Since most METARs are anything but poor, we tend to be unaware of the great difficulty and exploitation the poor are subjected to when trying to manage their financial affairs.
I saw this when preparing the 1040 tax return (as a volunteer Tax Aide counselor) for a worker at the local Goodwill in Sequim, WA. He had migrated cross-country from east to west and had W-2 forms from 3 different Goodwills. He was due a tax refund (including payroll tax deductions and EITC) of $650. He told me that he lived hand-to-mouth and didn’t have a bank account. He asked me to have a paper check mailed to his ex-wife in Georgia. There was literally no way to transfer money directly to this worker.
Millions of poor workers (and non-workers) are in a similar situation. They are exploited by payday lenders who charge stunning interest rates on loans. The ones with bank checking accounts are often hit with high overdraft fees.
The Consumer Financial Protection Bureau was opened to try to mitigate this situation. The situation is slightly improved.
Spotlight on Consumer Finance Wins
Pew Charitable Trust
In this Spotlight, we’re breaking down two big 2022 victories that are making life more affordable for Americans:
1. Overdraft reform became the norm: Most of the nation’s 25 largest banks reduced or eliminated overdraft fees and nonsufficient-funds fees.
Expected savings to consumers: more than $4 billion yearly.
2. Little loans offered big relief: Three large banks launched affordable small-dollar loans that meet our standards, bringing the total to six of the top eight banks.
Why it matters: These small loans offer much more affordable alternatives to payday loans, title loans, and other alternative financing that struggling Americans often turn to.
Explosive stat: The new bank-provided small-dollar (up to $1,000) loans cost 15 times less than average payday loans. [end quote]
These improvements can have a Macroeconomic impact on an entire demographic which is often ignored by the financial press.
The article didn’t mention which 6 banks are offering low-cost small-dollar loans. I wonder how the potential borrowers will learn about this new capability.
This demographic lives hand-to-mouth and spends every last penny on goods and services. Enabling them to use more of their scarce money on their needs instead of interest on payday loans will help boost the economy.