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It’s expensive to be poor in the Twin Cities

How tough is it to cash a check, get a loan, or transfer money here when you don’t have access to the financial system middle class Americans take for granted? Really hard, it turns out.

A system of payday loan operations and the like sucks $103 billion annually in high fees and even higher interest from those who, for a variety of reasons, can’t access the more regulated banking system used by middle class Americans.
MinnPost file photo by Sharon Schmickle

It’s not really possible for a small herd of comfortably middle class people to walk in the shoes of the working poor.

But last week I tried.

There were 32 of us, broken up into groups of four, walking into bleak inner city check-cashing joints and pawn shops in an effort to understand how the country’s financial system actually works for millions of Americans. 

The exercise, run by the non-profits Prepare + Prosper and the Center for Financial Services Innovation, was at times emotional and other times frustrating. But it was always illuminating, as we attempted to cash checks, get a $500 loan, pawn an item and transfer money. 

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Prepare + Prosper is on the verge of unveiling a “product” that would create a bridge for  people to avoid the often abusive payday loan system and access the more traditional, more regulated banking system.

Over the next year, the group, which has been offering financial services to the working poor for years, plans to partner with a bank system or credit union to create a service that will help those clients save money, pay off debts and ultimately build credit. 

Getting the message to those people Prepare + Prosper wants to serve will be crucial, though, thus the “walk in their shoes” exercise. The group of 32 was made up of leaders of various Twin Cities non-profits, which work with people in the target audience, plus a couple of journalists.

We were serious in our effort to act natural in places unnatural to most of us. The current “financial system” that serves the poor — a system of payday loan operations and the like — sucks $103 billion annually in high fees and even higher interest from those who, for a variety of reasons, can’t access the more regulated banking system used by middle class Americans.

But you can imagine the looks our little groups got as we tried to act as if we belonged in places most of us barely notice. My group consisted of two old white guys wearing sport coats and two young women: one white, the other a woman of Tanzanian roots who has a masters degree in business and who speaks English, French, Arabic and Swahili.

Emma Kasiga’s language skills came to our rescue right from the get-go. One of our tasks was to cash a $100 payroll check we had been given. But the check-cashing place we were seeking had no sign. As we scratched our heads, four Somali women stood a few feet away and stared at our strange group. 

Kasiga approached the women and put them at ease by greeting them in Arabic.

“Where do we cash a check?” she asked.

The women pointed to a small shop that had a sign for selling foodstuffs, but no mention of the check-cashing business we sought. We entered the store. Kasiga asked the man behind the counter if we could cash our check. 

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“Not here, not here,’’ he told her, looking somewhat nervous as he looked at us.

As we left the store, Kasiga told us the counter man had winked as he’d told her he couldn’t cash the check. The message was clear: He does business with people he knows, not a group of people who look like state agents on the verge of conducting an audit. 

Ultimately, our group was able to cash the payroll check, but were continually rejected in efforts to cash a $20 personal check from a bank that doesn’t do business in Minnesota.  

Our “walk in the shoes” journey took us from grimy places where clerks stood behind smeared bullet-proof glass to a “normal’’ neighborhood bank, with a comfy lobby that offered soft chairs and courteous staff.  

But it was the trip to the bank — we were seeking a $500 loan — where there was an a-ha moment. Yes, the neighborhood bank was clean, bright and comfy. But grittier places such as The Unbank — where my group tried to cash a personal check that morning — offered a wider variety of services needed by their customers, more immediacy and even more transparency.

The interest rates charged by The Unbank and similar operations are posted on the walls. The fees are killer high — the annual interest rates can range from 200 to 400 percent  —  but the rules are fairly clear.  In banks, it’s hard to pin down exactly how much interest will be charged. In a place such as an Unbank, there’s actually less red tape to try to get through than in those neighborhood banks. 

Not that those upstanding banks are strangers to exploitation. Kasiga, the linguist in our group who now works with the African Development Center, once worked with a major national bank. As we talked about the exploitation of check-cashing joints, Kasiga told us of a recent immigrant who wasn’t clear on the concept of the debit card she had from a bank. For two weeks, the woman swiped her card for a 75-cent cup of coffee at a neighborhood McDonald’s. She didn’t understand that her account was empty. It turned out that each of those 75-cent swipes were costly. Her bank charged her $40 for each overdrawn swipe. Not surprisingly, the woman no longer trusts the American banking system.

What was most surprising about the storefront outfits was the time-saving convenience for their customers. Start with the fact that they’re located everywhere. (Tracy Fischman, executive director of Prepare + Prosper, said there are more of these payday check cashing and loan operations in the U.S. than there are McDonalds and Burger Kings combined.) They also offer one-stop shopping — check cashing, money transfers, small loans. 

When you may have a couple of jobs, no credit, a couple of kids and a car that needs immediate repairs, right-this-moment convenience is a huge value.  But, of course, that convenience comes at a huge cost.

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The range of emotions of the group on this little trip on the other side of the economic street ranged from anger — “what do you mean, you need the name of my employer?’’ —  to sadness.

Jessica Nordell, who is with Zeus Jones, a Twin Cities branding company, walked with her group into a pawn shop to check on the value of her lovely engagement ring. The man behind the counter at the shop was kind, very businesslike, non-judgmental, Nordell said.

“But I couldn’t help feeling a sense of shame that I was there to pawn my engagement ring,’’ she said (even if she wasn’t actually going to pawn the ring).

The shame turned to sadness as the pawnbroker told her that he’d give her $75 for a ring that is a treasure to her.  “He said the stones didn’t really have value to him,’’ Nordell said. “He’d melt it down for the gold in the band.’’

After a couple of hours of such experiences, we got back into our comfortable, middle-class shoes and had a nice lunch.