An Ivy League professor who spent 4 months working in a South Bronx check-cashing store says we're getting it all wrong
The common wisdom isn't always right. "The prevailing wisdom from bankers and policy makers went like this: People who used alternative financial services — like check cashers and payday lenders — were making expensive and unwise decisions. If we could just educate the "unbanked" and "underbanked" and usher them into the modern financial system with a bank account, their fortunes would surely improve. But Servon, a professor of city and regional planning at the University of Pennsylvania and a former dean at the New School, spent 20 years studying low-income communities, and to her, that picture didn't add up. Most of the unbanked (the roughly 7% of US households without checking or savings accounts) and the underbanked (the nearly 20% that had such accounts but still used alternative financial services) that she encountered were neither naive nor irresponsible about money. "The implication of that" — the biennial surveys of the "unbanked and underbanked" by the Federal Deposit Insurance Corporation — "was these people were making poor decisions," Servon recently told Business Insider. "I knew that the people I had worked with closely who don't have very much money know where every penny goes. They budget things. They know where to get the best deals on things. And so it struck me that if they were using check cashers, there must be a good reason for that." Already steeped in academia and research, Servon didn't think she'd gain any new insight from behind the desk. So in late 2012, she decided to embed in these communities to get a firsthand look, landing a job as a teller for four months at a check-cashing store in the South Bronx. (She would later also work as a teller and loan collector at a payday loan store in Oakland.) She didn't go undercover, but rather was hired on the up-and-up thanks to some help from Joe Coleman, the president of a small chain of New York City check cashers called RiteCheck Cashing, who had guest lectured for one of her classes years before. "It felt like the only way I could answer this question: If alternative financial service providers are so bad — if they're so predatory and so sleazy and so much in the business of taking advantage of people — why are people using them in growing numbers?" Servon said."