Jan 01 1997

Lower Income Americans, Higher Cost Financial Services

Professor Caskey presents the results from a research project that examined the use of financial services by lower income U.S. households and reviewed the fees and operations of nondepository suppliers of financial services, such as check-cashing outlets, pawnshops, and rent-to-own businesses. The research used survey data to answer the following questions:

1) What institutions provide consumer financial services to low and moderate income households and what services do they provide?

2) Why do many low and moderate income households patronize check-cashing outlets, pawnshops, rent-to-own firms, and small-loan finance companies?

3) How do these businesses operate and why are their fees so high?

4) What opportunities do the answers to these questions suggest for credit unions seeking to deliver financial services to lower income households who currently patronize businesses in the alternative financial sector?

Report Number 22