December
2006
State Should End Check Cashing Stores
They're a scourge to any respectable neighborhood. For over a decade they signify a community in decline. Now it's time to end the legalized loan-sharking that has become prevalent in several Milwaukee neighborhoods.
Check cashing stores serve no good purpose other than to suck the lifesblood out of a community. If a user of these stores find themselves missing a payment, they can nearly double their debt in less than a month. Obnoxious fees by these financial maggots make it so that people who make the mistake of using them once may never be able to climb out of debt again.
They should never be used.
But still, they succeed by soaking the poor with some of the highest interest rates that can be legally charged. Exceeding hundreds of percent per year, these institutions draw directly out of their victims bank accounts and cause overdrafts.
This is not to say their clients are blameless. By not reading the small print they've hurt themselves but a lack of financial savvy shouldn't doom themselves to never being able to own a home or keep a normal checking account. Yes, they've lacked a certain amount of personal responsibility but having these parasites (they like to call themselves financial institutions) in our community is like handing out syringes full of heroin to anyone who walks by.
The problem though is not just for those who make the mistake of using these blood suckers. The problem also is an overall sense that the community one lives in is declining. Much like the "broken window syndrome", seeing one of these stores open in a community is disheartening for all the neighbors who live there.
The time to end the legalized loan sharking has come.
Under a Republican Governor and a Republican controlled legislature, these stores flourished. Now that we have a Democratic Governor who has a Democratic State Senate, let's see if they can do anything to clean up our community. They still must work with the Republican controlled Assembly, but if Assembly Republicans don't want to do anything, the Democrats have a responsibility to remind their constituents who blocked them.
Case in point — State Senator-elect John Lehman or State Senator-elect Jim Sullivan each have Republican Assembly representatives in their district. If the Republican Assembly Representatives in their districts do not fight within their own delegation (Assembly Republicans), both Lehman and Sullivan have a responsibility to tell their constituents (assuming they supported the anti-parasite legislation) that the Republicans, including the ones in the Assembly from their own districts, who opposed it.
This is a bread and butter issue for democrats. Anyone who has seen these stores or knows of anyone who has ever made the mistake of using one, knows that they are a cancerous scourge on our community. Let's see if the democrats have any luck undoing some of the damage the republicans did when they were in power.
Jim McGuigan
Jim McGuigan
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While I agree that Pay Day Loan and similar business such as “rent to own” are blood suckers they are legal.
Places like this exist for a reason and it’s because the poor are not served very well (or at all) by the mainstream banking community.
Where do you draw the line? Might not State government regulate credit card interest rates or bank lending rates?
It would seem to me that instead of an outright ban (not a likely outcome) that better disclosure of the costs of such loans would yield a better outcome. Nothing like a healthy dose of financial literacy to modify behavior.
As an aside, I recently returned from a trip to Alabama and I was awestruck by the proliferation of these places. It seemed to me that they were everywhere.
Chase Bank has a unique program in which, even if you are “unbankable” a working person can get a direct deposit card for payroll checks. The card works just like a debit card, and, a person can get two cards. The advantage of a second card is that the worker can give it to a family member — let’s say a parent or sibling or spouse in another country — thus wiping out the money transfer middlemen that are making a killing off of immigrants. Those wire transfer middlemen can also be found at check cashing places, and operate a billion dollar industry.
The fees in the Chase Bank program are too minimal to be prohibitive. It would save people a lot of money and cut out the middle man.
The catch is that employers must enroll in this program for any employee to have access to it.
These “services” need serious regulation, as well, as “rent to own”. We understand that business is based on finding a niche and pumpimg it dry, However, this type of business preys on people who have little to no choice in banking. I had the unfortunate displeasure of having to use this service in a different state many moons ago. Even back then (13 years ago) I was being robbed by the fees simply because i couldn’t get a checking or saving account. These services DO NOT help people by building credit, as far as I know, all they do is make money hand over fist by sticking it those on hard times or with terrible credit. I hope a good plan can be created that doesn’t rob people of their money and dignity.
Check cashing stores are required to provide a Truth-in-lending disclosure to customers/victims. I have seen many of these forms where the disclosed rate is 500% or more. The highest I have seen was 840%. While some customers benefit many are caught in the revolving debt cycle and end up repaying the original debt many times over or defaulting and being subject to wage garnishment. I have a novel proposal: Cap Interest rates at 100%. The term for exhorbitant interest rates used to be usury and it was illegal. 100% seems to be a more than fair return on the investment. Georgia has recently passed legislation regarding this business and several other states have prohibitions on the practice. Wisconsin needs to act to prevent these predatory practices.
An important subject that needs to be addressed–thanks, Jim
I’m a little confused, has some legislature been proposed? I agree that these businesses are parasitic and should be regulated. The 100% solution seems reasonable. I do believe, however, that we need to be careful about over regulation and outlawing certain industries. Another solution might be to encourage “big Business” like Chase to open their own micro-banks in some of these neighborhoods, neighborhoods underserved by traditional banks. And while the legislature is playing “we know best”, why not encourage employers to promote direct-deposit programs through incentives, not penalties. Our energy (and money) will always be better spent rewarding people for doing right.
To the best of my knowledge, no legislation has been proposed and no one has floated the idea.
It’s my opinion that these guys are parasites and I’m pleased to see that the majority appears to be with me on this one.
Before all of you make such outlandish comments maybe you should research the facts.
You obviously have never spoke to someone, or you yourself lived paycheck to paycheck. The only reason payday loan and check cashing stores exists is because cost conscious work class consumers know it is cheaper to take a fully disclosed, upfront out in the open payday loan then it is bounce a check and get socked with a hidden fee from their bank.
The banks created this industry in the late 80s once they started issuing these ” hidden loans” by covering bad checks and then charging a undisclosed, unauthorized, hidden fee usually anywhere from $25-$35 per item.
Do the APR calculation on UNDISCLOSED overdraft it is not in the hundreds but rather THOUSANDS of percent!
If you believe the government has the right to regulate people’s finances, start with the BANKS they are the reason payday loans/check cashiers exist!
And to claim Chase is helping consumers with their unbankable program, give me a break, quickly do a google search on Chase NSF and see how many consumers have been ripped off by undisclosed APR NSF fees from Chase, they are one of the worst in the business! The reason people cannot open a checking account is to the fact that they typically had an account but have been inadvertently sucked into an endless whirlpool of debt from overdraft fees and interest by the banks to the point they can never repay the bank and thus are forced to close their account. Once the account is closed by the bank, their Chexsystems score is ruined and the consumer never can open a checking account again. The consumers is then are forced to use a check cashier to cash their paycheck. Typically this experience with the bank is so awful and humiliating they vow never to use a bank again and would rather pay an upfront, fully disclosed 2-3% service fee to cash a check at a check cashier then to get socked with hidden fees, and games the banks play. It is estimated there are $80 Million people in the U.S. who do not want or cannot get a checking account.
Banks make anywhere from $18-20 Billion dollars a year in non disclosed, “hidden loans” via overdraft fees so ask yourself who benefits if payday lenders go out of business, BIG BANKS! Who gets politicians elected Big business/Big banks.
Nice job playing “help the poor, so shut down payday lenders” tune, that’s exactly what the big banks and the media, want you to do, so they can secretly make billions and get their politicians elected to keep the cash flowing.
If you took this issue to the people…which is how our country is suppose to be run….I bet you would not get the reponse you are looking for.. This industry is needed. Not all of us have the luxury of have thoussands in our saivngs accounts.
How is this going help our economy? It will only make it worse. I would invite anyone to call or visit a store in Colorado. I bet it would change your mind.
I own 3 stores in Colorado, and it is also my life! Please don’t take it away!!!!!