11/07/2008 - Today’s financial crisis has many origins. But here’s one cause that is often overlooked: Traditional bankers badly misread the market for financial services in low-to-moderate-income communities. “Banks have been approaching these customers purely from a short-term-gain perspective, and they’ve missed opportunities,” Matt Fellowes, director of the Pew Safe Banking Opportunities Project, told me. Banks declined to offer small, simple lines of credit to poor and blue-collar customers, leaving them to payday lenders, while they pushed high-limit, high-interest credit cards on everyone and acquired hundreds of billions in subprime debt. They undervalued the hundreds of billions a year in modest paychecks that pass through a place like Nix and ended up short on cash. Now that the economy has turned ugly, these poor and blue-collar customers are the hardest-squeezed. Payday loans are up, Nix told me when I spoke to him recently, and check-cashing revenue is down.
Read the full article Check Cashers, Redeemed on the New York Times Magazine Web site.
Pew is no longer active in this line of work, but for more information visit the Safe Banking Opportunities Project on PewHealth.org.