Financial services prey on the LGBTQ community in two ways. First, predatory financial products and schemes such as check cashing, payday loans, and overdrafts can extort high fees from users. Second, predatory marketing and attempts to ingratiate financial services groups to the LGBTQ community at events such as Pride parades, banks have revealed their interest in the LGBTQ as a market for its services. But the LGBTQ community can do better than traditional financial services: we can start our own.
Predatory products take advantage of consumers economic vulnerabilities in order to reap massive profits. Most often they take advantage of the needs of the most vulnerable for cash today for necessities, overdrafts and payday loans for example. Even subprime lending products may be thought of as predatory, by raising interest rates and fees for financially precarious individuals.
LGBTQ consumers, given their particular risks for poverty, financial, and credit issues, are victim to such predatory financial products more often than their more economically secure peers, and are also more frequently unbanked or underbanked. This leaves them vulnerable to other preadatory products, such as check cashing or prepaid card issuers, who also charge high fees for their services.
The high cost of the fees and interest for these products sap the funds which LGBTQ consumers could be better using for their own needs. This not only benefits the individual, but their community as well as it enables the funds to be put to economically productive use in stores and consumption, as opposed to wasted in pointless fees.
A financial institution offering outreach to LGBTQ individuals might help those among unbanked and underbanked groups enter into more conventional banking services. It may also help reduce the amount of fees and interest which LGBTQ consumers are subject to as a result of alternative financial products. Lastly, it may help put more money back into the communities where those individuals reside, through the consumers productive spending.
Numerous financial services groups and philanthropies make donations to LGBTQ organizations and contributions to Pride events, where they advertise their services and generate goodwill within the LGBTQ community. Major credit card companies issue cards emblazoned with rainbows, allowing LGBTQ consumers to show off both their pride and their brand loyalty. Why? Because LGBTQ consumers are a growing market.
Increased social and economic recognition is improving the conditions of LGBTQ consumsers, and financial services groups and numerous others are poised to take advantage of increased spending power on the part of our community. But their intentions are to use their share of our earnings to generate investor and financial institution profits, not improve the wellbeing of our communities.
An LGBTQ financial services group can ensure that the benefits of growing LGBTQ economic and social wellbeing are not dissipated into the “free” market but instead channeled productively to create a virtuous cycle of sharing, giving, and growth.