It turns out the old saying “The rich get richer and the poor get poorer” might not only be true, but the poor are actually helping the rich get richer. The new book Broke, USA: From Pawnshops to Poverty, Inc. – How the Working Poor Became Big Business examines the $33 billion-a-year “poverty industry.”
Journalist Gary Rivlin investigates alternative financial institutions and services such as payday lenders, tax preparers who offer refund anticipation loans, and rent-to-own stores. Payday lenders in particular have become so common, that in recent years there have been more payday lenders in the United States than McDonald’s and Burger King stores combined.
Locally, we know from a recent report published by the Federal Deposit Insurance Corporation (FDIC) that 7.6 percent of all households in the Central Florida area are “unbanked,” meaning 65,000 households do not have a bank account of any type. Studies have shown that someone without a bank account will spend an average of $40,000 over his or her working lifetime just to convert paychecks to cash.
Rivlin’s main objection to alternative financial services is how much money is being made. In a recent interview, he said: “Until recently, [payday lenders] were making profit margins of 20 percent to 25 percent a year…To me, the moral point is: Sure, there’s nothing wrong with doing business in the inner city or working-class community in a rusted-out Midwestern town; it’s just that you’re making so much more profit off the working poor than you are over the more prosperous customer. That, to me, is where we get into morally questionable behavior where there’s a profit opportunity.”
Heart of Florida United Way is a partner of the Florida Prosperity Partnership’s “Bank On” efforts, which encourage the un- and underbanked (those who are underutilizing traditional banking services) to establish bank accounts and manage those accounts responsibly.
Furthermore, during tax season, United Way’s Prosperity Campaign of Central Florida promotes more than 30 free tax preparation sites throughout Central Florida. These sites help low- and moderate-income Central Floridians file their taxes for free, usually saving hundreds of dollars in fees and interest on refund anticipation loans.
With tax season just around the corner, stay tuned for more information the free tax sites, as well as the Earned Income Tax Credit – or EITC – which United Way promotes locally to help local families improve their financial stability.
Brittany Richards, MPP
United Way Community Investment