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The report introduces the South Bronx financial corridor and explains why many residents use check cashers instead of banks. It contrasts the high fees critics see with the convenience and services customers value.
Speaker A
Next, you need some cash real quick.Economics correspondent Paul Salman explores why for some customers, the best bet might not be the bank.It's part of his weekly series Making Sense of Financial News.
Speaker B
This is East 138th street, which in many ways is the Wall street of the Bronx.You've got a lot of financial service providers along the street.
Bodegas, you have small money remitters and
Speaker C
there's a pawn shop.Not the kind of financier you'd find on the actual Wall Street.But hey, this is the South Bronx, poorest congressional district in America, where some 40% of residents live below the poverty line.
Speaker B
The main service provider on the street is Right Check, where we have our financial service center.
Speaker C
Joe Coleman is president of this chain of 14 stores in the South Bronx and Harlem.They'll cash your checks, pay your bills, transfer money 24 hours a day, 365 days a year.Something like half these customers are unbanked, meaning they have no bank account on purpose.Jose Benitez is a construction contractor.Every time you go to a bank, there's a problem.
You lose time.The bank takes too long to cash checks.
Speaker D
He says, can you sign there for me, please?
Speaker C
And says cashier Jackie Morell, the bank
Speaker D
don't offer other services that we do.We have prepaid cards.They pay their bills, pay their rent.It's different things that they can do in one place.
Speaker C
But the best alternative is check cashers, payday lenders, pawn shops.Maybe you assume what I did that they prey on the poor.
Suzanne Martindale is with Consumers Union.
Speaker E
Many of these products really strip away what few assets consumers have.If you are constantly paying a fee to cash a check, you you're losing money on the deal compared to if you simply had an account and were depositing checks.
Speaker C
Yet check cashing alone nearly doubled to $60 billion from 2000 to 2010.
Lisa Servon describes her research working at Right Check and what she learned about customers living paycheck to paycheck. The segment shows how small fees can make sense when people need immediate access to every dollar.
Speaker C
Why?Wondered Lisa Servant.
Speaker F
It didn't make sense to me that people would be using a service like this in increasing numbers if it was so bad for them.I had done work in low income neighborhoods for 20 years and I knew that people who don't have very much money know where every penny goes.So that's when I scratched my head and I realized there's gotta be more to the story.
Speaker C
To find out, Servon worked as a cashier at this Right Check for four months and then wrote a book, the Unbanking of America.
She returned to the window when we visited and was reminded of what she'd learned.People on the edge have no savings and often need access to every cent they can get their hands on right away.
Speaker F
One of the things that we do here is to take money off of people's EBT cards.That's electronic benefits transfer.What you get is kind of the equivalent of welfare these days, right?
And we give you how much you want from that, minus a $2 fee.One day a woman came in and she wanted.She said she had $10 on her card.So I ran the transaction and I gave her $8.And after she left, I just was scratching my head and thinking, wow, she just paid me 20% of what was available to her cashier.
Speaker C
Jackie Murrell, who taught serve on the ropes here, explained.
Speaker F
Jackie says, like, well, you know, the ATMs don't give you $8 or $13 or $28.They give you multiples of 20, maybe 10 if you're lucky, right?So suddenly something that seems illogical makes sense because you realize that she needed that $8.She needed every dollar that she could get access to, and it was worth it to her to spend $2 in order to get it.Time and again, working at the window, I was able to see those things sometimes ask questions and then really see, like, oh, this is logical.Actually, I would probably do the same thing if I was in that situation.
Speaker C
Joe Coleman goes further.
Joe Coleman explains the history of regulated check cashing and argues that the fees are clear and often cheaper than bank overdrafts. The chapter also highlights the personal relationships between staff and regular customers.
Speaker C
Firms like his with regulated maximum rates were actually a reform move by New York state back in 1944, when check cashing was a truly free market.
Speaker B
It was being done in bars and restaurants.It was the Wild West.They could charge you 20, 30% to cash a check.
Speaker C
And while the fees may seem high, says Servon, they're completely transparent.Unlike at banks where you rarely know
Speaker F
what you're paying, the signage that spans the teller windows looks exactly like what you would see at a fast food restaurant like McDonald's.And it tells you that it costs 2.03% of the face value of your check to cash it.$1.50 to pay a bill, $0.89 for a money order.All of that information is there.
Speaker C
Servine also found that for those with no financial cushion, cashing checks here can be cheaper than at a bank.
Speaker F
If they've deposited that check in the bank, it would take three or four days to clear.
When they come here, they can use that cash right away and they won't be subject to the kind of mistiming at a bank that could lead to an overdraft fee of $35.
Speaker C
Enough volume and even the smallest fees add up.So, right check caters to folks that big banks aren't much interested in.
Speaker D
Have a good day, Jace.
Speaker C
Thank you.
Speaker D
You're welcome.
Speaker C
Robert Flexer is a right check devotee.
Speaker F
The people are so beautiful with you.They're so beautiful and humble and lovable.
Speaker C
Jackie Murrell has worked behind the counter for 14 years.
How many of the people who come in here do you know personally?
Speaker D
85% that comes here every week.Everybody know me in the street and everything.They bring me food, they bring me presents for my kids, they bring me everything here.
The discussion shifts to payday loans, their high costs, and the cycle of repeat borrowing that critics warn about. Coleman defends the product as a short-term solution, while Consumers Union argues it traps borrowers in debt.
Speaker C
Okay, maybe there are good reasons to use check cashers, but surely not payday lenders, so common in cash strapped communities these days.
Servon writes that there are more payday lenders in the US than Starbucks and McDonald's combined.And she herself did a stinted one
Speaker F
where I worked in California.They cost $15 per $100 borrowed, which comes out to an APR of 400 or 600%.
Speaker C
That's APR annual percentage rate because it's 15%, $15 on $100.
Speaker F
A lot of people end up not being able to pay the loan when it's due.And this is where the problem comes in.
Speaker B
Right.
Speaker F
If you can't pay that $100 loan back in two weeks, you basically end up taking out that loan again and paying another $15 for another two weeks.So now you're paying $30 on $100.
Right.And if you roll it over five or six times, you're paying way more than you borrowed.
Speaker C
But look, says Joe Coleman, there's nowhere
Speaker B
to go to get a couple hundred dollars.The payday industry has evolved organically to solve a short term immediate problem.
And I don't do the product, by the way, in New York.We don't do payday lending in New York.But you would?Yes, I would if I could.Because it's a reasonable product if you use it responsibly in the way it's designed.
Speaker C
Not surprisingly, Suzanne Martindale of Consumers Union disagrees.
Speaker E
The evidence has been clear and damning for many, many years that the vast majority of people that start to take out payday loans end up in a cycle of debt.
Speaker C
80% of payday loans are reborrowed within 14 days and almost 90% are reborrowed within 60 days.
Servon and Coleman argue that these businesses exist because many people still need fast, flexible access to cash. The report closes by linking their growth to declining wages, income volatility, and ongoing financial insecurity.
Speaker C
In fact, Servon says what's interesting is
Speaker F
that even my boss at the payday lender said payday is a lousy product, but we're filling a need that nobody else will fill.
Speaker C
But aren't the payday lenders taking advantage of these people?
Speaker F
It's a very hard question.To answer the question really being are payday loans helpful or harmful?Or alternatively, is very expensive credit better than no credit at all?And I would say that the jury is still out on that question.
We talk about getting rid of the lenders without recognizing that the demand is still there.And the demand is still there because we've had declining wages since the 70s.Income volatility has doubled over the past 30 years, so people have much less ability to predict how much money is coming into their household from week to week.
Speaker C
And the less predictable the income, says Joe Coleman, the greater the need for check cashing for payday lending.
Speaker B
Even Voltaire said of the Supreme Being that if he didn't exist, we'd have to invent him.
And the same can be said for our industry.If we didn't exist, you'd have to invent us.People need the Service.
Speaker C
The PBS NewsHour this is economics correspondent Paul Salman reporting from the South Bronx.