Mar 8, 2016.
What does it say when a former hip hop innovator, who now makes money off the backs of poor people with his predatory financial products, declares himself “to the left of Bernie Sanders,” and then endorses Hillary Clinton?
We don’t endorse or attack candidates at PBI. We want everyone thinking about public banks–including public consumer banks like postal banks–and we think that unchecked privatization of financial services and a huge shareholder profit motive hurt governments, communities, small businesses, and people. We feel the same way about predatory payday lenders as we do about the Wall Street firms robbing billions of dollars from our cities and states. In both instances we ask: Why do we allow these private entities to run so many things?
Half of America is broke. That’s the field the presidential candidates are battling in. So it was interesting when former hip hop innovator and current financial services entrepreneur Russell Simmons endorsed Hillary Clinton’s candidacy for president. Simmons cofounded Def Jam Records, has been a well-known organizer for prison and drug law reform, and has supported Dennis Kucinich and Bill de Blasio.
But Simmons is also the owner of a financial product firm, and his pre-paid debit card–something almost exclusively used by poor people–is called one of the most predatory in the business.
The Rushcard, which Jia Tolentino at Jezebel called “a labyrinth of jacked-up transaction fees for the privilege of getting their paycheck two days early,” is a particularly egregious piece of plastic. Tolentino writes:
Russell Simmons, who in 2011 published a book called Super Rich: A Guide to Having It All, has long defended Rushcard as “empowering” for black and low-income communities, going so far as to say that he will continue to “fight this fight, provide a voice for the voiceless and seek ways to provide financial freedom to those in need.” But Rushcard has become notorious for its fine print contradicting its big promises: it’s got a $20 activation fee, a $10 monthly fee, transaction fees up to $2.50. It doesn’t actually help build credit the way it advertises, it reportedly leaves its users little recourse in the case of identity theft, and its users, when they sign their contract, lose their right to sue under any possible condition.
Prepaid debit card fees like those found in Simmons’s products are the bottom-feeders of the bottom-feeders. They are less-regulated than bank accounts, and Business Times lists several of its fees–the kinds of fees that chip away at the poor’s overall financial standing as they try to manage their money.
RushCard Pay As You Go card charges a buck a pop, up to $10 a month. RushCard also has a tiered selection of flat monthly service fees ranging from $5.95 to $9.95 in lieu of per-swipe fees.
This is a specific instance where not having access to a bank sticks you right in the wallet. Rushcard even charges you for not using your card. Jamelle Bouie of Slate explains further:
RushCard customers pay to withdraw from ATMs, to make point-of-sale transactions, to make signature transactions, and to receive paper statements. They also pay if their account is dormant.
On top of that, the card is unreliable and has denied users access to their accounts for days. So much for the free market solving financial access better than public entities.
Since at least 2014 there have been waves of efforts to end payday lending and other predatory financial services like pre-paid and high-fee debit cards.
But it’s hard to remove something without building an alternative, especially where financial services are concerned. The unbanked and underbanked simply have no place else to go. And with nearly half of all Americans unable to withstand a $500 emergency, lending and payday advances simply must be part of the package. Of non-profit entities touted as alternaitves, currently only the U.S. Postal Service has the huge economies of scale necessary to provide very low-interest loans, absorb the risks of doing so, and make a profit–which it would, small but solid.
In his essay explaining why he supported Clinton, Simmons wrote: “My personal politics are even to the left of the platform that Bernie Sanders stands on today.”
It is difficult to believe this when Simmons runs a business that is embraced by Darrel Issa and opposed by Elizabeth Warren–a business that would surely not be around in any actual “left” government–or any sensible government, regardless of ideology.
In a slightly better world than the one we live in now, Hillary Clinton would, at the very least, politely thank Simmons for the endorsement while vocally pointing out that his business practices hurt poor people. That’s the world we’re working for, no matter who gets elected.