Thursday October 12th was the first payday for a crew of 400 workers harvesting strawberry plants in a remote town south of Klamath Falls. The workers are part of a program to help agriculture employers hire workers who are legally authorized to work. Because the workers move to the community for the seasonal work, they are far removed from their familiar social and economic networks. As a result, many basic transactions, like cashing a paycheck, become more difficult and costly because the workers are vulnerable to predatory financial services.
Over a working lifetime, check cashing fees can add up to $17,000. For unbanked households, cashing a paycheck or social security check means paying fees as high as 10 percent of face value. Just how much could a cap on fees save families? You do the math.
Check cashing shops in Klamath Falls quote fees of 6 percent to cash paychecks. That means it could cost as much as $60 for a worker to cash a check. For Christine Newkirk, Community Resource Manager with Oregon Human Development Corporation in Portland, that was too much.
Newkirk had learned about the perils of high-cost financial services at a workshop about the economic fairness campaign. “This is the exactly what we mean when we talk about the high cost of poverty,” says Angela Martin, director of the Economic Fairness Coalition of Our Oregon. The coalition is working to close the door on predatory high cost banking by passing strong consumer protection laws and open the door to low cost alternatives through innovative partnerships.
One of the ideas discussed during the workshop was working with employers to leverage their financial assets and banking relationships to negotiate a better deal for their unbanked employees. Newkirk took this idea to the employer, Sierra Cascade Nursery. The employer made arrangements to deposit the payroll funds for future paychecks in a local bank. In exchange, the bank agreed to cash the checks for a small fee, $15 versus the $60 that the employees would have paid at check-cashing businesses, and stay open late. The service will be free on future paydays.
The savings is considerable. Going to the local check casher would have cost about $24,000. Going to the bank will cost $6,000. That’s $18,000 going back into the worker’s pockets.
“All in all, I feel this is a good outcome – an excellent outcome,” says Newkirk.
“Thanks to Christine’s great advocacy, along with the employer’s willingness to pursue lower cost options, those 400 workers get to keep more of their money. It’s like giving them a raise without increasing payroll costs,” says Our Oregon’s Angela Martin.
During the next legislative session, lawmakers will have the opportunity to make cashing checks more affordable for all Oregonians.
Oregon is one of a few states that does not regulate check cashers or the fees they charge.
“By passing common sense limits on the fees, we are putting money for a college education, home ownership or a secure retirement back into the pockets of the most financially vulnerable families,” says Martin.
Payday Loan Fairness: [x] Yes, [] No
©2006 Our Oregon. All rights reserved. Photos by Leah Nash.