Just last month, the Pew Charitable Trust announced a new project. The goal – to promote bank accounts for moderate-to-low income households. Pew wants to help new, young depositors get started in banking, as well as people who’ve had trouble affording bank fees, stay away from check-cashing establishments and stop taking out payday loans.
In an earlier blog, Who Really Gets Paid On Payday Loans?, I explained that these loans are extraordinarily expensive for borrowers. The Pew study estimates that “alternative financial services businesses”, including check-cashing establishments and payday lenders, are estimated to charge full-time workers an average of $800 per year in interest and fees, (often on a rotating balance not more than that number!).
As a bankruptcy attorney and consumer bankruptcy specialist for close to twenty five years in Indianapolis, I applaud the Pew effort. Promoting safe financial services is more important than ever today. I see that people are having trouble covering food and gas prices and can’t spare money for fees to cash their paychecks! In my bankruptcy law offices, I deal with people’s income and expenses every day. One important part of my work in helping clients prepare to file bankruptcy through the Indiana court system is to assist them in organizing all their financial records, showing all their income and each category of expense. Overall financial counseling and specifically debt counseling are an everyday aspect of my interaction with people in my four bankruptcy law offices.
I always advise people, when they pass signs advertising payday loans, to drive on by. Once the Pew Safe Banking Opportunities Project is complete, I’ll be able to add, “Keep driving all the way to the bank!”