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NATIONAL VIEWS
Stop rip-offs; connect the poor to banks
This editorial appeared Wednesday in the The Detroit Free Press.
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An estimated 30 percent of urban residents are “unbanked,” meaning they don’t have accountants at federally insured financial institutions and are therefore vulnerable to check-cashing and predatory lending schemes they can’t afford.
The 28 million unbanked and 44 million underbanked in America lose $11 billion a year to neighborhood checkcashing outlets, pawn shops and pay day lenders, which can charge interest rates of up to 30 percent.
Personal finances are not traditionally the purview of public officials. But in these tough times, government certainly has an interest in helping constituents protect their assets and create financially stable households. The life savings of many New Orleans residents were washed away during Hurricane Katrina. In some cities, a cash economy has become a public safety problem, with people becoming “walking ATMs” on days when pay or government checks are issued.
That’s why the National League of Cities and the Cities for Financial Empowerment Coalition are working with many of their members to ensure consumers are financially literate and that banks offer deposit, payment, credit and electronic products that meet the needs of the unbanked. The league’s “Bank on Cities” campaign includes education and outreach efforts that partner with local banks.
In San Francisco, for example, city and county governments served as links between residents and 17 participating financial institutions, resulting in 31,000 new accounts that saved customers an estimated $20 million. Other ideas include local financial hotlines and Web sites and financial boot camps for youths.
City leaders will also lobby for changes in state laws and federal regulations, including prohibiting banks from automatically enrolling customers in costly overdraft protection plans without their consent. Interest rates on fees from overdraft ATM and debit transactions typically amount to more than 1,000 percent, according to a 2008 Federal Deposit Insurance Corporation study.
Poor people already pay excessive rates for food, insurance and other staples. Government should help ensure that basic financial transactions don’t further erode their assets
Stop payroll headaches with paycards
May 8, 2008 by Shane Borer
Tired of hearing employees gripe about waiting for paper checks or not wanting to convert to direct deposit? Now there’s another Payroll option in your arsenal.
On March 20, 2008, Colorado state legislature and the governor signed off on a bill which allows companies to pay employees via paycards as long as two requirements are met:
- Employees are provided access to the entire amount of their paycheck at least one per pay period, and
- Employees can choose to use other means (paper checks or direct deposit) to receive their wages.
What’s in it for companies? Paycards eliminate time spent cutting paper checks and dramatically reduce the risk of fraud. They’re just as secure — and cheap — as going with direct deposit, but they can have a much higher enrollment rate. The cards are immediately loaded with an employee’s wages on payday, but employees don’t need to have a checking account to receive their money. It’s a win for both parties: Payroll gets the security boost and time-savings it needs, and employees get their money as quickly as possible.
If your company’s in Colorado and you think paycards might be the next great thing for Payroll, you’ll want to make a note: Although the legislature was signed and passed by the governor, you’ll still need to wait until (at least) August 6, 2008 before the act is put into effect. Luckily, that gives you just enough time to research vendors and set a system up.
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