(detnews.com) More than a quarter of Metro Detroit households aren’t using or are underutilizing banking services, data released Wednesday by the Federal Deposit Insurance Corporation shows.
A total of 9.9 percent of households in the area don’t use banks at all, above the national average of 7.7 percent; 18 percent of local households have bank accounts, but are considered “underbanked” because they’ve used nontraditional financial products like payday loans in the past year. That’s just a tick above the national average of underbanked households, which stands at 17.9 percent.
Some minority households were more likely to be unbanked or underbanked, as were those with lower incomes. Roughly a third of African-American homes don’t have a bank account or underutilize those they do have; about a quarter of Hispanic households are in the same situation.
Later in the article, vice-chairman of the FDIC Martin J. Gruenberg is quoted saying the following:
“The bottom line is we need to be offering access to financial products that are appropriate to people’s needs. We need to ensure that banks and credit unions can do this.”
The payday loan industry has been demonized over the past few years mainly because they typically charge very high interest rates to issue loans.
Unlike a bank, payday loan operations take a much greater risk when loaning money because all they typically require is proof of employment–that’s it. Credit score plays no role when they lend money. That explains the high interest rates. While many folks simply use this service as a temporary way to catch up on some bills, others factor it in as a permanent revenue stream without reading the clearly posted interest rates you will find in most of these stores.
Now apparently someone is thinking that perhaps the payday loan model wasn’t so bad after all.
Nice!
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