110 lets start with how did you write this book and who did you write it for . I wrote the book in a nutshell because i could not understand originally why particular of Financial Services like tech casters and payday lenders were bad for people, why were they using them . In the course of my research which took a few years, i learned that banks were not really serving the low and middle class and i also realized that there were some good alternatives coming on board. I wanted to tell that whole story. Its the first book ive written thats not an Academic Book meaning, its accountable accountable for a wider audience. I wrote it for policymakers, for people who are working in the Financial Services industry, and ultimately, people like you and me who may or may not be happy with the consumer Financial Services that are currently using. Lets talk about what you mean by Financial Service providers. Lets level set on what that and why you call it alternative . I seen a Consumer Financial industry is being broken into three components. One, the mainstream component which is banks and credit unions. Is alternative, tech casters, payday lenders, pawnshops, rent pawn shops, rent to own shop, theres a whole set of them as their growing. The third is informal Financial Services which are not on the map of policymakers but their use by many americans. You talked a little bit about how people think some of these alternative providers are quote unquote bad. Say more about why you think thats the impression and it may be true but put a finer point on that when i started doing this work, i was reading about Financial Services and many policies had blamed the issue of federal Deposit Insurance Corporation which out every two years the survey of banks and on bank household and they were looking, creating looking at banks and under banks. Banks being households that use a bank account and do not use alternative Financial Services on banks being those people who had no bank account at all. Under banks being people who have a bank account but rely on alternative Financial Services the message of the policy reports that everyone should use a bank account. The latest report says that about 20 of of americans are under banks and another 8 have no biggie got it all. The implicit message was banks are definitely best for people. Those who traffic in the alternative Financial Services are predatory, sleazy, part of the poverty industry and they will take advantage. Thats when i got back to what led me to the question that made me say, if so many people are using the services there must be a reason aside the fact that their ignorant or dont know better. Ive done work in low income communities for 20 years and i know that families who have very little money, no where every penny goes. There had to be a better reason for why people were using the services. Your slightly critical of mainstream banks. Essentially, you talk about how theyre more interested in earning revenues through fees as opposed to interest, that their Business Model has changed and, as in fact, you tell a story story about a Community Bank that you first bank that. Right. I wasnt really thinking about that when i started this research but ultimately i worked as a teller at a check cash or in a payday lender and it me back to my childhood story which was i grew up in a small immigrant town in central new jersey, my grandparents came from poland in the 30s and i grew up there. I went to the bank with my dad on saturday morning. We would go to the butter, post post office, my dad would get a haircut and wed end up at the bank. I think other spaces it was community space. You bumped into neighbors, my dad knew all of the tellers and the tellers knew him and i get a lollipop. When i was seven i got my first bank account, for viewers who are my age or older, it was a green passbook with gold letters and i got my birthday money there and i put savings from my allowance, if i didnt spend spend it, i put the tips i earned as a waitress and it felt like a rite of passage. I realize later that i had been conditioned as a Financial Services consumer as a result of that early interaction with the bank. Now, obviously, my relationship my relationship with bank like most people is different. When my pick think im going to the bank they think of the machine without dollar bills. I dont know tellers and they dont know me. Weve lost sight of the fact that its not that relationship piece of the equation that changed . As you mention, the the way banks make money has changed as well. Back in that era, the late 60s and 70s when i was going to the bank with my dad, banks made their money from interest. You made 3 interest on your savings account and youd pay for a loan and it was called the 363 era of the bankers. That doesnt happen anymore. What changed is that Interest Rates became a less predictable way for them to make money and regulator said look, Interest Rates are volatile and we saw what happened with the savings and loan crisis you need another way to make money. Thats when bank discovered fees. The same piece that angered most of the people that i talk to, we now pay between 27 and 35 if you overdraft on your account. Banks made more banks made more than 32 billion last year in Overdraft Fees alone. That Business Model and theres lots of other fees i could talk about, has created a situation where those of us have more money to keep an account can afford the monthly fees or not pay them because we can afford the minimum balance, we tend not to overdraft our accounts very often we have enough of a buffer and we dont make those miscalculations that people who live closer to the edge do. Its driven a lot of people away from makes. What does your research so about lowering income people bank a generation ago . Were they being served by the committee banks . Or are they outside of the system . Interesting. Many of them were being served. However, we have an act called the trinity reinvestment act was passed in 1977. That act was response to bank redlining, in other words, drying redlines about particular neighborhoods where they refuse to lend. Banks were not serving everyone well. It was largely low income people, people of color, immigrants, where they werent serving them. The act was response to that and it didnt really have any teeth until 1992 when president clinton amended it. While banks were not using fees is much as an income generator there were still discrimination in the market. There continues to be, even though there are laws in place to see African Americans paying more for credit, being denied prime mortgages or getting subprime mortgages or often, women be charged more on credit cards. We saw that so clearly in the mortgage crisis where so many people of color who would have qualified for a prime mortgage actually didnt get one. The results of that was very difficult to modify those mortgages. How much of those couples changed the public trust in banking . I think it changes the trust in banking a lot, across the board. Banks who had the trust in banking is at an alltime low. As you mentioned, africanamerican and latinos lost much more of their wealth and the wealth that they had before the crisis and they were starting from a lower base. The crisis was devastating. It often can be traced back to differential mortgages being offered. Trust is at an alltime low. The people who are least able to bounce back from that have been the most part and have been the least amount of trust. In your book, you talk about how when you worked in some of these alternative Financial Services providers that you actually thought that trust link which you were not expecting. The reason i went to work as a teller in both of these places was that it seemed like the only way i could answer the question about why some people using the services. I spent four months in the south bronx working at a tech cash or as a teller. Three weeks fulltime as a lender and as a loan collector and a payday lender in oakland california. What i saw that many people talked about having Bank Accounts as well but doing Different Things that one place or another. After both incest teller i came out from behind the counter and interviewed customers, told them why i had been doing the work there and wanted i was upfront with everyone. It would have been completely ethical to pretend that i was working as a teller. I talked to people why they werent using banks or why they had closed their bank account i found that 50 of their tech cash or people, customers i interviewed, had Bank Accounts or had them in the past and close them. The three things they talked about in terms of why they chose to use the tech cash or was that it was less expensive, which was completely counterintuitive to everything ive read, the tech cancer was more transparent that they knew what they would be pain and when they would be painted and there was no spices. And that they tested it more. They had relationships with the people who work there and that they didnt get very good service at the bank. Is interesting because so many people look at checkcashing almost with some moral conception. When i was a regulator for the Consumer Protection financial borough we would hear that you had to do something about catchers but when i would play devils advocate i would say, tech checkcashing is one of the most transparent Financial Products there is out there. You talk about how at the store you were at there was very clearly marked what the prices were for specific services. When i speak to offices of people i asked if they had tech cashers or payday lenders and if you havent i would recommend that you go into one. If you walk in the signage that spans the teller windows look like a mcdonalds to be. Got all the product listed, whats for sale, how much you pay for each so, for example, when i worked as a check cash or a cost 1. 95 of the face value of the tech to pass it. It cost to test it. It cost a dollar 50 to send a bill. It cost . 89 for a money order up to 500 which 500 which is less than what the post office charges. People would often come into their banking there. They would come on a friday when they got their check and bring their bills and they would cash the check, give them their cash, person out the money on top of the bills, often times, not paying the full bill they couldnt afford it but figuring out how much do i have to pay to the phone company or to the Electric Company to keep from getting my lights turned off. Paying their rent in full they knew they had to do that. Whatever they had had left with the money they had to live on until their next paycheck. They they were happy in the knowledge that of what theyre getting and what the cost. They knew the bills would be paid immediately. If they had deposited that same tech in their bank account and then written tax or gotten on line to pay their bills, it wouldve been hard for them to be certain that those bills with their account after the tech had cleared. One of the biggest complaints from people is that they put their tech into their account and they didnt know it would clear when it would clear. Then they had to face a late fee but they needed to buy food for their families over the weekend. It was an expensive decision but it was a logical one. In the book you talk about a situation where a customer is unable to make the 20dollar payment and how you soft piping response from the establishment. That the story i told a woman named martha, puerto rican in her 50s and and she came in regularly to test a government check. She came in regularly to my window and i scanned for tax, put her customer id number and Software Information come up on my computer screen. What i saw was a message that she had to pay up 20 every time time she came in. I had never seen that before. I asked another teller to explain what was needed to do and she said marta cast a bad check last month, it didnt clear for some reason. We just create an arrangement with her that shell pay us back 20 every time she comes in. It was interesting in and of itself. If you had gone to a bank, you would have been charged a bad check fee in that transaction would have been logged into tech systems which is a system that all banks use to keep track of their customers bad behavior. If you have too much of that bad behavior even if its not your fault, you may be out of your bank account and because they share it you wont be able to get another account for several years. I heard a story about that over the weekend. Martin says i cant pay the 20 today because i had emergency medical expense. So, again, do we say sorry, we need the 20, do we cash or check but the teller who is working with me of course will capture tech, shes a good customer until ps next time. Thats a good example of why i told the story in the book is evidence of how the relationship Still Matters and many of these businesses where its very hard at a bank to get that kind of service and to figure out how theyll help resolve your problems. Without being penalized in the process. Do you see this, banks essentially, not serving this population well and creating opportunity for alternative providers . Or do you see it as alternative providers out or seen from the bank . Banks frankly make more money off of those who have more money. The guy who hired me at right check in the south bronx said, by way of illustration, look, lisa, banks want one customer with a Million Dollars and tech cashers want a million customers with 1 dollar. That speaks to the basic Business Model. No one can argue with that. Every other profitseeking Corporation Want to maximize their profit. The question is whether there being ethical in the process in not and whether banks because they have a Critical Role in the economy, is a little different different than other Service Providers or state manufacturers, and held to a different standard of rule. It is creating an opportunity for the alternatives and also for other businesses that are springing up now that are looking to solve the problem in another way. You see people in the industry called fin tax, Financial Technology for creating different products and Services Designed to fill the gap in the market. It caused people to choose either banks but they cant afford or someone expensive alternative Financial Service provider. Will get back to been packed but i want to ask you about this mac might argue that you offer a sympathetic portrayal but you also caution that they need to be regulated and to curb some of the abuse. How do you feel about that balance . Its a tough balance in particular really tough because there are now five federal agencies that regulate Financial Service providers and not all regulators talk to each other, get along with each other, theyre not all the fairly coordinated and that not even counting the states. Right. Important to point out that there regulated at the state level not the federal level except for which you mentioned is coming down with some regulations on payday lenders. Probably a good example of how to talk about regulation. So, right now, now, we have a situation where 12 or 13 states is not legal to make payday loans so the states have come down about that. The other states that you provide them have different fees and Interest Rates, terms and very hard to make of it from a consumer perspective and your people crossing state lines and getting loans from online lenders to get those loans. A case where i think the federal federal regulation is appropriate. It makes sense to have a uniform set of laws and where i think some of the rules that are coming down from the cfp d make a lot of sense. The most big one is the ability to pay regulations. What people have argued, consumer advocates and policymakers, is that people who take out payday loans are not using them the way they were design. Maybe for people who live in a state where the things arent legal is destructive to say what they are but their small loans between 50 and 300 that have very quick due dates. Theyre due in full within two weeks or four weeks after their issued, depending on their next payday or tech date of the borrower. They cost 15. Hundred borrower. The reason theyre not used as advertised is that they find they take those hundred dollar loan and its due in two weeks and they cant pay back in two weeks in a situation that caused them to take it out in the first week has maybe been rectified, maybe not but they havent gotten a windfall to compensate him so they take up that loan for another two weeks and picking up another 2dollar charge. Its true that its problematic. You get someone paying 30 for the same hundred dollar loan. And it keeps getting faster and faster. Exactly. So they could pay more than they borrowed ultimately. The cfp d prepared to do is say you need to, lender, ascertain whether the borrower is going to be able to pay that back. Now, that is hard to do and i want to set that aside for the moment but say, that makes some sense and the fact that the lenders will have to do some work to underwrite that loan before the customer can get it, the borrower can get it, creates space for other competitors into the market. What borrowers want most is to get that loan immediately and they do now. They usually needed for emergency but if theres a short waiting period that will allow other lenders who are making loans much more cheaply, one i like in california is opportune which is responsible for 30 . They still think thats expensive but it definitely lowers the cost for some people from a payday loan which is 326 apr. How do you see the space needing to be regulated . You are looking at the cfp d rule and what you think states are doing right or not right . You mentioned some of the outright bands but specifically the experience of colorado. Where do you see the states being particularly smart or not smart on this issue . From an academic or Research Perspective its interesting. You have these different experience going on all over the place. Colorado outlawed the lump sum loans where you have to pay the whole thing back immediately. They made them turn into installment loans meaning you take out that hundred dollars and you have a longer time period to pay it back. Overall, thats a good thing. It gives people more time and lessens the costs and the likelihood that theyll have to roll it over. Thats one interesting thing. We need to do more research on these before and after kinds of things and in some instances it appears that when a state has outlawed payday loans out right but theres been an increase of usage of overdraft and an overdraft which is essentially a shortterm loan also has a 5000 apr if you converted the Interest Rate and made it apples to apples with the payday loan. We have to be careful that we dont just think were doing Something Better and make sure that the outcome is actually better. We need to do more research to figure that out. The trends overall in many of the lenders are starting to change in anticipation of the payday loan, rules coming down from the cfp d, two installment installment loans and that is going to help. There will probably be, frankly, a stall right now in terms of the state regulations all people are waiting for the rules to come down. Were seen in the Financial Market that some Financial Institutions and investors are looking closer and increasing their investment in subprime credit card lending. How do you think more subprime credit card lending which has changed quite a bit the card act . Will that be a big threat to payday lending . It has the potential to be. I write about one of these cards in my book, the bill card that was created by fenway and summer. The build card was created to be more transparent and more ethical alternative to payday loans. The idea was to target people who would have otherwise taken out payday loans. Has a 500dollar limit so certainly that limits opportunity to get a large loan but it does offer the ability to pay it back in installments and for people to have a leeway to know they have that credit instead of having to go out to apply for it when the emergency hit and to manage it. Studies of bills so far has it been out very long but theyre promising. Given the kinds of work that went on with the card act that curtailed back practices. Theres quite a potential for credit card marketed the prime population to make a difference to be a real alternative for this group. People would argue that a complete ban on payday style lending or even a years recap, you mentioned in the book which caps the apr. They needed Venture Capital but some of those models could scale of pay and certainly these regulations lower the user recap or alright banned the seeing that come up from the bottom but one of the central questions in is in is expensive credit and better than no credit at all . One of the things i try to do in the book is not just how that argument if we should be and the payday lenders delicate the situation people find themselves to understand from their perspective i think with the focus almost solely of the of lenders we run the risk to bam bam out right so to separate the supply from the demand those that make pay day lending swell to that level it starts to become used regularly and not have these solutions we need to have those questions about what to do and also what happens to those situations they are making choices that i cannot imagine making the right take out the loaner have my kids go hungry . Barred while lose my job because i cannot get to work . And musher people realize what it would be to walk in their shoes. In this little bit mixed whether it is emergencies or not,. Correct also with creditcard three see the increasing use of credit cards for basic expenses like food and utilities that could be because of the incentives also shift overtime when people think it is appropriate to take on credit. Host talk about the of regulators so by your comments you feel the fdic has pled immoral preference on having a bank account with that every citizen should producing a should . At all think it makes sense for every citizen right now. The works for people who have good jobs are stable income and can afford to say with the relatively high balance but adding Banking Industry needs to change in order for that to be the answer for every american. We have it backwards of those programs being pushed open Bank Accounts without making sure the of product or service that is available for them works for them. Credit unions are often a viable alternative but not always Community Banks the delay is isnt that easy if figure out when it does and where to do that so lot of people say theyre not happy with their bank but they dont know what to do with the alternatives. Talk about how more and more financial is to tuitions are dependent on overdrafts more than the other charges that is also true for Smaller Banks. I am concerned the four largest banks in the number of the smaller bank have diminished rapidly over the last few decades. At the same time Smaller Banks feel they need to adopt the same practices and that is troubling and makes a harder for people to say that is better. Is not a formula any more. There is a book thats called how to be debated does provide information to figure of the financialservices they and have now or they could find a credit union. Host what do the regulators need to change about their mindset . Over the nonbank Financial Providers . What regulators could do to solve the of problem that my customers told me about one was transparency. I painted that picture of what it looks like when you walk into the czech hasher most people know what that looks like but they dont register that you dont see anywhere the products or how much they cost or the options and now the law says with overdraft protection if they have the option in your option notes. You dont know if that makes sense to have overdraft protection or not and those are important for the one of the things i advocate for this like a financial black box that accompanies every product or service to dislike breakfast cereal or pasta sauce you could stand side by side to say i will compare this Checking Account to that one. Another thing the regulators could help is evaluate one provider over another better we live in your city every restaurant has a the letter in its window. I do not order thai food from the letter b or though letters seafood. As they do hire jurisdiction over the payday lenders so people could say this is the seal of approval and finally there are products and services that people try to create to serve People Better better having trouble getting through to the regulations that they need to get the product to market. The fda has the ability to test the drugs for the golan to the market with a financialservices creators to do the same thing and test market something before it goes through those hurdles so those are a few things the regulators could do. The cftc has that project catalyst helping to bring products to market how do they change in terms of interaction offering more competition to market . Opening of regulations is the first to realize to have conversations with these providers and to make a determination of their products are safer and to see that they dont fit into of preexisting box they are i of the habit and now we have our entrepreneur is to come from all different sectors creating products that have the potential to help people but because it all fit into the box that dont make it through the screening. As my experience with the regulator everytime they tried to work with them the banks are the ones who get upset because that is the analogy that could disrupt them. Thats right because some of the people that i spoke weft said why arent the banks doing this . Because they are likely goal laboratories funded with small amounts of money. Those with the Banking Industry and the policy makers. They are not as dynamic and as nimble they rather have the experiments if there is of future with them. Xx spend some time in the book talking about millenials and their experience with banking. With dave to day contact. First of all, i think they get a bad rap when it comes to money that they are saving at a higher rate than the pretty previous generation. So to see that irresponsible generation relying on their parents but they have a lot the student debt but the largest generation 25 of the population. Matter what we say they will change the face of Consumer Financialservices the four biggest banks make the top10 list theyre not into old brick and mortar. Even those that pattern and then much more comfortable so people like my mom to it is 82 has the distinctive risky version putting your information into the computer. Our using caps apps or looking at banks about brick and mortar so they bank local and they tended to do the research and also listen to their peers. People my age and millenials will talk to each other so there is a real opportunity for financialservices providers to develop those applications and programs and theyre willing to examine them. So many people who are millenials, they agenda financial create and the financial crass. Pled crash then you see that that student that has more than doubled so hot ods think weve changed the view the public has of millenials you are leeching off their parents. About how they are doing things and with all this stuff the we have been doing is maybe the firstgeneration to face a very differ reality. What struck me with the focus groups is how they did not relate to the American Dream blake my parents to get a good job, a stable income, one job. I talked to those of the masters degree. Live a definitely cannot buy a house. Has they are graduating to say to fill at they were falling short with a personal feeling and sometimes they are resentful to see my parents have this but it is not for me so theyve gotten the raw deal. Moving back comber not gainfully employed without looking at the of larger context ditches the same that has the upsurge. But in some sense living at home could bid more for you to the responsible thing to do. A un pled not have to go back home. But then for them to go is the stages of adulthood because of the financial context of. Doesnt make them more skeptical to take a lawn negative especially after Student Loans . I thank you will. But although whole to feel they were reticent to run up their creditcard or to take on debt to buy a house. Theyre not too sure they can rely on that and come. Pdf so how many people talk about not doing things like go to their friends wedding . But i thought about it with the social networks that we as American Samoa is live close to where we grow lot. And they often had to opt out to be financially irresponsible they cannot participate. There heard from one gentleman and who defaulted and his grandmother was a cosigner and the relatives did not want him to come home for thanksgiving because the grandmother was being financially harmed by it so it is also damaging to their psyches. Absolutely. Talking to many parents who do not expect to have to take an Adult Children and to feel guilty as parents do. But there could be more opportunities for disruption. Absolutely. ; these really have a chance to fundamentally transform the business of banking in the open marketplace . I think they do. But what would change the infrastructure banking m1 a that was called ripple theyre looking to create an internet of value that well use to create a system to enable money to move from one place to another without cost and immediate the same way if i would send an email. Doesnt make a possible to deposits that check . Noah dont have to wait three or four days to clear board to remit money to my relatives or send it across the country that is expensive if you go to Western Union. Sa that is one innovation another is around the credit scorers while looked one that was bought by trans union would of the big three Credit Bureaus to pilot a new credit scoring formula if i would give my credit scored done right now it would be a snapshot today are how much i amusing or if i am late. This looks at the 30 days period it is also more fair looking and assets and liabilities if i pay my rent and utilities that credit scored is not include. And what they felt there are millions of people who have no credit score which means if they try to get a loan they will pay a lot of money. Because it dont have the information that the traditional Credit Bureaus do. If you apply this model they can all be scored many get prime scorer acute be scored those of prime they could go to super prime. And we have seen millions of people to have access to cheaper and better credit. And then to open the Financial Markets to a much wider group of people. And certainly there are companies that make money sending money overseas will they dire simply figure out a way to stop in ovation from Going Forward . I do not know Western Union as well as i should but they do want to compete but what happens now a vice send money going to guatemala igc a pretty hefty fee but between here and my cousin to say it takes a little time and there is a potential for error and that this call for action. Mayor trying to keep that fraction of the of the system and on the surface that is good for Western Union to compete with other providers that is how industry always works that benefits the consumer and makes it reasonable. Talk about those other solutions to think it is important other than fostering innovation you actually embrace the Postal Service participation in the marketplace towelettes more about that. To start i would say we have of range of relationships when you think of the Banking Sector and the Public Sector berger going back to Justice Brandeis sort Thomas Jefferson who argued the Banking System law is like a railroad of a public utility part of the infrastructure that makes the economy run in those benefits from government like fdic insurance we instituted this insurance that if you put your money and a bank you would not lose it that is a big if vantage to the banks they give something in return. But has happened since the 80s is the relationship has moved from being responsible to larger Public Interest to the banks being profitable to their own efficiency and think we need to move that relationship back and there are a few ways to do that the system that is proposed by many people as one way to do that. That was done for immigrants earlier but the argument is the Postal Service would not be in the business to make a huge profit but providing services. That was raised as an idea for five years ago but the paper argued it would be a benefit to consumers at the Postal Service could make negative up profited dont think is feasible but we should consider a public Banking System but the reason is because it is the right thing to do that should be our right to have safe Affordable Access to Financial Services. We have a program called the Lifeline Program giving all access to Telephone Service with the argument if you need a phone to call 911 or participate in the job market so we will subsidize your providers. So given the amount of money they could argue to be subsidized but it does not fit their Business Model. That is something that could be considered as well and we need to pursue more of these ideas to get government involved all the with the Current Administration idol know of that is a likely prospect. What about that financial justice in the Uncertain Times . Spirit the first thing we need to do is think about what financial all justice means. Are all americans treated the same way . And those that outside the Financial Services system just like what we saw in ferguson with africanamericans in poor neighborhood to be unfairly targeted with minor infractions that led them to fund the municipal system with Debt Collection practices so the first that is to collect penetration information. There is of lot of certain groups and individuals targeted in different ways. Then to change the way weve talked about this issue we have these categories which i think cathay deficiency built into the new are unhealthy or uneducated that there is something wrong with you. Focusing on Financial Health so what do americans need to save for retirement those that are increasingly common that obviously leads to the banking is the solution. But the weather word with the middleclass does not make sense as a solution. Host thanks for being here today. Available on bookstores and online. Its been a pleasure. The new form of warfare i have covered National Security affairs for over 30 years and then all over the world covering issues and i think it is a reflection of the Information Age looking at this new form of warfare that i define of what we have seen so much of as well as the content influence said a merged so these unbeliever the dominant form of warfare