The Hidden Costs of Payday-Alternative Apps in Tampa - OppLoans

The Hidden Costs of Payday-Alternative Apps in Tampa - OppLoans The Hidden Costs of Payday-Alternative Apps in Tampa The Hidden Costs of Payday-Alternative Apps in TampaInside Subprime:  September 3, 2019By Jessica EastoAccording to federal reports, the percentage of unbanked Tampa area residents is at a six year high (8 percent), while almost 19 percent are underbanked. When people do not have access to accredited financial institutionsâ€"either because they don’t qualify for traditional products or because they lack physical access to such institutionsâ€"they frequently turn to “alternative” financial products, such as payday loans, which are frequently risky and predatory.A local news station noticed the increase in a new class of financial products that target Tampa residents, such as apps and digital wallets that market themselves as alternatives to payday loans. The news station decided to investigate. What they found is that these payday-alternative apps often come with very little oversight and hidden costs. In some cases, they even use shady tactics to target vulnerable communities.H ow do these apps work? Some of them offer customers early access to their paychecks in exchange for “optional tips,” like you would give a server in a restaurant. Other apps claim to help customers set up accounts and credit cards for a monthly fee, targeting those who don’t qualify for a traditional bank account or credit card, either because they don’t have enough money to maintain one or qualify, or because they don’t have a social security number (some of these apps let customers use tax identification numbers instead of social security numbers).  The problem, according to the report, is that there is not a whole lot of transparency with these apps.  There is currently an investigation underway by the New York State Department of Financial Services that is looking into the tipping model, since some say the tip is not actually “optional,” as those who don’t tip don’t get as much credit as those who do. Aaron Klein, a Brookings Institution expert on banking regul ation and technology, told reporters, “If something is said to be optional but is actually in fact required, that’s a problem.”  It was discovered that a different payday alternative app was marketing itself to parishioners at a Hispanic churches in the Tampa Bay area, a group of people who are disproportionately affected by being underbanked. According to federal data, 28.9 percent of Hispanic Americans were underbanked compared to 14.1 percent of white Americans in 2017. What’s more is the company who runs the app donated to churches in exchange for being able to market the app to their parishioners, which seemed like a conflict of interest to consumer advocates. In some cases, the company even paid pastors to do “research” for it.Experts urge customers to only trust their money to banking institutions that are FDIC-insured, which means that if the bank goes under for some reason, your money is still protected. Many of these financial apps are not FDIC-insured.Learn mo re about payday loans, scams, and cash advances by checking out our city and state financial guides, including Florida, Tampa, Jacksonville, and Miami.Visit  OppLoans  on  YouTube  |  Facebook  |  Twitter  |  LinkedIn