Seattle-based check-cashing and payday-loan giant Moneytree is a homegrown success story that has made great strides in changing the shady reputation of its industry, as
Seattle-based check-cashing and payday-loan giant Moneytree is a homegrown success story that has made great strides in changing the shady reputation of its industry, as Laura Onstot described in a cover story last March.
And some thanks it gets!
"Bank on Seattle - King County" that is meant to encourage people to open
up bank accounts and stop using services like Moneytree's.
"If you rely on expensive check-cashing services, now you have a great
alternative," says the city's marketing materials. "Predatory lending
and check-cashing practices exploit low- and moderate-income people by
stripping almost $22 million from families and communities in Seattle
alone," the city says in a fact sheet, citing a study by the Brookings Institution.
That kind of language doesn't sit well with Moneytree CEO Dennis Bassford, who wonders why these kinds of initiatives try to justify themselves by "demonizing" his business. As Laura noted in her story, some observers contend that services like Moneytree can represent a better deal overall for people operating on
the financial margins when compared to the incredibly high fees that banks
impose if you bounce a check. A study by the New York Federal Reserve,
for example, noted that a $29 fee on a $150 check represents an annual interest charge of 503 percent, compared to the 391 percent that places
like Moneytree are allowed to charge for payday loans in Washington.
The institutions that are participating in the "Bank on" program (including most of the big banks in town, and many credit unions) have agreed to
give every "Bank on" customer a once-a-year waiver on bounced checks. The banks have also agreed to accept a Mexican Matricula Consular card to open an account instead
of requiring U.S. government-issued I.D.
estimates there are about 52,000 "unbanked" households in all of King
County, some of whom use establishments like Moneytree to cash
their paychecks or to get money orders to pay their bills.
"Bank on" is being funded, in part, by Bill Clinton, through his foundation's Economic Opportunity Initiative, which plans to support similar efforts in other cities. Earlier this year, Clinton and California Governor Arnold Schwarzenegger wrote up an op-ed on the subject for the Wall Street Journal entitled "Beyond Payday Loans."
"What I find remarkable," says Moneytree's Bassford, "is that when these initiatives are announced, we aren't invited to the table. They want to reach out to the customers who come to me, so why don't they invite me to discuss this customer base? If you're looking at what their needs are, why not ask the people who are serving those needs?"
Bassford (at left in the photo) says that half his check-cashing customers already have bank accounts. But they still find Moneytree's hours, and instant service, useful. "Have you ever had a hold put on a check?" he asks rhetorically. There is none at Moneytree, he notes. "We charge a fee, and you walk out with the cash." His company also gives six free money-orders with each check cashed, so people can pay their bills.
Bassford agrees that for people who never overdraw their account, and never incur minimum-balance fees, a bank account is a smart idea. But others, he says, "find our services cost-effective." ("Bank on" is aiming to provide money-management guidance to participants so they begin to fall more in the first group, and not the second.)
launching the program in September, the city has recently started
placing ads on every King County Metro bus route, says Jerry DeGrieck,
a policy advisor in the city's Human Services department. Ironically,
Moneytree too has recently started a Metro bus campaign as well. DeGrieck
says the city has also partnered with a couple dozen community
organizations to do outreach for the program.
What about handing out brochures in front of Moneytree? "That's a great idea," says DeGrieck. "We may do that."
The Seattle program is based on one started in San Francisco two years
ago that is seemingly a big success. Bank on San Francisco has 24,714
new accounts "currently open and active," according to the San Francisco mayor's office. Who is benefiting from the program? Well, one thing we know for sure is that a 71-year-old woman named Virginia Johnson is.
Here, for example, is a press release from the San Francisco Treasurer's Office: "Bank on San Francisco seeks to help people like 71-year-old Virginia
Johnson. Ms. Johnson, who lives in the South of Market neighborhood
and cares for her disabled grandson full-time, has been cashing her $900 monthly check at a check casher since 1974."
And here is an article from the San Francisco Business Times: "The program made a special outreach effort to people relying on costly
check-cashing services. For instance, 71 year-old Virginia Johnson said she used to spend almost $200 a month to cash her $900 Social
Security check, her grandson's disability check and pay bills with
money orders. She's
relied on check-cashing services since 1974."
And here is the lead paragraph of an article a week later from the San Francisco Chronicle: "For three decades, Virginia Johnson - who is 71 years old and lives on
a fixed income - spent nearly $200 a month to have her Social Security
checks cashed and money orders prepared to pay bills for herself and
her disabled grandson."
And here is the city of San Francisco's submission to
the Government Finance Officers Association's 2008 "Awards for
Excellence in Government Finance": "Bank on San Francisco helps people
like Virginia Johnson. Ms. Johnson, who cares for her disabled grandson
full-time, has been using check cashers since 1974..."
Sounds like Bank on Seattle King County needs to find its own Virginia Johnson.