HOW MUCH DOES
YOUR MONEY COST?
By Ron Milsap
Series 1 – Banks vs. Community Currency Exchanges
The total number of community currency exchanges in Illinois is 419 (as of
6/1/15). Community currency exchanges provide various services, including
check cashing, money orders, bill payment, stamps, city stickers, license
plate renewals, auto title/registration and money transfer.
Of the 419 community currency exchanges in Illinois, the vast majority
exist in low-to-moderate income areas. In neighborhoods like Chatham on
Chicago’s south side, currency exchanges outnumber conventional banks—
six banks to ten currency exchanges. Whereas in upper-income tracts like
Naperville, there is only one community currency exchange.
Unfortunately, I’m sure there are other low-to-moderate income communities
in Illinois that boast similar statistics as the Chatham neighborhood. This is
especially true when you look at the broad umbrella of alternative financial
services (i.e., non-bank, non-regulated), which include everything from rentto-own stores to pawn shops, payday lenders, title lenders, and subprime
mortgage lenders.
Why are there more community currency exchanges in low-to-moderate
income communities and, to be more specific, communities of color? The
Illinois Department of Financial and Professional Regulation (“IDFPR”), which
regulates community currency exchanges in Illinois, determines the number
of these service providers based on “community need” and the effect that
granting the license will have on the financial stability of other community
currency exchanges serving the community.
How is this “community need” determined? And are community currency
exchanges generally concerned with the welfare of their patrons? Research
shows that currency exchanges and other alternative financial services
strategically target the most vulnerable communities and individuals. These
businesses serve as a major source of credit services for low-income
and working poor consumers, residents of minority neighborhoods, and
consumers who tend to be in debt or behind on their payments with
derogatory credit histories.
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