Great book that really opened my eyes to the terrible practices that are used by banks and other financial companies to get more and more money from people who don't have it to begin with. I appreciate the great amount of research and work that went into this book - it's a great read for all!

I found this book to be fascinating & eye opening. As an educator who works with parents from all types of backgrounds, you can't help but wonder how the "lower class" are surviving. Eye opening into the world of payday loans. Thank you~

When I first received <i>The Unbanking of America: How the New Middle Class Survives</i>, I thought I would be hearing about how Americans are being taken advantage of by check cashing storefronts and other alternative financial institutions. Instead, I saw a web of hidden fees and schedules that drive people away from traditional banks in the first place. I also learned that many people have learned to use a combination of alternate and traditional financial institutions, as fits their needs.

<i>The Unbanking of America</i> opens with the author Lisa Servon working at a chain business that cashes checks. It is clear from her experience that this establishment is customer-centered, with a business structure based on many small-fee transactions. Transaction costs are stated on a display, not hidden in the fine print of a brochure or agreement as with traditional financial institutions. PayPal is based on such a model, a service I have used for years.

Next Servon spent time studying banking regulations, briefly describing each one and the agencies that enforce them. She also describes why regulations grow ever-more complex: government agencies that spring up to regulate laws would shrink or cease to exist without them. The book then goes on to describe some of the causes of the decoupling of middle class and economic stability, with catastrophic events (such as unexpected medical costs) happening ever more frequently. This section is full of numbers and most of them are depressing. Wages have been declining for over 49 years, while as anyone who wasn’t already in a coma knows, medical expenses are growing and covered less.

Servon reminds us of a time in the early 70s when the credit extended to a married woman was subject to her husband’s approval(!) For single women, a man had to cosign a loan. Working up to the present, she paints a picture of millennials who are working hard, but are saddled with tremendous debt, and often can't find steady work. This was particularly acute during the 2008 financial crisis, when many of them became “boomerangs” and moved back home.

Servon, a professor, spends time educating the reader on the difference between a payday lender (illegal in some states) and a check cashing business, both places she worked for her research. She interviews participants in an informal lending pool, where the money collected may be distributed by lottery (which I had heard of) or at regular intervals (which I had not). At the core of the problem, she claims, is the fact that banks are too risk-averse to try new innovations, particularly disruptive ones. Startups have tried to fill some of this gap, but in some cases get absorbed by the larger, traditional players. She proposes a series of changes that could make the system better, from subsidizing basic banking accounts, to having the post office provide banking services, as done in many countries. It is clear from <i>The Unbanking of America</i> that something has to give.

Wow. That's all I have to say. Banks and credit card companies are possibly more evil than payday lenders and check cashiers, despite what the media says. Who knew?

Well, if you believe the media, I have a bridge to sell you. But I digress.

Now, just to be fair, the author isn't saying banks and credit card companies are evil, just that they are no longer customer oriented and more profit oriented. Which in my book, IS evil, especially when the profits come from screwing over customers, especially those who can ill afford it. Seriously, if a check bounces or an account is overdrafted because of a lack of funds, charging the person $40 isn't going to help them at all! And I'm sorry, it shouldn't cost a financial institution making billions of dollars a year $40 to deal with an overdraft/bounced check. Not to mention a lot of banks rig it so there are more charges and charge fees that if I were to charge them to a friend borrowing money from me would be decried as usury and I would be locked up so fast my head would spin!

But I'm not a fat cat bank. So yeah, banks and credit card companies are evil.

They are also huge, part of the status quo and unable/willing to see that by screwing over too many people, innovators will start new businesses that are smaller and willing and able to meet the customers needs without screwing them over.

So there is hope. It's not coming from the Government, which backs the banks as "too big to fail", basically telling the banks, "Go ahead, do whatever you want, cuz we won't stop you, we can't." Which is a big bunch of Horse Hockey. But whatever. Small businesses, rise up! Stick it to the banks! Customers, take your money where you are a name and valued, not just seen as a dollar sign on a lollipop.

This book is fantastic. Five stars and should be made necessary reading for everyone, especially high schoolers. College debt is discussed and is definitely something someone going to college needs to think about. Read this book!

My thanks to NetGalley and Houghton Mifflin Harcourt for an eARC copy of this book to read and review.

THE UNBANKING OF AMERICA by University of Pennsylvania Professor Lisa Servon explores issues related to the current banking system and growing alternatives. Somewhat like Barbara Ehrenreich (Nickel and Dimed), Servon recounts her personal experiences working briefly as a teller at RiteCheck, a check-cashing business in the South Bronx, and as a payday lender in Oakland. Throughout this book she uses facts and statistics to support her observations; the author's note, footnotes and bibliography are over 50 pages long.

Servon's subtitle is :How the New Middle Class Survives" and she recounts the movement away from banks and credit cards by middle and lower income Americans. We are currently recommending THE UNBANKING OF AMERICA to Junior Theme students interested in economic trends/changes, inequality, and class divisions. Many are surprised at data such as these findings based on a recent (2013) FDIC survey:

"approximately 8 percent of Americans were unbanked and another 20 percent were underbanked. The picture looks far worse for people of color. One in five African American households and nearly 18 percent of Latino households are unbanked."


Extremely well-researched, THE UNBANKING OF AMERICA received starred reviews from Library Journal and Publishers Weekly.

Thoughts on possible pairings include Hillbilly Elegy and "World's Eight Richest People Have Same Wealth as Poorest 50" (recently posted by The Guardian and other media outlets).

Live links in post:
http://treviansbookit.blogspot.com/2016/09/hillbilly-elegy-by-jd-vance.html
https://www.theguardian.com/global-development/2017/jan/16/worlds-eight-richest-people-have-same-wealth-as-poorest-50

As someone who spent his whole working life in the employ of a large retail bank in the UK, the title of this book intrigued me. How could anyone considered to be middle class (almost regardless of the precise definition) survive without using a bank? Well, in this book Lisa Servon (Professor of Urban Policyan at Milano School of International Affairs) delves deep into the issues confronting potential bank customers in America today. She starts by stating that there are, in essence, three avenues to basic banking services:

- Banks
- Alternative financial services providers (e.g. check cashers, payday loan shops and pawn shops
- Informal set-ups (e.g. via friends, family and work colleagues)

Each of the above is explored in some detail, with the advantages and disadvantages of each presented in a clear, no-nonsense way. Indeed, she even spent time working as a teller in a South Bronx check casher branch and as a lender in a payday loan shop. Both were eye opening experiences!

I did notice some interesting differences between mainstream retail banking in the UK versus the US. Some examples:

1. Bank charges have certainly come under the microscope in the UK but I’m convinced customers get a much better deal here. The charging policies and shady practices adopted by large banks in the US (e.g. treatment of overdrafts, sequencing debit transactions to maximise their ability to charge and even charging up to $25 for a replacement debit card) far outstrips anything I’ve experienced or heard about in this country.
2. It feels to me that the use of checks (cheques in the UK) is more predominant in the US. Here, electronic payments have all but made cheque issuance redundant. This difference helps to account for the widespread presence of check casher branches in the US.
3. The availability of basic bank accounts in the UK, allied to the prevalence of electronic payments and the direct debit system should mean that there is no need for anyone to look outside banks for access to standard services. That said, there remains circa one million people in the UK who don’t have a bank account of any type.

An interesting point that is made throughout this book is that banks really only want to have relationships with relatively well off people. Banking for people on the margins of financial security can be very expensive and, indeed, some can be excluded altogether due active credit scoring policies. Another strong message is that the banks generally provide a depersonalised service offering, this is much in contrast to the check casher and payday loan shop experience where customers tend to be well known to staff. In fact, customers using the non-bank services even tended to bring gifts to staff, tip them following transactions and ask after the welfare of favoured tellers.

Another key point is that many people who have bank accounts also use check casher and payday loan facilities. So why would they do this?

Check Casher: The short answer is because of instant access to funds rather than having to wait days for a cheque to ‘clear’. There is an up-front cost for this but when the cash is needed to buy food or other necessary good or to pay workers (in the case of small businesses) this is a necessary expenditure.

Payday Loan: There are several reasons but the expense of overdrafts and lack of access to cheaper loans both play a part.

The whole credit scoring issue is a big deal and once someone is driven below a certain score (for a host of potential reasons) they become tagged as ‘subprime’ and lending becomes harder to access and interest rates rise to account for the perceived additional risk.

I hadn’t realised that payday loans have a hidden trap. The facility is short-term and a one-off fee is payable upon repayment (pay day), but many customers can’t afford to carry the whole cost of repayment in such a short space of time and are forced to take out another loan to cover the shortfall. This can become an extended, and very expensive, process. Often these loans are used to pay for emergencies such as medical needs or a car repair and this highlights the plight of many Americans living close to the ‘breadline’. Another interesting fact is that even though payday loans are illegal in some states, there exist more payday loan stores in America than the combined total of McDonalds and Starbucks outlets!

At the end of the book there are some sensible recommendations as to the way forward for a country whose banks increasingly cater only for the well-off, leaving everyone else to settle for more expensive ways of resolving their financial services needs. Despite some differences in systems and policies, there are a lot of parallels with the UK here. I found this to be a thoroughly researched and enlightening piece of work.