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Why the Working Poor and Banks Are a Bad Match
January 13, 2014

The Consumer Financial Protection Bureau is expected to draft rules governing payday lending this year. But the conventional wisdom that will likely guide it is based on false perceptions about the working poor and the best way to serve them.

So argues Lisa Servon, a professor at The New School in New York, who spent four months as a teller at a check-cashing business in the South Bronx and three at a payday lender in Oakland, Calif. Servon's conclusion is that many low-income consumers fulfill their financial needs outside the regulated banking system by choice and in many cases are better off for doing so. The professor of management an urban policy explains why she believes bankers and policymakers are wrong in many of the conclusions they've drawn about underbanked and the types of financial services that would best cater to them.

Comments (6)
Thanks for this interview. It really helped provide more context for the issues we face in banking. It also reflects the benefit of respecting the decision process of people who use check cashers so that we develop and offer better services to meet their needs. I don't agree that the working poor and banks are a bad match. Instead I believe we have to work smarter to better meet their needs. The responsibility is on us!
Posted by teri | Tuesday, January 14 2014 at 8:25AM ET
Mind blowing levels of false equivalence here. That mainstream financial industry does a poor job of being easy to deal with and transparent doesn't mean that therefore people should go get ripped off in a friendly an transparent manner! She may have worked the window, but she hasn't worked with the thousands and thousands who have been trapped in payday debt.

How much is the industry paying her for this?

Posted by LRyanM | Tuesday, January 14 2014 at 11:24AM ET
You cannot be all things to all people; banks should stop trying to be all the financial services to all the customers. Accept the fact that some businesses fill a niche better than you do and be willing to make a little money by servicing those MSBs that do the job better than you.
Posted by Charles P | Tuesday, January 14 2014 at 11:35AM ET
LRyanM, I won't disagree with your assessment of payday lending but you are engaging in false equivalency yourself when you equate payday lending with check cashing. Look at such states as New York and New Jersey that license and regulate check cashing without allowing payday lending.

What industry are you referring to in you second comment, retail and commercial bankers, check cashers or payday lenders?

Posted by Charles P | Tuesday, January 14 2014 at 11:50AM ET
the banking industry gives lip service to he notion that they would welcome the "Unbanked" as new customers . "free checking" as an example has long been the key driver to noninterest income . it has always been the "HOOK" to get new customers with the understanding that the real tactic was to generate fees that low balance accounts could not afford. as stated in the interview. the "CHOICE" made to use alternative financial providers makes financial sense to many people. Stop calling them "UNBanked
Posted by bellfair | Tuesday, January 14 2014 at 12:56PM ET
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