The Unbanking of America: How the New Middle Class Survives

by Lisa Servon

Overview

An urgent, absorbing exposé—why Americans are fleeing our broken banking system in growing numbers, and how alternatives are rushing in to do what banks once did

What do an undocumented immigrant in the South Bronx, a high-net-worth entrepreneur, and a twenty-something graduate student have in common? All three are victims of our dysfunctional mainstream bank and credit system. Today nearly half of all Americans live from paycheck to paycheck, and income volatility has doubled over the past thirty years. Banks, with their high monthly fees and overdraft charges, are gouging their low- and middle-income customers, while serving only the wealthiest Americans. 


Lisa Servon delivers a stunning indictment of America’s banks, together with eye-opening dispatches from inside a range of banking alternatives that have sprung up to fill the void. She works as a teller at RiteCheck, a check-cashing business in the South Bronx, and as a payday lender in Oakland. She looks closely at the workings of a tanda, an informal lending club.  And she delivers fascinating, hopeful portraits of the entrepreneurs reacting to the unbanking of America by designing systems to creatively serve many of us.  Banks were once essential pillars of our lives; now we can no longer count on them to do right by us.

"Required reading for fans of muckraking authors like Barbara Ehrenreich, this fascinating look at the future of money management insists that the 'unbanked' are a sector deserving of respect and solid options." —Publishers Weekly, starred review

Product Details

ISBN-13:	9780544602311
Publisher:	HarperCollins Publishers
Publication date:	01/10/2017
Pages:	272
Product dimensions:	6.00(w) x 9.00(h) x 1.20(d)

About the Author

LISA SERVON is a professor of city and regional planning at the University of Pennsylvania and a former dean of the New School. Her work on consumer financial services has been published in the Wall Street Journal, the Atlantic online, The New Yorker online, and elsewhere.

Table of Contents

Introduction: We're All Underbanked xi

Chapter 1 Where Everybody Knows Your Name 1

Chapter 2 Bankonomics, or How Banking Changed and Most of Us Lost Out 25

Chapter 3 The New Middle Class 47

Chapter 4 The Credit Trap: "Bad Debt" And Real Life 63

Chapter 5 Payday Loans: Making the Best of Poor Options 77

Chapter 6 Living in the Minus: The Millennial Perspective 103

Chapter 7 Borrowing and Saving Under the Radar 121

Chapter 8 Inside the Innovators 143

Chapter 9 Rejecting the New Normal 165

Author's Note 179

Acknowledgments 185

Notes 191

Bibliography 227

Index 241

Editorial Reviews

★ 10/17/2016
The failure of banks to meet the needs of the 99%—and the cottage industries filling the gap—are thoughtfully explored in this startling and absorbing exposé from Servon, a professor of city and regional planning at the University of Pennsylvania. As she describes, commercial banks now cater largely to the wealthy, and more Americans are turning to alternative financial services, including check cashers, payday lenders, and a variety of informal arrangements. To better understand the options available, Servon took jobs at RiteCheck, a check-cashing establishment in the South Bronx, and Check Center, a payday lender in Oakland, Calif. Surprisingly, she concludes that the seemingly predatory “shadow” banking system may simply be a reasonable (if inconsistently regulated) approach to customer demand. In layperson-accessible language, Servon explains the effects of banking regulations—both recent and historical—and of technological innovations in consumer financial services. Most notable is the breadth of people she finds who have removed themselves, or been removed, from the world of conventional banking, including those with chronically low income, students, and entrepreneurs. Required reading for fans of muckraking authors like Barbara Ehrenreich, this fascinating look at the future of money management insists that the ever-growing number of the “unbanked” are a sector deserving of respect and solid options. Agent: Adam Eaglin, Cheney Literary. (Jan.)

Publishers Weekly

"The Unbanking of America is an eye-opening and compelling read about an issue that touches us all: financial security. Local banks were part of the fabric of our communities; their disappearance has tilted the playing field further toward the rich but also opened the door to a new and much more service-oriented financial industry. The unbanked may be leading the way!"—Anne-Marie Slaughter, author of Unfinished Business: Women Men Work Family
 
“Lisa Servon is one gutsy professor.  Unlike so many academics – who just theorize – she lived her story.  She actually rolled up her sleeves and worked as a teller and a loan collector in several poor neighborhoods.  She also provides a smart, lucid, and original take on how our banking system became such a mess.  This is an important book.”—Jake Halpern, author of Bad Paper:  Inside the Secret World of Debt Collectors
 
“In her eye-opening book, Lisa Servon does a Barbara Ehrenreich and goes to work at a check-cashing shop and a payday lending store to illuminate how this little-understood side of the financial service world works.  Servon shows keen insights into the financial problems that millions of Americans face, how and why banks and other financial institutions often fail them, and what’s on the horizon for financial services for the new middle class.” —Steven Greenhouse, long-time journalist and author of The Big Squeeze: Tough Times for the American Worker
 
“A startling ethnographic investigation of everyday financial life, based on Lisa Servon's work as a teller, lender, and loan collector in some of America's most insecure communities, and extensive research on banking among the middle class. The Unbanking of America muddies the distinctions between reputed and stigmatized financial institutions, showing that we're all overpaying for low levels of service. It's an important story, and a powerful read.” —Eric Klinenberg, Professor of Sociology and Director of the Institute for Public Knowledge at New York University

"The failure of banks to meet the needs of the 99%—and the cottage industries filling the gap—are thoughtfully explored in this startling and absorbing exposé ... Required reading for fans of muckraking authors like Barbara Ehrenreich, this fascinating look at the future of money management insists that the ever-growing number of the 'unbanked' are a sector deserving of respect and solid options." —Publishers Weekly, starred review

"The author delivers valuable evidence on the fragility of the personal economies of most Americans these days . . . An indictment of a financial structure bent on large returns at the expense of all else, but also offers hope for ways around that ravenous system."
—Kirkus Reviews

"An intelligent plea for financial justice . . . [An] excellent book . . . Servon’s compassion and intelligence light up every page of this valuable book.  'Unbanking' exposes core reasons why many Americans aren’t gaining financial traction as she skewers huge banks for maneuvers and manipulations that have little to do with providing service."
—Christian Science Monitor

"[An} exceptional piece of academic research that not only masters the statistics and the implications of an important social problem, but informs that cool account with frontline observations in the great tradition of Barbara Ehrenreich . .  Unlike too many other commentators, Servon does not let mainstream banks off the hook in her rigorous analysis of the dynamics of lower- and middle-class debt . . . A readable, informative, thorough, and even gut-wrenching account of an under-reported problem that causes much misery. Viewed as a piece of muckraking journalism, her book is a significant contribution to the progressive narrative regarding the biggest problems we confront."
—The American Prospect

From the Publisher

★ 12/01/2016
Servon (city & regional planning, Univ. of Pennsylvania) provides insight into why many Americans, such as the working poor, immigrant and minority groups, millennials, and even entrepreneurs with ample funds, have not been served properly by traditional banks. The author, a recognized expert in the field of banking alternatives, as evidenced by her education and bylines in major publications, such as the New York Times, shows how individuals have used alternative banking methods, such as lending clubs. Servon spent large amounts of time working as a teller at a South Bronx check-cashing business and an Oakland payday lender while researching this book. This book will appeal to many different readers. Servon is an engaging writer who relates stories of these new business owners, their employees, customers, and innovations with a personal touch. VERDICT This well-written book offers a fascinating read. [See Prepub Alert, 7/11/16.]—Caroline Geck, Somerset, NJ

Library Journal

2016-11-21
Banks seldom have much green money these days—and not many customers, either.As Servon (City and Regional Planning/Univ. of Pennsylvania; Bridging the Digital Divide: Technology, Community, and Public Policy, 2002, etc.) writes, banks have changed since their heyday half a century ago; in becoming too big to fail, they devote almost no attention to small-scale customers, who used to comprise the bulk of their constituency. Now, banks cater to corporate customers, and where they deal with private clients at all, it is often to soak them for overdraft charges while steadily lowering lines of credit. "People who were approved for credit cards in 2011 were offered only half the amount offered to those approved in 2005," writes the author. In one case that Servon offers almost offhandedly, a young single mother who had steadily worked her way out of a credit trough overdrew a checking account by $10 and was hit by $300 in various penalties and fees. It's no way to run an equitable railroad, but the banks are in the business of cash equity only. Enter informal and alternative systems of banking such as check-cashing services, some more or less ethical, some nakedly predatory, and private associations such as the Latino tanda, whose members pool funds. All "substitute for or complement relationships with formal institutions." Servon provides firsthand knowledge of how they work, having taken time out from academia to work as a teller and loan collector. Her conclusions reinforce the developing thesis that people move into banking and informal systems situationally, "depending on what they needed and the resources available to them." This is not earthshaking news, but the author delivers valuable evidence on the fragility of the personal economies of most Americans these days, with fully half living paycheck to paycheck. Servon's approachable if somewhat academic study is an indictment of a financial structure bent on large returns at the expense of all else, but it also offers hope for ways around that ravenous system.

Kirkus Reviews