Fringe Banking and Low-Income Communities in the Twin Cities
Fringe banking—using financial services like check-cashing outlets, pawnshops, and payday lenders instead of conventional banks—grew rapidly in recent years. These services are costly, with fees and higher interest rates reaching several hundred to more than a thousand dollars a year in excess of conventional banking. Despite the higher fees and interest, the industry tends to thrive in poorer urban and ethnic minority communities. However, very little is known about the industry and why residents use it. David Karjanen (Department of American Studies) will estimate the extent and location of friend banking in the Twin Cities, interview consumers of these services to gather data and conduct analysis on why they choose fringe banking over conventional banking, and distribute the results to community-based organizations to inform future policy development.