Plenty of Good Proposals for Replacing Payday Lending

Citizen Wealth Financial Justice

article-2511819-19A290E800000578-756_634x458New Orleans        Enough of the negative, let’s go positive and not just talk today about how predatory payday lenders are and how they are ripping off lower income families and trapping them in a vicious spiral of debt, but instead look at the ideas and institutions that are doing something different.

Let’s start with Senator Elizabeth Warren’s argument that we use the United States Post Office to handle loans and transactions of small sums.  In Japan, the post office is a huge savings system.  In Canada, the post office handles money transfers or remittances for families sending cash to their home countries, although unfortunately they do so with a contract with MoneyMart, one of the primary MTOs.  In short, there’s already a way, if we just had the will.

In the United Kingdom there is an active market to undercut the predatory marketing model of the payday lenders, especially the big whopper in Britain, Wonga, and much of it is led by a revival of credit unions over recent years.  According to The Guardian:

My Community Bank…operates online with the aim of becoming the first national credit union in the country. Its interest rates expose the high cost of the payday lending sector yet again, as borrowing £255 from My Community Bank for 30 days (the average payday loan) would cost £5.62. At Wonga, you’d pay £83.65.

In dollars, we would be talking about huge savings.  255 pounds is about $390 and a Wonga rip-off would cost a bloke $127.90 compared to the credit union’s charge of $8.59 for a simple in the pocket profit for Wonga that is 14 times the credit union charge.  Too bad My Community Bank can’t be in the US and Canada or heck, go global at those prices!

What’s surprising is that there are only a million credit union members all told in the UK, compared to Canada say where 50% of the population are members of a credit union, and some of them, like our frequent partners and supporters of ACORN Canada, VanCity, in British Columbia, are huge.   Unions in the United Kingdom see fighting the payday lender bunch as part of their mission.  Unite, the largest union in the UK, has created a network of credit unions for their members and families, as has Unison, the second largest.  Unfortunately in the United States it is sometimes hard to tell the credit unions from the regular banks or worst.  In a big push to join your local credit union to protest banks a couple of years ago, I marched in myself and plopped some dollars down.  I now get more mail from them than anyone else for credit cards, high priced loans, and pretty steep fees.  You figure.

But, hey, let’s keep this positive.  There are good ideas around the world about how to create alternatives to these scum buckets.  They need support and encouragement, and maybe some pressure and push to policy makers to finally stand up to their lobbyists and contributions and do the right thing for everyone for a change.