WASHINGTON — A reporter and research fellow at the New America Foundation said both credit unions and banks have a lot to learn from check cashers and payday lenders about reaching out to lower income and underbanked communities.
Douglas McGray is an Irvine fellow at the foundation and the author of Check Cashers, Redeemed, an article which ran in the Nov. 7 New York Times which looked at why some people use check cashers and payday lenders and how they operate. McGray also participated in the Foundation's roll out of its Community Banking Trust proposal on Nov. 20.
Speaking at the briefing on the proposal, McGray recounted how his research into why people use check cashers and payday lenders indicated that those consumers behaved in a economically rational manner when they chose the payday lending option, opting for an approach that, while it had high fees, was also better about disclosing those fees up front and not surprising them later with unexpected expenses.
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He also observed how much more open check cashers appeared to lower income communities, often having tellers hired from the community and posting their products and rates, menu style, where they could be easily seen and understood. He contrasted that experience with an experience of visiting an area credit union, the name of which he said he could not remember, where anyone coming into the branch had to pass through a mantrap sort of security door and where the only ways to find out about products and services the CU offered was to ask someone inside.
After visiting the CU with the owner of a check cashing outlet he profiled for his story, McGray quoted the owner as saying, "its wild that the would want to serve my customers here."
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