* Ameya Pawar and Ted Cox…
According to the Federal Deposit Insurance Corp., over 80 million Americans are underbanked or unbanked — about a quarter of the country.
Consider that many people who received $1,200 COVID-19 relief checks under the CARES Act then had to pay a fee just to cash them because they didn’t have a bank account — government checks with no chance they’d bounce. So payday lenders and currency exchanges continued to extract money from the people who can least afford to lose that extra cash.
We’ve mentioned before that the U.S. Postal Service could conceivably step in and offer those basic banking services — check cashing, money orders, bill payments, and even short-term loans — in a bid to fill a basic need and undercut predators like payday lenders.
The federal government moves slowly, however, and there’s something similar we could do more immediately on the state level in Illinois to fill the same void.
Have Secretary of State offices, like driver’s license facilities, offer those additional banking services as well.
They already handle cash; they have vaults. Their frontline workers already handle incredibly sensitive information, even dealing with the U.S. Department of Homeland Security, so you’re talking about a pretty sophisticated workforce. The Secretary of State Office has its own fleet of vehicles — and own police. It has the scale to deal with the assignment — with license facilities in urban areas and rural communities, both of which have been hard hit by consolidation in the banking industry. The Secretary of State has dozens of locations across the state, and while some are closed in the pandemic, the vast majority are open and dealing with driver’s licenses and tests.
According to banking expert Mehrsa Baradaran, low-income households spend up to 10 percent of their annual income drawing on financial services. This extraction reduces incomes and robs them of future wealth.
The alternative financial services industry extracts $100 billion annually, with payday lenders commonly charging what ends up being multiple times whatever small loan was originally taken out as fees and interest accumulate. This is money that’s not going to rent, food, consumer goods, or flowing through the local economy.