Denver residents spent $26 million in 2006 at payday lenders and check cashing strip mall shops, according to city Council Member at Large Doug Linkhart. These short-term, high-interest, fee-ridden services pose a key barrier to building savings, assets and credit and destroy the possibility of maintaining personal monthly budgets. That’s the recent conclusion of a task force Linkhart headed with Denver Office of Economic Development Executive Director André Pettigrew and funded by a grant from the national Bank on Cities campaign. Denver was one of eight cities selected to attack these problems based on a San Francisco pilot program.
With support from the Federal Reserve and local banks and credit unions, the aim of the new “Bank on Denver” campaign is to create “new products that are free and easy to use that we can encourage people to take advantage of,” Linkhart told the Colorado Independent. He lists free checking accounts with free debit cards and low or no overdraft charges as products that could make an enormous difference.
Payday lenders are “the root of the problem,” Linkhart said. “A lot of people in Denver are not banking through financial institutions for one reason or another. They’re using payday lenders and check cashing places and they’re paying an average of $40,000 over a lifetime in interest as a result.”
Colorado Bankers Association and the Colorado Credit Unions Association are helping to sponsor the intitative here in Colorado. The Federal Reserve will be bringing banks into help partner with the city.
“We are trying to get people banked,” Linkhart said. “We have to make it so they can avoid those interest charges and educate them about how to get better credit and manage their money better.”
Estimates suggest tens of thousands of Denver residents don’t currently have bank accounts.