How Alternative Financial Services Undermine Public Assistance

David Stoesz is a professor at Virginia Commonwealth University with an interest in the functioning of the social safety net. He recently wrote a paper for the Asset Building Program called “Quick Credit: The Fringe Economy, the Great Recession, and the Welfare State.” One of the key takeaways from the paper is that our social safety net is undermined significantly by the alternative financial sector. Payday lenders, refund anticipation loan providers and others in the sector derive a significant chunk of their business from low-income Americans using their services to access benefit payments. By his estimate, as much as 10% of the total value of the EITC is removed from the hands of low-income families by the alternative financial service sector.

Reid Cramer sat down recently with Professor Stoesz to discuss his paper, the future of the social safety net, and the new Consumer Financial Protection Bureau, watch the video: