An ad on my Facebook page alerted me to a film coming out this summer to be called “Spent: Looking for Change.” It is said to be about the 70,000,000 Americans who are “underserved” by the regular financial system.
Now, Kamaaina Loan blog has often considered the unbanked and underbanked. Pawnshops are prominent among the “alternative financial institutions” who do serve the unbanked. No credit? Bad credit? No problem, as long as you have an asset to pledge.
It is clear from the “Spent” trailer that the film — posing as a documentary but actually a long commercial — will be a hit job on, among others, pawn shops.
Are pawn loans expensive? Compared to what? If you can borrow a million dollars, you can probably get it for 4%. If you want to borrow $160 (an average pawn loan), you will pay 20% in Hawaii, less in some other states; although where the rates are lower, fees are usually allowed. In Hawaii fees are not allowed.
Let’s say you need that $160 to pay your electric bill. Borrow on pawn and it will cost you $32. Borrow from the utility — by waiting until next month — and you will probably pay even more than $32 in late fees, plus maybe get a bad mark against your credit.
We wouldn’t recommend anybody take out a pawn loan every month to pay electric bills; but once in a while, when the bills outstrip the household budget, it might be the cheapest, most prudent alternative.
Now let’s get down to the nitty-gritty. Who is paying for “Spent”?
Yes, one of the giants of banking that is not serving those 70,000,000.
Why? According to ABC News:
“Spent” will premiere this summer and is sponsored by American Express. The company currently offers two alternative financial products for the financially underserved, in their “Serve” and “Bluebird” prepaid debit cards.
Not really an alternative for the typical pawn customer sketched above, who, if he cannot pay his electric dill also cannot buy any prepaid debit cards.