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The Alternative Financial Services Industry

The alternative financial services industry (AFS) consists of the growing array of financial service providers operating outside the system of federally-insured financial institutions. Check cashing outlets and payday lenders, pawn brokers, title pawn/lenders, rent-to-own stores, and subprime mortgage lenders are among the growing number of AFS businesses. More expensive and less regulated than traditional financial institutions, the AFS industry constitutes a major source of credit and banking services for low-income and working poor consumers, residents of minority neighborhoods, and individuals with heavy debt burdens or less favorable credit histories.

In this AARP Public Policy Institute Issue Brief, Sharon Hermanson and George Gaberlavage offer an overview of the AFS industry, discuss its growth, and address policy issues affecting consumers. (16 pages)

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