Clinton and Schwarzenegger Team Up to Terminate Payday Loans
Just when you thought the political season couldn't get any more thrilling, an all-new partnership has been announced: Former President Bill Clinton and Former Movie Star (and current California Governor) Arnold Schwarzenegger have teamed up to do away with....PAYDAY LOANS.
That's right: the Governator and Mr. Clinton recently published an editorial in the Wall Street Journal to bring attention to the devastating effects payday lenders and similar operations are having on middle and low-income Americans.
The editorial focuses on what the politicians call "unbanked" Americans: those who have neither savings nor checking accounts in a bank or credit union. It calls for specific government action to help unbanked citizens get on the road to financial stability and therefore the American dream.
Here are some of the statistics the article provides:
- More than 20 million Americans use payday lenders, check cashing services and/or pawn shops every year.
- More than $60 billion worth of checks is cashed yearly by check cashing companies, all for a fee.
- Americans spend more than $8 billion each year for the fees and interest rates involved in using payday lenders and check cashers (services bank users get for free!).
- The average cost of cashing a check is $40; over a lifetime, someone who uses a check casher for each paycheck will spend $40,000 on this service.
- Companies that offer small loans (like payday lenders) make more than $40 billion annually on fees and interest rates.
If these numbers shock or surprise you, you're not alone. The editorial includes an outline of the average American who uses payday lending services: married, employed, earning about $27,000 a year and working for a small business.
And consider this little tidbit: Clinton and Schwarzenegger estimate that, if the $40,000 lifetime expense of using a check-cashing service could be invested in the stock market, that amount could be turned into $360,000 - enough for the average user of these services to live in retirement for 25 years!
So what are these two men doing about the situation besides writing articles?
California, under the direction of Schwarzenegger, will be the first state ever to implement a plan to help its unbanked citizens open "starter" accounts. Studies show that about 11% of California households have no checking account (25% of minority households), and nearly 50% lack a savings account.
With the help of the FDIC and various financial institutions, Clinton and Schwarzenegger hope to help Californians begin opening and maintaining bank accounts. Nationally, several major cities have taken similar initiatives, and the William J. Clinton Foundation has offered its support of these efforts.
Organizers hope to increase financial literacy among Americans and help people get on the road to financial success and freedom from oppressive and aggressive lenders.
Besides the government-backed efforts, Clinton and Schwarzenegger are calling for employers to help their employees open bank accounts and establish mainstream ways of handling their finances, an effort predicted to improve both financial wellbeing and overall morale.
Hopefully, with forward-looking moves from leaders like Clinton and Schwarzenegger, more Americans will have the opportunity to reap the benefits of their hard work.
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