and it need not be! And I have heard about that book before. If I could only get my head out of fictional English crime novels, maybe I could read Ms. Alexander’s book. Thanks for the heads-up on it Dr. Bramhall!
That only seventeen states have anti-usury laws, that lenders can charge veterans 36% interest, and that no federal laws have been enacted to reverse/end such a disturbing state of affairs, meets the definition of outrageous.
Amen! Jerry! Amen!
Reblogged this on The Washington Sentry.