A partial defense of payday lenders: Banks are just as bad

For many people, payday lenders and check-cashing outfits are the scum of the financial-sector earth; they’re called usurious, compared to illegal loan sharks and may finally be subject to at least some federal regulation (if not enforcement). But G.D. at Post Bourgie has an interesting defense of the so-called “fringe” banking services: At least they’re not as bad as banks.

But the proliferation of banks in poor neighborhoods has done little to keep the unbanked from opting for “fringe banking services” — check cashing services, payday lenders, and the like. Those institutions charge onerous fees of their own, but unlike the big banks, their fees are explicitly outlined. Customers may cough up $12 for the privilege of cashing your $300 check, but it makes more economic sense than being stuck with miscellaneous surcharges over the course of several weeks for not maintaining a minimum balance, withdrawing money from an ATM, writing a check, or overdrafting your account — penalties that can accrue much more easily and be much more disastrous when your life is inherently unstable.

Although market research indicates the alternative-to-banking industry as a whole earns about $27 billion in profits a year, banks made $20 billion on debit card overdraft charges alone in 2009 — which means they’re undoubtedly pulling in more than $27 billion in profits from ATM fees, minimum balance fees, check writing fees, bounced check and overdraft charges. Who is it that is screwing over Americans with banking fees again? Because it seems more and more like the answer is “everyone.”