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Check cashers outnumber banks

By Marcie Geffner ·
Monday, August 16, 2010
Posted: 4 pm ET

Pacoima, Calif., isn't a place I would normally visit on a Saturday afternoon, but last weekend, I was there.

Pacoima is a little carve-out in the northeast corner of the San Fernando Valley, north of Los Angeles. The main street has a lot of liquor stores, a couple of fast-food outlets, block after block of stucco apartment buildings and more than a few small churches. It also has at least four check-cashing companies, but only one bank branch that I saw. Indeed, the contrast between the multiple check cashers and the lone bank, which looked deserted, was startling.

My startlement was all the more that evening when I drove a few miles along the interstate to nearby Burbank, Calif. As I pulled off the freeway, I was immediately confronted by two large bank branches, one on either side of the main boulevard off the exit ramp. Burbank, it seems, has plenty of banks, but not one check-cashing service was in sight.

By now you may have guessed that the disparities between Pacoima and Burbank aren't limited to financial services. Burbank is home to half a dozen Hollywood production companies and studios, a municipal airport, medical center, massive shopping, restaurant and movie theater complexes and more. And Pacoima? Well, it's somewhat smaller than Burbank, but it doesn't seem to be home to anything other than poverty and neglect. We couldn't even find a restaurant there.

According to my admittedly unscientific survey on Google Maps, there actually are some banks in the general vicinity of Pacoima, but they're located in a sort of ring around the outskirts, not in Pacoima proper.

Of course, banks are in business to make money and, of course, they naturally can make more money in communities that already have money than in communities where money is scarce.

But still, the dearth of banks, combined with easy access to check cashers, in Pacoima has to raise an important public policy issue that isn't new and should have been addressed years ago: How can we hope that people will raise themselves and their children out of poverty when they don't have even the minimal checking and savings services of a proper bank?

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Marcie Geffner
August 24, 2010 at 5:57 pm

Thanks, Debra. That's an astute observation and a good example of how a change in public policy can have unhappy consequences. How to encourage banks to locate in poorer neighborhoods is a longtime problem since banks naturally want to be where the money is, even though public policy might suggest it would be a general benefit to have more banks in poorer areas as well.

Debra James
August 20, 2010 at 11:48 am

With the new CARD Act regulations in place, you probably will see fewer branches in the poorer or predominantly immigrant neighborhoods in the coming years. I say this because, banks are now required to ask you to opt-in for overdraft protection. Many account-holders will say no, and that will mean banks will see a loss of billions in earnings from these fees. Traditionally, it has been the people from these neighborhoods who paid the bulk of those fees. Since that cash cow can no longer be milked, then the banks see no reason to keep a barn for it.