There is often talk about how to reduce bankruptcy filings.
The credit industry’s oh-so-caring approach was to make it harder to file for bankruptcy by adding various speed bumps and obstacles to the 2005 Bankruptcy Law (aka BAPCPA). That was a very reactionary, not to mention sloppy, approach that was really intended to serve the credit industry’s short time desire for profit.
But what if there were a more thoughtful and proactive approach? For example, many people fall into debt traps because they don’t have access to banking services. They use check cashing and payday loan services and other services that prey on their financial vulnerability.
This is the point made by Michelle Singletary in her “Color of Money” column in the Washington Post (“An attempt to open banks’ doors to all“). She explains that for a certain percentage of the population, banks simply don’t provide basic services such as a place to open an account and the ability to write checks. She refers to this segment of the population as the “unbanked.” And she points out that non-bank financial services tend to cost more to a segment of the population that can less afford to pay for them, citing an FDIC report that 17 million Americans are “unbanked” and an additional 43 million Americans are “underbanked.”
In response, the FDIC and consumer groups are attempting to work under the Community Reinvestment Act of 1977 to come up with ways to encourage and incentivize banks to create banking services for the unbanked and underbanked. The idea being that in helping this segment of the population, we would be helping out our society and our economy as a whole by reducing the costs associated with financial problems and bankruptcy (e.g., non-producing members of the work force; money being spent on ballooning interest payments rather than on more productive uses).
It strikes me that this is comparable to our country’s concern for the un-insured and under-insured. And our recognition that relying on the emergency room as the default source of health services for the un-insured is extremely inefficient and ineffective.
Hopefully Michelle Singletary’s column will result in additional attention being drawn to this issue. Because it’s the thoughtful, proactive solutions that ultimately help our country deal with complex issues such as these. Not the reactionary, selfish ones.
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