Re: dealing with CCOs

[Margaret Coleman <drmsecon@xxxxxxxxxxxxx>]

While I agree that the working poor should have access to 'legit' banking as opposed
to ghetto banking (loan sharks, pawn shops, and check cashing places), there are
real problems with banking and the poor -- mainly because banks don't give a shit
about the poor and are set up for the middle and upper middle classes.  There have
been some attempts to have welfare recipients get their benefits through ATMs and
there were several problems;
1.  In NYC the bank was Citibank and apparently they did not make benefits available
in a timely fashion. Someone living payday to payday can't have this happen to them.

2.  ATMs usually (not always) dispense $20 bills and poor people might need that
last $10 or $15 to feed the kids.  (I have recently heard of $20 bills referred to
as yuppie food stamps).
3.  Check cashing places know that the poor are their bread and butter, banks don't
feel the same way and are much less responsive when someone with a small or no
balance complains of errors.
maggie coleman

Forstater, Mathew wrote:

> A state senator (D) here is concerned about Commercial Check Cashing Operations
> (CCOs).  Studies show that, not surpisingly, folks without bank accounts tend to
> be disproportionately poorer, less educated, a member of a racial or ethnic
> minority, have more children.  Among the approaches to dealing with the high
> fees of CCOs are the following:
>
> 1) policies to increase the number of people with bank accounts - require banks
> to offer "basic" or "lifeline" accounts, i.e., accounts with no or small fees
> and no or small minimal balance requirements
>
> The banking industry opposes this and argues that requiring lifeline accounts
> does not increase the number of people with accounts.  There is some independent
> research to support this view. Many people do not use savings institutions
> because they do not have any financial savings at the end of the pay period
> and/or they prefer to transact almost exclusively in cash.
>
> 2) regulating CCOs - set ceilings on the fees that CCOs can charge - Some argue
> that this will drive some CCOs out of business and if it does, it can actually
> hurt some customers wh will have an increased travel expense that outweighs the
> decrease in fees.  Also, some CCOs might stop cashing riskier checks, such as
> personal checks or paychecks from small businesses. To counter the loss of
> revenue to CCOs resulting from ceilings some states have allowed them to go into
> other services such as issuing license plates.
>
> 3) Postal Savings System - many other industrial nations have Post Office
> accounts, the U.S. has done some of this in the past. This is definitely worth
> serious consideration, but seems to require national legislation and
> considerable institutional modification.
>
> 4) asset-buidling strategies - It seems clear the best way to increase accounts
> is to increase family wealth. This is an important long term issue but is not
> likely to have much effect in the short run
>
> The state senator here is interested in a bill that would require employers to
> pay low income employees in cash.  There are a few main arguments against this:
>
> a) There is no paper trail, so can lead to tax evasion. The rise of CCOs was
> connected to the increased use of checks due to more stringent bookkeeping and
> tax requirements.
>
> b) theft - here both the employer handling the cash and the employees being paid
> in cash would be vulnerable
>
> c) some small businesses don't actually handle payroll - their bank handles it
> and would be reluctant to hand over that much cash to them
>
> What are the counter-arguments to the main arguments against the pay in cash
> plan?
>
> a) As far as the paper trail, a receipt can be issued with the cash that is
> similar to the pay stub, outlining the information--taxes taken out, etc.
>
> b) theft - this one is a little more problematic.  But people who use CCOs have
> cash in hand and are used to dealing in cash.  So this may actually not be as
> bad as it sounds.
>
> c) Banks may be reluctant to accommodate, but if faced with the alternative of
> lifeline legislation and other regulation, they may accommodate.
>
> One way to approach it would be to consider a bill that would require (large)
> employers to make SOME arrangement so that lower-income employees without bank
> accounts can obtain their pay without paying a fee (or a small fee).  There are
> several banks that now offer products, similar to an ATM card, that employees
> can carry and use to obtain their pay from an ATM machine.  They can do this
> without owning a bank account.
>
> I'd be interested in comments on this. Thanks.
>
> Mat