Alternative Banking for the Poor

Here’s an interesting way to look at where a large proportion of the population is poor. This chart shows low end credit scores.

That chart is lifted from this report from the Federal Reserve on the vicious alternative banking industry; i.e. payday loans, pawn shops, check cashing stores. These exist because on the one hand the regulators of the formal banking sector has been allowed them to abandon the low end customers and on the other hand these same regulators have allowed the parasites to fill the void thus created.

500% interest! With charges of 10$ to 20$ per $100 borrowed they are effectively charging 260% to 560% in interest. In the decade ending in 2007 the number of payday loan stores has grown by more than a factor of ten. In urban areas we now have one payday lender for every thousand people, and almost that many check cashing stores. Numbers that would clearly be higher if not for a handful of states that still have regulatory limits in place.

That chart’s alignment with the states with a strong Republican presence is another bit-o-evidence that Conservatives tend to prefer that Government look after the large economic entities rather than the small. Cause or effect? Does the ruling class tend to become increasingly disinterested in the small players when the little guys become so numerous, or do you tend to get a lot when so governed? I suspect, unfortunately, they go hand in hand.

hat tip: Infectious Greed

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