First, let’s state the obvious. Banks have never gone out of their way to demonstrate their fondness for poor people.
That was made clear when financial institutions began shutting down their community retail branches, and started encouraging customers to transact from the comfort of their lovely suburban homes, using their lovely high-speed Internet connections and lovely iPads. That trend occurred around the same time the banks began posting uniformed private security guards to pace around theatrically outside the doors of their remaining outlets, to make certain that every potential customer feels warmly welcomed: poor people, especially.
But the money-lending trade has always been creative, quick to appreciate how a wicket opens, corresponding to each time a door closes (or is blocked by a parading rent-a-cop.) That spark of foresight led to the establishment of the payday loan industry, which meets the check-cashing needs of the disenfranchised, or the undocumented, or the non-conforming, or others who may not be qualified or willing to hold bank accounts. The pillars of this thriving new enterprise go by peppy, consumer-friendly names such as Wonga, Cash Money and Zippy Cash (“It’s fast, it’s easy, it’s zippy.”)
Such companies belong to a lucrative new sector of the economy classed as “Misc. Financial.” At the top-end of the category is Cash America International Inc., a burgeoning publicly traded service-provider (trading symbol CSH on the NYSE) that is rated by market analysts as a Strong Buy.
Money Mart, the leading Canadian chain, is a subsidiary of Dollar Financial Corp. of Pennsylvania (trading symbol DLLR on NASDAQ.) Dollar Financial describes itself as “provid[ing] retail financial services to unbanked and under-banked consumers.” There are nearly 500 Money Marts to serve you in Canada, and one is conveniently located near your neighborhood-in-decline, no doubt.
Nearly eight hundred branches of “Misc. Financial” enterprises in in Canada are represented by the Canadian Payday Loan Association (CPLA), which pledges on its website, “CPLA is not your typical industry association.” By which they mean, of course, that they are exactly that: a typical industry association, formed to put the most positive spin on what has been their industry’s dodgy reputation.
Five years ago, Statistics Canada took note of the rise of the check-cashing parlors, and produced a report. With charming innocence, Stats Can wondered: “Why do people borrow money using a payday loan rather than through a bank?”
Yes, why? The agency provided its own answer: “Some may prefer the convenience, with location, hours of operation, and ease and speed of approval playing a key role (Environics 2005). Some may choose a payday loan because they live in a community that is underserved by mainstream financial institutions (ACORN 2004). Those with a poor credit rating, a previous bankruptcy, or no bank account may not have the option of using less expensive means such as credit cards, lines of credit, or overdraft protection. Without payday loans, some consumers may be led to less desirable credit options such as loansharking and organized crime (CMC 2002).”
Of course, “less desirable” may be in the eye of the beholder. Under the heading “Causes for Concern,” a 2006 Parliamentary report claimed payday lenders regularly charge effective annual rates of interest that top 1,100 per cent, or 1,242 per cent, depending on circumstances. Potentially, the loan-shark seated on a stool in your local beer hall may offer you far more generous terms.
In spite of which, the Misc. Financial shopkeepers continue to thrive. Advertisements for these operations fill the pages of the free daily newspapers in Toronto, and television offers frequent commercial spots for the Cash Money chain, featuring bouncy theme music and a plush mascot named Casharoo. There is one outlet down the road from my office, where at lunchtime there is a steady flow of customers, some of whom look as if they must know better. It makes for a depressing spectacle, and while watching the suckers being fleeced early one afternoon, I read on my smartphone an advisory from financial commentator Jim Cramer, recommending the purchase of shares in good old CSH. He said it represented a wise investment, betting on the trend toward the North American middle-class being dragged deeper and deeper into poverty. That was his phrasing, not mine. But to prove his point, U.S. government data says one out of 10 American households has dropped out of the banking system, while 25 per cent of Americans use payday loan stores, pawn shops, and related means of struggling through.
However, just when you’re about to conclude with some dour summary obvious-ism about how money is by definition heartless, and how money never gave a shit about people, the tiniest rays of decency begin to emerge, from the least likely places.
American Express, working with Wal-Mart, just launched a alternative payment instrument named Bluebird, which functions as a no-fee checking account and cash-card, and is aimed at those unbanked and under-banked citizens that others might think to prey upon. Amex has greatly diversified their product offerings over the years, but it’s still unexpected to see them step out as heroes of the working class.
Finally, there is an incident I witnessed last weekend that I can’t entirely get out of my head. I stopped into the ING Direct banking office at Yonge and Shuter in downtown Toronto, to get some money. It was a windy afternoon in late November and an apparently homeless man came in from the cold, and was standing around. The ING storefront is set up as a kind of Starbucks-meets-bank branch amalgam, and contains a large and stylish cafe with comfortable lounge chairs. I took 10 minutes to handle some routine banking stuff, and walked over toward the ATM, where the homeless man was shuffling from spot to spot, and was now peering into a trash bin, assessing the contents.
An employee came over and asked if the man was alright. I didn’t catch his answer. I knew what would follow, which was bound to be an urgent entreaty for the man to remove his non-hygienic self from the trendy premises, so as not to distract the fashionable customers from their lattes and iPads.
“Sir,” she said, “my colleague is going to bring you something to eat from the cafe. Conrad will get you two sandwiches, and two cookies. Is that okay?”
Conrad was a pleasant fellow in a polo shirt, who appeared a half-a-minute later. “Here you go, sir,” he told the man, handing him the food. “Enjoy it.” The man stayed on the premises, eating his meal. No one objected.
I considered the incongruity. I’d never previously encountered, and, frankly, expected never to see a spontaneous act of quiet kindness and decency being privately extended on a busy Saturday afternoon to a hungry non-customer — indeed, a poor person — occurring during the last part of the year 2012, inside the walls of a multinational financial institution. I’m certain as can be it is not indicative of any radical new direction in the banking industry, but, one way or the other, it happened. And, in a world that often seems to divide into victims and their exploiters, I’ll tell you that it was a very cool thing to observe.