A Solution to those Payday Loansharks

San Francisco has come up with a way to help low-income people who’ve been preyed on by payday loansharks. Bank On San Francisco is a group effort by the mayor, the city treasurer and the Federal Reserve Bank of San Francisco.

Whether it’s a bad credit history or the sky-high minimum balance required by most banks, about 50,000 San Francisco households don’t have a bank account. This leaves them at the mercy of sleazy check-cashing services and payday lenders (or worse). A $30 check-cashing fee is a lot of money for somebody on a fixed income. If this money can be spent on groceries and other necessities, it stimulates the local economy as well as helping the individual.

Under this program, fifteen local banks and credit unions are offering free or low-cost checking and savings accounts. They're specifically targeting low-income neighborhoods where the residents are the most likely to be preyed on by sleazebags. They're also accepting alternate forms of identification (e.g. consular identification cards) so that (legal) immigrants are able to open accounts.

So far San Francisco is the only American city with a program like this for getting low-income paycheck-to-paycheck people into the financial mainstream. A few other cities — Seattle, Boston, Atlanta and Los Angeles — have made noises about creating similar programs. Let’s hope they do. When thousands of low-income people are able to open bank accounts and start saving, everybody wins.