Alternative Financial Services

Alternative financial services are services and products marketed toward lower-income households and have the stated purpose of [Page 95]facilitating payments to utilities, supporting cash transfers, cashing payroll checks, and providing short-term credit. These products are directed toward individuals who are either unbanked or underbanked, or who have some difficulty in obtaining traditional sources of short-term credit. The alternative financial services industry has grown dramatically over the past several decades. While pawn loans, money orders, and money transfer services have a very long history, most of the other products and services, such as payday loans and prepaid debit cards, are more recent inventions. Significant debates exist among consumer and industry advocates as to whether these various services, particularly short-term credit, are actually helpful or harmful to ...