Follow up article on the 'un-banked' discussing the huge profits the financial industry makes off those without bank accounts.

Earlier this year I did a post about the very powerful movie called SPENT.  It was about the unbanked population and how they face a difficult burden be existing outside the traditional banking system.  I came across this article today which relates to SPENT and thought I'd share.

Click here for the original post which contains the movie.

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THE $103B BANK REVENUE STREAM [click to see original source]

By PYMNTS @pymnts

What's Next In Payments®

6:14 AM EST December 12th, 2014

Financially underserved consumers now spend more than $100 billion a year on financial fee and interest charges, according to a report released Thursday (Dec. 11) by the Center for Financial Service Innovation.

The CFSI estimated that underbanked U.S. consumers used $1.3 trillion in financial products and services in 2013 and spent $103 billion on the nonbank charges, up 7.1 percent from 2012’s $96 billion in charges. In 2014, that spending is projected to grow 4.6 percent to $107 billion, Credit Union Times reported.

Much of the growth came from expansion in subprime auto lending and auto leasing, which has been crowding out more expensive “buy here, pay here” auto-sales outlets.

Another growing niche: credit cards. “The increasing availability of subprime credit through credit cards has brought renewed strength to consumer solicitations and approvals in the Subprime Credit Card segment, a trend projected to continue in 2014,” the CFSI wrote. Secured credit cards also saw a sharp jump in revenue, driven by a 30 percent jump in average fees from 2012 to 2013. But those fees are expected to plateau in 2014.

People turn to Payday Lending because banks are more costly??

I came across this very interesting article about payday lending.  If you recall, I had posted links to a movie about how these lenders take advantage of the 'unbanked' by charging high effective rates.

Turns out, the payday lenders may not be as expensive as the banks people are trying to avoid and the users of these services may be smarter than most will admit.

[click] to see the post which featured the movie.

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TURNS OUT THAT PAYDAY-LOAN CUSTOMERS ARE PRETTY SAVVY BORROWERS

By PYMNTS @pymnts

What's Next In Payments®

7:15 AM EDT October 2nd, 2014

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Conventional wisdom might lead one to conclude that payday lending is a scourge upon the Earth and an institution dedicated wholly to feasting on the financially disadvantaged and entrapping them unwittingly into an unending cycle of interest, fees and renewals intended to turn a $500 loan to buy groceries into a lifelong commitment. One also might reasonably begin to expect that their days may be numbered as the CFPB prepares to wipe their societal contagion from the face of the earth with purifying regulatory fire.

But recent data released by the CFPB seems to indicate that the conventional wisdom may be wrong on both counts.

An analysis of the complaints received by the CFPB  from consumers in its first three years indicates that payday lending isn’t really that big a problem insofar as only roughly one percent of the consumer complaints are related to payday loans. Mainstream financial products and services such as mortgages and credit cards dwarfed payday lending for the volume of complaints received. When debt collection is added in, those three areas accounted for roughly 66 percent of customer complains, reports American Banker.  This data is corroborated by FTC data that essentially reveals the same thing–payday loans represent about 1 percent of consumer complaints.

The CFPB data also revealed that if overdraft protection, the mainstream alternative to a payday loan, were evaluated in the same APR terms that payday loans are, they can come off much worse –in some cases clocking in at around 1700 percent (as opposed to the totally reasonable APR average of payday loans–350 percent). Moreover, the CFPB study noted that understanding short term loans in terms of APR may be less than helpful, since consumers prefer to evaluate the loans in terms of fees charged in dollars.  [click to go to article site]