My Turn: Tackling the micro-aggressions of economic inequality

The New Hampshire House of Representatives recently voted to raise the minimum wage. Those of us who voted in favor of this basic move toward economic equality aren’t naive, though. We know that even if the measure gets through the Senate, the governor will veto it.

But raising the wage is only one part of the bigger picture of ensuring economic opportunity. Banking practices in New Hampshire need to change to better serve us, and the House will soon be considering two important pieces of legislation that could make a difference as big as a wage increase.

One bill will address access to cash in a crisis: House Bill 1419, which would create small-dollar loan programs through New Hampshire banks and employers.

In a state that has among the highest average household incomes in the country and among the lowest unemployment, it’s easy to overlook another number that’s all too real for many: 40% of New Hampshire residents are one unexpected $400 expense away from a real crisis.

I’ve been there. When I was young and starting out, my truck wouldn’t pass inspection because it needed four new tires. That’s over $400 in tires – $400 I did not have. Without the cash, my truck wouldn’t pass inspection. Without my truck, I couldn’t get to work to earn the $400. Too many of our neighbors are in this same situation right now.

Small dollar loans are usually considered those with a 12-month repayment period, a maximum interest rate of 26% and a maximum value of $2,500. Credit unions typically offer this type of loan to their members, but credit unions only serve a small percentage of the population. Banks don’t offer small dollar loans because they don’t think they can make money on this type of loan. And they see the people who need these loans as unreliable borrowers. In short, banks would rather make a million dollar loan to someone who already has a million dollars than make a loan to someone who has a job but needs a set of tires.

The facts don’t support the banks’ assumption. According to a pilot program conducted by the FDIC in 2010, banks can make money on these loans and the repayment rate is as good as that of other borrowers. Small-dollar loans make sense, both for banks and their potential customers.

In the coming weeks the House will also come to grips with another banking practice I’ve grappled with, and I bet you have too. It’s called debit resequencing, because “charging unnecessary fees” doesn’t sound good. Some banks choose to cash your checks or debit transactions in an order that will cause as many checks to bounce as possible, forcing overdrafts and (ka-ching) overdraft fees you then pay to the bank. Bouncing checks on purpose is a profit center for banks. Shady, right? If you think this is paranoid thinking, note that according to research by the Pew Charitable Trust, “more than 2 in 5 banks rearrange transactions in a manner that maximizes overdraft fees.” Or, for some really interesting reading, Google the Wells Fargo account fraud scandal.

It doesn’t have to be this way, though. While banks like to point out that they offer overdraft protection coverage, the majority of people charged an overdraft fee don’t think they ever opted in for the service, meaning their check or ATM withdrawal should have simply been declined (Pew Charitable Trust). Of course the burden of this type of overdraft falls primarily on the most financially vulnerable among us – easy pickings for banks. What to do? Require banks to either post transactions in chronological order or prohibit banks from posting transactions in descending order from highest to lowest. This is what House Bill 1471 would do.

So when Gov. Sununu vetoes the minimum wage increase, get angry. And then get active supporting these two bills. It’s not just the minimum wage that needs fixing.

(Craig Thompson is a farmer, state representative and candidate for Executive Council District 2.)