Profit from the Working Poor with the Predatory Lending Association

November 13, 2007 4:16 PM

The Predatory Lending Association takes a comic look at the dark practice of payday lending. Just when you thought charging 391% interest wasn't legal. This is from the same folks that created WalkScore.
posted by commonmedia (40 comments total)

And with the swelling rolls of the working poor, this is a growth market.
posted by absalom at 4:21 PM on November 13, 2007

Interestingly enough, Manitoba is holding hearings on payday loan outfits, and considering regulating the interest rates they charge. Been slow going to start, but it got more interesting this week with the head of Loans 'Til Payday defending interest rates of 700% or greater this week.
posted by never used baby shoes at 4:25 PM on November 13, 2007 [1 favorite]

So, guy on the street with a couple of goons with bats, he’s a loanshark. Folks who charge enough interest to take your home away from you, they’re businessmen.
Yeah, I think I’d rather have my legs broken.

“Myth: The government should regulate predatory payday lenders.
Reality: Although it is true that our government regulates some free market activities such as prostitution and drug abuse, payday lending is fundamentally different because it is a financial service.

Myth: Payday lending is comparable to selling yourself into slavery.
Reality: Although there is a market need for slavery, people do not choose to sell themselves into slavery. Free choice is the difference between payday lending and slavery.”

It’s funny cause it’s true.
posted by Smedleyman at 4:27 PM on November 13, 2007 [1 favorite]

I've always wondered how people that own these businesses sleep at night. Oh yeah, on a giant pile of money with several beautiful women.
posted by zzazazz at 4:32 PM on November 13, 2007

This is delightfully tongue-in-cheek while remaining surprisingly educational. And the photos are so cute in that happy-go-lucky educational pamphlet way.
posted by mek at 4:35 PM on November 13, 2007

I've always wondered how people that own these businesses sleep at night.

How about the people that work at these businesses? Can you imagine how grindingly awful it would be to see the same people come in month after month, visibly poorer (i.e. larger ragged holes in clothing, gaunter countenances, etc) each time? I don't know about anyone else, but by the second time I saw someone I'd want to tutor them in how to manage their finances so they don't have to come there.

I'd rather work a mind-numbing conveyor belt job.
posted by DU at 4:49 PM on November 13, 2007

If the victims of payday lenders weren’t stuck in all those lousy jobs, they could at least hope to move up a notch and become the victims of the sub-prime mortgage guys. That way they could loose even more money.
posted by Huplescat at 4:55 PM on November 13, 2007 [2 favorites]

I'd rather work a mind-numbing conveyor belt job.

I've done a few of those. You either develop the ability to spend hours on end amusing yourself in your mind or you go insane. I used to create Vampire: the Masquerade characters with really flesh-out backgrounds...
posted by Pope Guilty at 4:56 PM on November 13, 2007 [1 favorite]

"Q: Are 20 payday locations near one military base too many?
A: No. Here we see Maxwell-Gunter AFB with 40 active lenders. The first 8 are shown below. Click here to see more on Google Maps."
posted by Pope Guilty at 4:58 PM on November 13, 2007

This is a great site. I just worry about the Jon Stewart problem: that irony doesn't really solve anything.
posted by sy at 4:59 PM on November 13, 2007

Burns: Are you acquainted with our state's stringent usury laws?
Homer: Usury?
Burns: Oh, silly me! I must've just made up a word that doesn't exist.
Smithers: You have any collateral?
Burns: Oh, Smithers, let's not be so cold. His spirit is my collateral. Just sign this form, and the money will be yours. Muhahahahaha... Ahem. Sorry, I was just um, eh, um, thinking of something funnyn Smithers did today.
Smithers: I didn't do anything funny today.
Burns: Shut! up!
posted by Effigy2000 at 4:59 PM on November 13, 2007 [2 favorites]

Its costs a lot of money to be poor.
posted by Huplescat at 5:05 PM on November 13, 2007 [7 favorites]

There's a payday loan place 2 doors down from where I work (sigh, small businesses). A common thing I've seen and been depressed by is the mothers with 2-3 kids in the back of a car who parks 6 store fronts away, so she's around a corner and the kids can't see where she goes in to. At least that's the motivation that I infer as I end up watching her walk into the payday loan spot with 2-3 parking spaces open in front.

On the plus side, seeing that happen for the 4th time was depressing enough that I stopped getting a sub for lunch every other week, so now I don't need to walk that route.
posted by nobeagle at 5:10 PM on November 13, 2007

The "poor finder" is pretty off. It says there are two liquor stores near me, and of course liquor stores are only in poor neighborhoods. (Maybe because I'm in Pennsylvania, where the state owns all the liquor stores.) One is actually a Mercedes Benz dealer. And that gun shop downtown? Actually the office of the Bureau of Tobacco and Firearms. Ok, blame Google.
posted by ALongDecember at 5:13 PM on November 13, 2007

Well, you can get further wth irony, and a gun, than you can with just a kind word.
posted by Smedleyman at 5:32 PM on November 13, 2007 [1 favorite]

What do the people who need money do if they can't get a payday loan? Or are the people who get them generally making unnecessary purchases with these terrible loans?
posted by Mayor Curley at 5:45 PM on November 13, 2007

Or are the people who get them generally making unnecessary purchases with these terrible loans?

Most likely, some are. (Cockeyed.com's anecdotal article on distance between check cashing places and liquor stores or bars.)
posted by fings at 5:55 PM on November 13, 2007

Its costs a lot of money to be poor.

That's absolutely true. It's pretty fucked up.

But what kind of system would you set up instaid for people living month-to-month who do have financial emergencies? Should there be a state lender of last resort? Maybe social services would take over their finances until they paid their debt?

What kind of alternative would you propose?
posted by delmoi at 5:57 PM on November 13, 2007 [1 favorite]

Most likely, some are. (Cockeyed.com's anecdotal article on distance between check cashing places and liquor stores or bars.)

That's idiotic. Just because people might live in the same area doesn't mean they're the same individuals. Besides, simply stating that "some" of the people using those services might be spending the money on booze dosn't solve the problem of what to do with the people who are genuinely fucked. Maxed out credit cards, bad credit, and a busted car. What would you suggest someone do? Start taking the bus until they can save their pennies for car repairs?
posted by delmoi at 6:05 PM on November 13, 2007 [1 favorite]

Yeah, I wasn't all that impressed with the "poor finder"-- it includes among the liquor stores "We're Nuts Wine & Cheese" which is a hoity-toity imported cheese, gourmet biscuit, by-appointment-to-her-majesty-the-queen exotic jam, $90-Barolo (to name but one in my price range every now and then when a special occasion rolls along) peddling place.

They do, happily, have a military discount though.
posted by Hal Mumkin at 6:30 PM on November 13, 2007

Otherwise quite amusing though.
posted by Hal Mumkin at 6:30 PM on November 13, 2007

Maxed out credit cards, bad credit, and a busted car. Start taking the bus until they can save their pennies for car repairs?

Americans? Taking the bus? You ... you monster!
posted by enn at 6:53 PM on November 13, 2007 [3 favorites]

But what kind of system would you set up instead for people living month-to-month who do have financial emergencies?

One of the banks here is running a program with a charity to offer small loans (up to $3k) for people who do not qualify for normal credit. The examples they used were single mums on welfare.
I understand it is suitable for emergency needs (OMG my car needs a new transmission and I'll lose my job if I can't drive) and a 1st world version of micro credit (if I had a freezer I could buy bulk meat at half the price the local butcher sells it.)
It is currently only available in a few areas, but it looks promising.
posted by bystander at 6:59 PM on November 13, 2007

We used to have laws against this but the GOP thought that they restricted commerce. They really have no end of shame when it comes to stomping on the little guy and minorities. If they could make slavery legal again I think they would. It's good for the economy you know, and those black folk were better off under slavery with caring slave masters to attend to their every need, don't ya' know.
posted by caddis at 7:28 PM on November 13, 2007 [1 favorite]

Well, at least we have one presidential candidate who knows all about these kinds of operations. And he's a front-runner now, too!
posted by hexatron at 7:44 PM on November 13, 2007

I've often wondered how the rates and fees these outfits charge can stay so high when there are so many players in the market. Why doesn't competition bring it down to a less punishing level?
posted by Horselover Fat at 7:47 PM on November 13, 2007

hexatron, what are you saying (click your so called link)?
posted by caddis at 8:13 PM on November 13, 2007

I've often wondered how the rates and fees these outfits charge can stay so high when there are so many players in the market. Why doesn't competition bring it down to a less punishing level?

Two reasons I can think of:
One is these places prey on people that are desperate and often not aware of their options. These people are unlikely to shop around in the same way I shopped around for options when I wanted a mortgage.
Also, loan sharking is not always the unlimited money tree that some people make out. A significant percentage of borrowers will default. The difference between a loan shark and a bank is that the bank will loan money at low interest to low risk borrowers and refuse the high risk borrowers (according to it's own definitions). A shark freely loans money to everybody at the same high rate, hoping that the massive interest will make up for the high rate of defaulting.
This doesn't always work out as planned. Several finance companies here in New Zealand are in trouble due to bad debts.
posted by AndrewStephens at 8:19 PM on November 13, 2007

Avenger's economic theorem #238: The number of Payday Loan Services and Pawnshops rises proportionally with the length of a Republican administration.

Vote Hoover in '32!
posted by Avenger at 8:35 PM on November 13, 2007

Well, this sounds pretty excessive, but I have to point out, it's hardly fair to calculate yearly interest rates for loans that people take for a few days. It's true that there would be no business at all in giving one-week loans where the yearly interest rate works out to something like what you'd get for a multi-year mortgage. So yeah, this should probably be regulated, but the interest rate will always be very high when you calculate it for a whole year.
posted by Joakim Ziegler at 12:09 AM on November 14, 2007

But what kind of system would you set up instaid for people living month-to-month who do have financial emergencies?

I can tell you what used to fill that gap - pawnshops. Pawnshops are proverbially cruel symbols of quashed dreams and desperation, and they're infinitely more just than these gleaming, nationally-franchised, 300%-interest mother-rapers. With a pawnshop, you can get emergency cash, pay back something not ludicrously far off from what you borrowed, and walk away free and clear. The loansharks tell you you can have the money right now, there's no chance of losing grandmom's ring yet, just look at the shiny facade and keep making interest payments until you win that twenty-million-dollar lottery prize you spend $100 a month on.

Pawnshops are an embarrassment and should all be bulldozed the second we get the national microloan system set up. But as the laws keep being weakened in the name of commerce, an existing social evil is being crowded out by something much worse.

(Educated middle-class college-town liberal MeFite, former Unskilled Labor I temp)
posted by ormondsacker at 12:19 AM on November 14, 2007

Its always struck me as funny how the churchies forget this particular part of the jesus schtick.
posted by srboisvert at 2:14 AM on November 14, 2007

I've often wondered how the rates and fees these outfits charge can stay so high when there are so many players in the market. Why doesn't competition bring it down to a less punishing level?

The theory that competition lowers prices to the consumer seems to fall-apart once you get into areas where "need" replaces "want" in terms of consumer motivation.
Once a captive market is established, where consumers must purchase services, service-providers will tend to mirror each other, in terms of pricing, rather than risk the business by embarking on a race to the bottom, pricing-wise.
See "healthcare insurance"

In the past year, these places have begun popping-up like dandelions along the main drag of the small city I live in. Blunt testaments to the failing economy here.
posted by Thorzdad at 4:22 AM on November 14, 2007 [1 favorite]

caddis writes "It's good for the economy you know, and those black folk were better off under slavery with caring slave masters to attend to their every need, don't ya' know."

The premise of George Fitzhugh's 1857 apologetic for slavery, Cannibals All! or, Slaves Without Masters, ferevently and unironically argued precisely this.

He pointed out that Northern factory workers were disposed of without pension or relief as soon as they were unable, because of age, infirmity or a general turndown in the business sector, to continue to make a profit for the owners of capital.

In contrast, he claimed, Negro slaves benefited from a beneficent paternalistic system that not only provided for them in the bad times, but kept them from licentiousness or libertine ways when in times of prosperity.

Seeing the Southern agrarian economy as a more feudalistic system of ties of mutual responsibilities been master and slave, similar to those (purportedly) between feudal lord and peasant, Fitzhugh argues that it is the slave who in the end is most free, free from worry, free from doubt, free from the vexations of having to plan his own course in life and provide for himself.

The Northern system, Fitzhugh says in contrast, is "cannibalistic", in that it encourages owner not to form a lasting (fuedal) bond with his employees, but instead to extract every ounce of labor from the worker, down to the marrow-bones, and then abandon them for new employees from the pool of immigrant labor in the North.

We will never know if Fitzhugh would have taken satisfaction from the 20th century Marxists who while repudiating his racism, agreed with his critique of the capitalist system. Presumably, not once those Marxists (and non-Marxist too, of course) began agitating for the vote for the sharecropping sons of slaves who worked the farms of the South after the 13th Amendment destroyed Fitzhugh's glorious paternalistic plantation fantasy.
posted by orthogonality at 4:55 AM on November 14, 2007

It's true that there would be no business at all in giving one-week loans where the yearly interest rate works out to something like what you'd get for a multi-year mortgage.

Credit card companies seem to be doing just fine lending money at 20% APR or less.
posted by schoolgirl report at 7:40 AM on November 14, 2007

“Its always struck me as funny how the churchies forget this particular part of the jesus schtick.”

Actually, couple of ministers and priests in Chicago working on fighting this (among other things, liquor and cigarette ads near schools in poor neighborhoods, etc, etc).(I’ll grant a lot of JesusCo, MosesCo, BuddhaCo, et.al organizations are looking the other way and just collecting donations for mouthing platatudes)
They - the protester crusading minister types - get about zero play in the press though and really have to work to get arrested. I’m not milking stereotype here, but there are, really, a lot of Polish, Hispanic, Italian and Irish Catholic cops in Chicago. And one priest in particular really has to bust his ass to get arrested for protesting stuff.
In part because he’s constrained by his pacifism and the tenets of his religion (he’s not going to bust store windows or jack someone in the face). Meanwhile, everyone who knows him knows he means well and don’t want to arrest him, especially don’t want to get him sent to county, so you’ve got this non-violent, activist guy trying to get arrested by good Catholic cops who would overlook it even if he did punch someone in the face. So he’s got to be creative. Because pretty much the only time he gets press is when he is arrested. And then of course the department looks like a bunch of fascist gestapo assholes (not that there aren’t those on the force, but not so much as a whole) and the prosecutors get all kinds of letters telling them what dicks they are and how they’re going to hell, etc. meanwhile, they were going to drop the charges in the first place because the payday loan places don’t want the bad PR even if the guy did bust out a window or something.

Really, it’s screwy all around. But it does prove that freedom of speech is useless if you’re marginalized.
posted by Smedleyman at 10:20 AM on November 14, 2007

Not all that different than the Student Loan Industry (aiming for the 18-25s) or the credit card industry passing out plastic to incoming college freshman) or the Sub-Prime Mortgage lenders (aiming for the 25-50 year olds) or the reverse mortgage industry (Seniors) or the... well I could go on but you get the point.
posted by Fupped Duck at 4:09 PM on November 14, 2007

Oregon recently obliterated the market by enacting a 36% APR max on all types of loans, including payday places. It also added restrictions that forced 1-week loans to only last for 2 weeks max.

My little town in the past year had over a dozen payday loan places pop up and every single one of them is now gone (which is a very good thing).
posted by mathowie at 10:04 PM on November 14, 2007

It's always struck me as funny how the churchies forget this particular part of the jesus schtick.

Agreed. And it ain't solely a Jesus schtick, as the Hebrew Scriptures are rife with prohibitions barring usury and the loaning of money at interest generally:

And if thy brother be waxen poor, and fallen in decay with thee; then thou shalt relieve him: yea, though he be a stranger, or a sojourner; that he may live with thee. Take thou no usury of him, or increase: but fear thy God; that thy brother may live with thee. Thou shalt not give him thy money upon usury, nor lend him thy victuals for increase. - Lev 25:35-37

But what do we get here in the States instead of, say, a tightly orchestrated push for a constitutional amendment barring loaning-at-interest? A (somewhat bizarre and incredibly telling, in my opinion) obsession with the handful of scriptural prohibitions regarding weiners and butts. And that bit about witches not being suffered to live, though I guess we've tempered the interpretation and, uh, "execution" of that teaching of late. Spinoza was right: Christ, what a bunch of assholes.
posted by joe lisboa at 11:26 PM on November 14, 2007

Fitzhugh was not the only one to make that argument (although he may have been the first, but I am lacking background here). This is an argument that has refused to die even until this day with some slavery justifiers using just that argument in a vain attempt to explain why slavery wasn't so bad. It boggles the mind.
posted by caddis at 4:35 AM on November 15, 2007