Innovative banking products are often used to fuck people over. Regulators need to be cautious. Maybe these guys should have gotten a traditional credit union established first. After they had shown that they could competently established a viable union they could have started innovating. I'm sure we aren't getting the full regulatory story.
Sounds like they are quite cautious: We wouldn't want more people getting their hands on debit cards, where would it lead? Better to stick with the safe, established status quo: What if no one volunteers to give us the "full regulatory story" and we have to make a decision based on the information we have? Banks, like car washes and coffee shops, can harm customers by offering bad products that customers mistakenly believe will benefit them. Such customers pay for their mistakes and, maybe, learn not to repeat them. Regulators are actively harming people, and incentives are often aligned so that the problem is perpetuated. In my view, we could do with a good deal less banking regulation.Regulators need to be cautious.
After an 18-month application process, regulators let the Internet Archive Federal Credit Union open in 2012, but with restrictions that did not allow it to offer basic banking products, such as debit cards and online banking.
The credit union aimed to provide financial services to poor immigrants, and its opening was attended by the Mexican consul general in New York. But Mr. Modell said that with the restrictions placed on it, the credit union would only have been able to give out what amounted, in practice, to predatory payday loans, which he did not want to do.
Currently, the Office of the Comptroller of the Currency, which regulates banks, has such stringent underwriting standards that it costs more for banks to meet the paperwork-intensive requirements than they could reasonably charge for such small sums. Indeed, the regulations have in practice (though not in rule) banned banks from offering small credit to a broad range of people.