Being young and not understanding I asked my mother why the old man would do something so foolish. She explained with great patience about bank failures and why many people of that generation did not trust banks or bankers. Years later I read about an elderly couple in Ohio who were fighting eviction through eminent domain. Everyone assumed that it was just an old man who would not let go of his house, but as the bulldozers moved in and began to knock over the house vast quantities of coins were discovered hidden in the walls.
Silver dollars, half dollars, rolls of quarters, the old man didn't trust the banks. Eventually over ten thousand dollars was recovered. Funny thing though, that was only the face value of the coins. The value of the money to coin collectors was upwards of fifty thousand dollars. That crazy little old man received a far better return squirreling his change away in the walls than he would have gotten at the bank.
Today in America seventeen million adults have no bank accounts whatsoever. Forty-three million have accounts but use them only to cash paychecks. Sixty million people is a huge number of adults to make so little use of the banking system. I first discovered the advantage of cash back when I still had the accoutrements of wealth. When I went to the gas station to fill up my truck using a debit card, the gas pump computer voice would drone on and on about a gas additive that could be added to my purchase. I had to stand in the cold and the rain waiting for my tank to fill. But when I handed the clerk a twenty, no message about add-ons and I could wait in the cab until the pump shut off by itself.
I think a smart marketer should promote environmentally-friendly yard safes. Rustproof and moisture proof, guaranteed not to leak for a lifetime. You have a better chance burying your money in the back yard than trusting it to the banks.
The bankers are aware that growing numbers of Americans, either through situation or design, want nothing to do with their industry. The FDIC came up with a new program, which I call "Free Crack," to entice less affluent Americans back into the banks. The program was to encourage the banks to make loans of up to $1,000 while keeping the interest rate below 36 percent. God bless their little black hearts! Thirty-six banks made 16,000 loans totaling over $18 million. The problem is that making loans involves signatures and paperwork. Plus there are pesky state and federal laws about waiting periods and legal recourse. So to the banks making small loans for a paltry 36 percent, it wasn't profitable enough.
The administration's banking reform legislation kept bankers up nights thinking of new ways to separate you from your/their money. The legislation cost the banking industry $15 billion, as fees for overdraft protection were limited. The banks collected $38 billion in overdraft fees last year. Who would have guessed that Americans were so sloppy with their money? Well, it works like this: you make a purchase with your debit card and the money is withdrawn from your account instantly. If, however, you make a return or are due a credit, that takes from five to seven days, at the bank's discretion.
If that puts you into an overdraft situation, you are fined, even though your account has a pending credit. They win, you lose, every time, every day, twenty-four seven, three hundred and sixty five days a year. This smiling industry of jackals and hyenas does not take well to losing $15 billion in their/your money. So what's a blood-sucking, money-grubbing legal gangster to do?
The answer is really very simple. Since they have now had their claws clipped in the overdraft department they said, "Let's call it something else! Let's call it a payday loan!"
Cooler heads in the marketing department prevailed and answered; "Such august and major banks as Wells Fargo, U.S. Bancorp and Fifth Third cannot be seen dabbling in the unseemly world of payday loans."
The rebuttal, "But the interest rates are 120 percent a year, and there is no paperwork. The sucker/customer pays whatever we tell them they owe and thanks to direct deposit we get their money before they do!"
Marketing answered, "We'll call it Early Advance or Checking Advance, and then we'll market it as a service not a loan and free ourselves from the regulatory oversight of state banking laws!"
The Payday Loan stores cried foul, this is our corner, go find your own suckers. We were here first! Payday Loan stores have a $42 billion industry fleecing the poor and needy and don't appreciate their upscale suit and tie brethren horning in on their market. Steven Schlein who represents the Community Financial Services Association of America, a trade group of payday lenders, said, "National banks like Wells Fargo, U.S. Bancorp and Fifth Third are federally regulated, while payday lenders are overseen by the states. What the banks are doing are payday loans. Let's have everybody operate under the same system."
Payday lenders garnered over $7 billion in fees last year and what is brewing now are jackals fighting over the corpse. We've got suit and tie gangsters with drive-by attorneys and hit squad lobbyists in a turf war over who gets to fleece the suckers first.
This all began to coalesce in my mind when I started reading about the Greek economic crisis. Back in the heady days of 2002 the Greek government found itself in a budget mess. The government needed loans but because of the European Union's restrictions on how much a nation could borrow they had no source for new loans, until the American bankers showed up.
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