Lower-income people make, spend and borrow a lot of money. Here is what is happening in the industry today.
Payday lenders charge high-interest rates on loans. Borrowers sometimes have to borrow more to pay off older loans. That means they remain in debt. The federal government says this is not fair to lower-income people.
The federal government proposed new rules making it more difficult to give loans. Borrowers might have to find other ways to get money when they need it.
These are old problems. The problems of today reflect the role of the banks. It costs banks too much to make small loans. And they do help the payday lenders collect the money. They do this when borrowers give lenders access to their checking accounts.
The money transfer industry is another example. It is becoming harder to send money home. Most banks are not doing money transfers anymore. They are afraid they will get in trouble because of money “laundering.” They are not doing business with the small money transfer stores.
These are the “remittances” Trump said he would stop. The banks are already making it harder to send them.
The job of check cashers is to cash checks. They are trying to become part of the loan industry. New York State does not allow payday lending. Check cashers want to make loans through out-of-state banks. Currently, that is illegal. The check cashers have appealed to the New York State legislature. They are petitioning for a new bill that would make it legal to use out-of-state banks.
“The Faith for Just Lending” group is trying to lessen the problem of high-interest rate borrowings. The group is a coalition of Christian churches. The group has liberal and conservative support and members. They are setting up funds for low-interest lending. They are teaching people how to manage their money. Biblical bans on usury guide them.
In “Fiddler on the Roof” Tevye says, “It is no shame to be poor. But it is no great honor either.”
The problem is how to help lower-income people borrow money and not go broke paying it back. Many people and American institutions must work together to solve the problem.
Source: The New York Times