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U.S. PIRG Consumer Blog
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January 24, 2008
Bill Clinton, Arnold want to terminate payday loans and check cashers
Bill Clinton and Arnold Schwarzenegger have an op-ed today in the Wall Street Journal (pd. subs. req'd) called Beyond Payday Loans. They want to terminate demand for payday loans by opening up a supply of better-priced, affordable bank accounts. The Democratic former President and the Republican governor of California say the following: The American dream is founded on the belief that people who work hard and play by the rules will be able to earn a good living, raise a family in comfort and retire with dignity. But that dream is harder to achieve for millions of Americans because they spend too much of their hard-earned money on fees to cash their paychecks or pay off high-priced loans meant to carry them over until they get paid at work. Here is one initiative that can unite progressives and conservatives as well as business leaders and community activists: helping the "unbanked" enter the financial mainstream by opening checking and savings accounts, and working collaboratively with financial institutions and community groups to develop and market products that work for this untapped market. This will put money in the pockets of individuals and grow the economy. And it won't cost taxpayers a dime. The column points out that California is joining other states and cities in providing programs to assist unbanked consumers into starter accounts, and that the Clinton Foundation supports such efforts. I've seen several speeches by the former president where he talks passionately about his commitment to ending payday lending and other wealth-depleting financial ripoffs. He and the Terminator make a formidable team.
We support their efforts to open up accounts for the unbanked. We, of course, also strongly support efforts to strictly regulate check cashers, payday and other predatory lenders.
Since you asked, we have a few more ideas for what government and employers can do to rein in the predatory practices of the banks themselves. State and local governments should leverage their financial muscle by taking their own money out of banks that charge consumers fees to cash their paychecks, especially checks drawn on the bank itself. Make a condition: no state or local money should be deposited in banks that impose fees to cash their own checks. Similarly, employers should condition their deposit account relationships on the same rule-- if a bank wants to earn interest and fees on big payroll accounts, employers should insist that it cash the checks of employees for free.Governments should also more strictly regulate and limit the harsh ATM transaction fees that banks participating in various government EBT (electronic benefit transfer) programs for the unbanked are now allowed to impose. This is critically important as more and more "starter" account programs, such as California's, are developed. Congress and regulators must immediately move to solve a problem that they've long ignored (or in the case of the regulators, backed)-- draconian "bounce protection" fees banks (and even some credit unions) are collecting from their working-class customers. It's an insidious form of regulator-approved payday lending. Oh, you may know it by the bank-preferred nomenclature: "courtesy overdraft."
Posted by Ed Mierzwinski at January 24, 2008 06:33 AM
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