Despite what you may have heard before, nobody hates saying “I told you so.” One of the few universal truths about people is that we all love being right. Some of us may love it more than others, but nobody hates it.
Needless to say, I’ve never hated being right. In fact, I love it a bit more than I probably should, so a couple of weeks ago when I read that some South Carolina lawmakers were calling for a ban on payday lending less than a year after the passage of last year’s payday lending regulation bill, my first reaction was a hearty pat on my own back. In a post from February of last year, I called the then proposed regulation “so favorable to the industry that it should’ve been co-sponsored by Advance America.”
I’d gloat about being right some more, but really, anybody who’d bothered to read up on the bill last year would’ve been forced to come to the same conclusion.
What has certain well-intentioned SC lawmakers in such a tizzy that they’re actually pushing for a real ban on the industry is that last year’s law, designed to place some very loose restrictions on what can only be described as legalized loan-sharking, has a huge loophole allowing payday lenders to reclassify themselves as “supervised lenders.” Changing their classification allows the lenders to extend larger loans with longer repayment terms, thereby defeating the whole purpose of the regulation.
Considering that last year’s bill was crafted in such a way that it resembled the way foxes might draft legislation regulating the proper storage of hens, I doubt there are that many people surprised by this outcome. At least, I hope there aren’t. Of course, the obvious thing to do now, would be to ban the industry entirely, as 15 other states—including both our neighbors—have already done. Playing regulatory whac-a-mole with an unscrupulous business like payday lending seems like a bad idea to me. Still, anybody who expects that South Carolina might become the 16th state to ban payday lending is most likely barking up the wrong tree.
Two of the biggest reasons for that are Spartanburg’s own Sen. Shane Martin and Sen. Glenn Reese.
Martin, who supports closing the new loopholes but not banning the industry, is holding up a bill closing those loopholes because of an amendment put forward by Sen. Gerald Mallow, a Democrat from Darlington, which would ban the industry. According to the sponsor of the loophole-closing amendment, Sen. Wes Hayes, “There’s no way to take a vote on banning the industry because the Spartanburg senators are not going to take their names off the bill,” unless the Malloy amendment is withdrawn.
Sen. Glenn Reese, who apparently represents the Republican wing of the Democratic Party, said he isn’t even sure if there’s even a need to close the loophole, which he refers to as nothing but “a rumor.” Reese said he would consider lifting his opposition to the bill if he got assurances that Malloy’s amendment to ban the industry would be tabled.
I doubt it’s news to anyone reading this that Spartanburg is the corporate home of the largest payday lending company in the United States, Advance America. That in itself might be the explanation for the Spartanburg Legislative Delegation’s fierce opposition to an industry ban, but it doesn’t tell the whole story, not by a long shot. The rest of the story is that Advance America’s founder, George Dean Johnson Jr, is a Spartanburg favorite son. This well-known, but never talked about fact is at the heart of the local debate over payday lending.
In Spartanburg, saying negative things about the man whose name is likely on more deeds than any other name in the county isn’t likely to win you kudos from anybody on the left or the right, but the practice of payday lending is despicable, and the fact that a reasonable portion of Johnson’s immense fortune came from the business is equally despicable. I don’t give a damn how many breweries and corporate headquarters he brought into downtown, or that we’re about to open a business college downtown with his name on it, or how much money he’s given to our local nonprofit organizations. Just because a person uses some of his ill-gotten gains for good doesn’t wipe the “ill-gotten” part away.
As a community, we are shackled to this industry in a way that turns my stomach, and it is shameful that more of us don’t speak out against it.
Total revenues for Advance America in 2009 were $173.24 million, beating analysts expectations by more than $3 million, and though other companies have seen their balance sheets fall off a cliff since the recession, Advance America’s numbers were only down 1% from 2008. Bad times for working families means good times for the payday loan industry. Profiting on misery is the name of the game.
Taking a look at a profile of Mr. Johnson over at USC Upstate’s website, I see that he’s a member of Spartanburg’s Episcopal Church of the Advent. I’m assuming that makes Mr. Johnson a Christian. Sens. Martin and Reese also claim to be Christians, so I thought it might be a good idea to check out what the Bible has to say on the subject of lending. Turns out, things don’t look so good for supporters of the payday lending industry.
There are plenty of quotes to go around, but they all read more or less like this one, Exodus 22:25 “If you lend money to My people, to the poor among you, you are not to act as a creditor to him; you shall not charge him interest,” and as far as profiting from that unfair lending we’ve got Proverbs 28:8 which reads, “He who increases his wealth by interest and usury Gathers it for him who is gracious to the poor.”
I’d call the three of them hypocrites, but really, what’d be the point?
Maybe what I should do instead is run over to my nearest Advance America, which according to their website is less than 4 miles away, and get myself a short-term loan with a low interest rate of only 391.07%. After all, I’ll be supporting a local business with my money right?
Sarcasm aside, I am sickened by Spartanburg’s role in keeping this predatory industry alive in South Carolina. We’ve allowed well-greased local politicians and an amoral business tycoon to hijack our community in more ways than I could possibly list in one column. Payday lending has brought us many things in our community that we’re all proud of, but it’s come at a cost that I believe is too high. Millions of dollars collected from the poor and ignorant flow into Spartanburg, and nobody seems to care. That money has an interesting way of silencing people who might otherwise be more vocal.
Payday lending is Spartanburg’s shame, but our silence is far worse.
Christopher George
When you say Glenn Reese represents the “Republican wing of the Democratic Party”, did you actually mean the “Democratic wing of the Democratic Party”? Hmm, what do I mean? Well you seem to focus a lot of your anger on George Dean Johnson without any mention of Billy Webster, the Advance America co-founder and current CEO. See he’s one of Spartanburg’s most prominent Democrats, having served in three appointed positions within the Clinton Administration including being asked by Clinton personally to be his scheduling advisor. He’s given big bucks of his “despicable” fortune to the South Carolina Democratic Party, the SC Senate Democratic Caucus, SC House Democratic Caucus, etc. But he’s not the only example to bolster the argument that Glenn Reese is simply representing the “Democratic wing of the Democratic Party”. How about Steve Benjamin, the 2002 Democratic candidate for Attorney General and all-but-certain next mayor of Columbia when the election takes place this month? It’s been said of him that he’s South Carolina’s version of Barack Obama–well he serves of the board of Advance America. Well, he did up until a few months ago when he resigned to serve his political interests. And how about Joe Erwin–the former two-term chair of the South Carolina Democratic Party and Obama campaign advisor. His advertising agency Erwin-Penland in Greenville handles the marketing for a variety of payday lending corporations including Advance America. They were doing this while he was serving as chair of the SCDP as well. I’d also invite you to do some research and see how much money the Advance America PAC and individual employees have contributed to state Democrats all across the spectrum to get the full story of what you are trying to get at with this column.
This isn’t a partisan issue for me at all. In fact, for the most part I find what passes for a Democrat in this state to be a bit laughable. Glenn Reese votes with the GOP almost as often as he votes with his own party, that’s why I said he represents the Republican wing of the Democratic Party. In fact, I think the only reason the local GOP hates him so much is because he won’t go whole-hog and just put an “R” beside his name. If he did, I think you’d see most of that criticism coming from the local right-wingers dry up overnight. You’re free to disagree with that assessment if you wish.
As far as Billy Webster, I think he’s every bit as despicable as George Dean Johnson. Maybe even more so. Johnson gets the attention in my piece because he’s the one with his name all over town, and in my opinion, people in Spartanburg are slow to criticize the payday lending industry because of all the other things George Dean Johnson has done for Spartanburg. I believe too many people’s principals fly right out the window when talk of the man largely responsible for funding their pet projects is on the table.
As far as arguing that the Democratic Party is just as deep in the pocket of the payday lending industry as the Republican Party, I agree wholeheartedly. In fact, I wrote as much a year ago in my first piece on this issue. Despite what you may think of me, I am not a Democrat. I am not affiliated with, nor could I imagine myself being affiliated with, the state or local party in any way. For what it’s worth, I have no love for the aforementioned Clinton Administration either. Without a doubt I am a progressive, and a pretty far-left one at that, but I have no ties to any party whatsoever.
Still, there are many Democrats and even some Republicans calling for us to ban this industry once and for all, and I support those calls wholeheartedly. I hope we do ban it, but in the meantime I will make you a promise. I will not endorse, support, or vote for any candidate who is either affiliated with, or has received money from the payday lending industry. That goes for every political candidate at every level. Also, if you do not support banning this industry, then I will not support your run for office.
I keep hearing about the evils of Payday lenders & Finance Companys. But the problem is where do poor people, people with no credit, or people with bad credit go to borrow a little money when they need it? Banks won’t lend to anyone who does not have real estate or an clear auto title. Then they want to loan large amounts with big payments that the low wage earner can’t afford. Solve the problem of where you can borrow a few dollars when you need it at a reasonable interest rate, and the check cashers will go away. As for the high interest rates, ask the payday lending industry how much they have to charge off as uncollectable each month. If people paid their bills or didn’t pass bad checks, then the interst rates could come down. When your family is hungry and there is no money to buy food, or your car is in the repair shop and there is no money to get it out, so you lose your job because you can’t get to work on time. Duke Power is about to turn the heat off. That is when you borrow the money and don’t worry about the interest rate. When all these do-gooders solve these problems, then they won’t have to worry about the payday lending industry. Because if you solve these problems, they will go out of business.
Credit unions already do this kind of lending.
Steve’s right. Also, I addressed this in my post from a year ago.
“A simple government-subsidized emergency micro-loan program through credit unions could be set up to take the place of the predatory payday lending business. A simple application process, with guaranteed approval for low-income borrowers, reasonable interest rates, loans with a limit of somewhere around $500, and terms which allow payments to be stretched out over several months would do a lot to help poor people while keeping predatory lenders from taking more money from them than they can often realistically afford.”
So there you go, the problem of reasonable credit for poor people solved without the exploitation of payday lending. Care to make another argument defending this industry?
It is sad that robber barons are still amongst us. Yes these individuals make exorbitant amounts of money using perfectly legal, but fundamentally unethical means to gather their wealth. As is also usually the case these people, know it is a good idea to contribute to their communities or to the political people who made their livelihood possible.
The simplest solution is simply educate people on finances, and just what debt is and what does it mean to someone’s bottom line. Few people understand that concept, and the way much financial marketing is done these days, consumers are told how much to pay each month, NOT how much it going to cost all together.
Then there is the political spectrum on our, the voter’s side. We could be more careful in whom we choose for office, deciding that we will not support candidates who either overtly support and promote predatory lending practices or accept covertly campaign funding from those who do.
I am totally with Chris on this. Yes pay-day lending has been “good” to Spartanburg in giving some backing growing projects here in the area, and they do provide jobs, but the cost to their customers has been very very steep. It isn’t a democrat or republican issue, it is what is best for the economic health of all of us issue.
A lot of this is simply demagoging. Payday loans are not intended to be annual loans that accumulate your stat of a 390% interest rate. In most cases it’s like a $15 fee for a loan of maybe 100 bucks that you’re supposed to pay back in two weeks–when you get your paycheck.
There is a market for this service. I’m not about demagoging business and getting all conspiratorial about wanting to shut down entire industries. I’m surprised Sylvie agrees with Oskar on this one…didn’t she say she was a “moderate Republican?” Come to think of it, when has Sylvie ever disagreed with a column written by a self-described progressive leftist?
Anyway–it’s interesting that the evil ones are the corporate CEO’s and the politicians but somehow no mention of the people that keep them in business–the customers. The people of the “progressive” ilk that claim to be oh so caring about the working poor seem to want to take away a service that many of them use to pay their bills or feed their children. But somehow the thriving of payday lenders is not their fault.
But I will say I’m glad to see Oskar so consistent in his opposition to all of this…I only hope he’ll take it a step further and agree to not patronize any business or facility in downtown Spartanburg that exists in part due to George Dean Johnson’s evil money…
“A lot of this is simply demagoging. Payday loans are not intended to be annual loans that accumulate your stat of a 390% interest rate. In most cases it’s like a $15 fee for a loan of maybe 100 bucks that you’re supposed to pay back in two weeks–when you get your paycheck.”
Yeah sure. Advance America made $173.24 million last year with a business model built entirely around charging $15 on a $100. You don’t really believe that do you? Here’s a link that might help you with that delusion you seem to be carrying around: http://www.responsiblelending.org/payday-lending/research-analysis/ There’s some pretty good stuff there. Probably not your cup of tea though.
“There is a market for this service. I’m not about demagoging business and getting all conspiratorial about wanting to shut down entire industries.”
Two things: First, every service I can think of has a “market,” be it contract killing or cleaning houses. Having a “market” for something isn’t an argument one way or another about whether or not that thing should be legal. Second, this industry you keep going on about only exists because the General Assembly legalized it in 1998. Prior to that, what payday lenders are doing now was illegal. I’m not sure on this one, and maybe you can help me out, but there were poor people prior to 1998 right? Seems to me they weren’t doing any worse before we allowed the vultures to start plucking cash from their already depleted neighborhoods, or were they?
As far as addressing the credit needs of the poor, I’ve already suggested a viable alternative in a previous comment. If our concern is helping poor people rather than profiting from them, it seems like the better way to go to me.
“But I will say I’m glad to see Oskar so consistent in his opposition to all of this…I only hope he’ll take it a step further and agree to not patronize any business or facility in downtown Spartanburg that exists in part due to George Dean Johnson’s evil money…”
It’s amazing how often I end up having to use this quote, but here goes: “A foolish consistency is the hobgoblin of small minds”–Ralph Waldo Emerson
First, I have no idea who Oskar is, but I think we can go so deep into that rabbit hole that I won’t end up doing anything at all in Spartanburg, business ties being what they are. I never said everything George Dean Johnson does is “evil.” I think rational people are perfectly capable of separating the causes he’s funded from the source of that funding, so no I think you’ll still see me at the library checking out books.
Does Spartanburg need to be more vocal in challenging the payday lending industry? Absolutely! My argument has been that we don’t challenge the industry largely because of George Dean Johnson’s status in the community. That’s what I have a problem with, people putting aside their qualms so that they don’t offend a business tycoon’s purse strings. I hate to say it John, but you appear to have missed the entire point of my piece.
No I got the point of your entire piece just fine. You are entitled to your opinions, even if they are kind of crazy and exaggerated in their paranoia.
It is interesting to see you dial back your condemnation of Johnson in your comment above though when faced with the challenge of standing by your original statements. Guess you choose RJ Rockers over principle huh?
How am I not living up to the challenge of my original statements exactly? At no point that I’m aware of did I call for a boycott on all businesses associated with George Dean Johnson. Nice try though.
Using the standards you’d like to try to hold me to, we should all probably avoid driving on the Interstate Highway System because of its association with Nazi Germany (incidentally, you might want to read that “foolish consistency” quote again).
I’m not trying to hold you to anything. You’re the one going bat sh*t crazy about how that man earns a living. To me you make it sound as if the guy is some sort of criminal for operating a perfectly legal corporation. If a gangster opened a bar with his blood money I probably wouldn’t patronize it. But you go ahead and enjoy all the businesses around town that have the stains of a guy who is such a despicable predator on the poor.
“I’m not trying to hold you to anything. You’re the one going bat sh*t crazy about how that man earns a living.”
Hyperbole much?
I agree with Chris on this, because I know what it is like to have to wonder which bill to pay, the grocery or the electric. In fact I just recently had my income seriously slashed. $15 can make a big difference in my budget at times. Say I needed 300 because my car just blew something up. I go to a payday loan place, borrow that three hundred off my 600.00 paycheck which needs to last for two weeks. Now I am $45 short when that paycheck clears, and I still have to buy gas for that POS car, and pay the water, and rent, and damned if the baby doesn’t have a cold and I have to fork out a doctor bill as well..so I go back to the payday place and do it all over again.
Thankfully I never actually walked down that particular road. Partially because I learned several years ago to save something out of every single paycheck to prepare for such scenarios. I recently had a $400 surprise of which I had a week to take care of…Guess what, that little bit every two weeks I had set aside over the past 4 months took care of the surprise, and my checking account didn’t bounce.
my soon to be ex once took out a loan from a piranha style lender for going back to school, those people were a nightmare. He couldn’t get a better lender because we had just gone through a bankruptcy (long painful story, I won’t bore you with there) The interest rate was compounded daily, and they were prone to hold on to your payment a day or two so they could sock you with late fees. When we paid them off, I had to get the pay off for the day, and overnight the amount. I was tempted to pay them in pennies, but the freight cost was almost as much as the payoff. I personally vowed to do without before using such companies ever again.
The simple concept of saving a few dollars for that inevitable rainy day is what can help many people avoid predatory bottom feeders like pay day loaners. I firmly believe simple financial education can help many people avoid scenarios where they find themselves at the door of a payday or title loan shop.
And if you think I make a lot of money, I don’t. And again, this has nothing to do with my political views. I say that I am a moderate because the far right scares me plenty, and I think the far left doesn’t have a clue. I exist on 2/3 of former income I once shared with my soon to be former spouse and do fret about how I am going to make it…like half of America.
I don’t bemoan big business or their contributions to our communities. Heck I work for one of the largest retailers in the country. I do find it highly problematic that businesses are allowed to exist and thrive that take advantage of the poor amongst us.
Well as a reader of stuff on this site, I’d still love to read a political column of yours one day, preferably one that answers these very pressing questions:
What is wrong with the Democratic Party that causes you to call yourself a Republican?
What is wrong with liberalism that causes you to call yourself a moderate?
I have addressed my political views on my blog.
There is nothing wrong with the Democrats any more then the Republicans, I just have tended to vote more Republican in the past. These days however I am finding more problems with the far right leaning of the republican party.
My issues with liberalism is the same with the issues of the conservatives, an unwillingness to consider benefits of another view or possible solution. Liberals want to help with social matters, but tend to not think practically. To them government offers all the answers. They also tend to take a we/us mentality when it comes to business.
Conservatives champion business, often at the cost of social issues or individuals. They can lack compassion, and sometimes their arguments on social matters clearly demonstrate that. They too want government to offer many of the answers, but more along the line of control and restrictions.
Both sides I have issues with, so cannot sit firmly in either camp, at least how I see things…therefore I am a moderate.
I may be writing stuff politically in the future, as the more I read, the more annoyed I get, especially as I can see solutions that aren’t even on the table
Side note….Just learned that the legislature is trying to cut funding to people with disabilities, and “State Rep. Tracy Edges of Myrtle Beach says he hopes federal aid will be approved to spare those programs. ” The complete article occurs here. http://www.thesunnew I am hopping mad, and have already emailed my local reps..
“Anyway–it’s interesting that the evil ones are the corporate CEO’s and the politicians but somehow no mention of the people that keep them in business–the customers.”
So, to clarify, demand for a product or service justifies any predatory business behaviors? There’s a demand for drugs that keeps crack on the streets, do you feel that it’s demagoguery to keep that drug illegal?
And when Georgia made it a felony to engage in payday lending, were they doing so because of a liberal bias? Or when the U.S. Congress limited payday lending to military personnel at a maximum of 36% APR (that is, less than a tenth of what a payday loan is, around the same rate as a high-interest credit card) and the Defense Department called payday lending practices “predatory,” it was demagoguery?
I’m not trying to bait you here, I’m just curious if you find the actions by the State of Georgia, the Congress and the Defense Department to be “progressive,” rather than rational.
What APR cap do you believe would be reasonable?
No Chris’ arguments against payday lending as “legalized loan sharking”, “spartanburg’s shame”, “despicable”, “ill-gotten”, etc. and just the general tone of the piece is demagoguery. But it’s what I’ve come to expect out of his columnns, so no surprise there. It’s just not something that average regular folks obsess about, but to each his own. It’s always fun to have these “black-helicopter” leftists around to get a good laugh now and then!
You didn’t answer a single one of my questions. I’m not saying you’re wrong, I’m just asking you whether or not these concrete examples of actions state and federal governments have done in relation to payday lending are also things you’d also characterize as demagoguery, and what you think a fair, just cap on APR would be.
He’s not interested in arguing the merits of the issue, Steve. He’s only interested in arguing about me. It’s kind of flattering really.
Demagoguery….is a strategy for gaining political power by appealing to the prejudices, emotions, fears and expectations of the public—typically via impassioned rhetoric and propaganda, and often using nationalist, populist or religious themes.
Chris you vying for political power??
Sorry…sometimes I just can’t help myself.
I’m running for President of my living room. My opponent, Clyde the Beagle, has a sizable lead in recent polling.
Yep, you decribed it well Sylvie.
Christopher George, absolute ruler of his PS3.
“When you have nothing new to say, is it normal for you to repeat yourself over and over?”
Good one! You should ask that of yourself…
Don’t flatter yourself, Chris. You should just be glad more than four people are reading your column this week.
And Steve, sorry to say you are conflating issues here. My comments had nothing to do with whether any legislative action is demagoguery. Where do you get that I’d want to opine on whether the actions of the Georgia or North Carolina legislatures are classified as demagoguery?
It seems you guys are only interesting in DEMAGOGING a legitimate industry and people who make money through legal means instead of presenting fair and accurate arguments.
380 page views for this page alone so far today, and that’s probably only up to date from about mid-afternoon. Don’t worry too much about my traffic. It’s doing just fine.
I’m going to go out on what is probably a pretty stable limb and say that the Spark is easily the most-visited local blog site in Spartanburg. Don’t let a little thing like hard numbers get in the way of your fantasy though.
“It seems you guys are only interesting in DEMAGOGING a legitimate industry and people who make money through legal means instead of presenting fair and accurate arguments.”
When you have nothing new to say, is it normal for you to repeat yourself over and over?
“And Steve, sorry to say you are conflating issues here. My comments had nothing to do with whether any legislative action is demagoguery. Where do you get that I’d want to opine on whether the actions of the Georgia or North Carolina legislatures are classified as demagoguery?”
Because what Chris is claiming SHOULD happen here is what has ALREADY HAPPENED in other places at the state and federal level. Since you’re making the claim, I’m asking you to clarify what you actually consider demagoguery. When the Defense Department made the same appeal Chris is making, and for the same reasons, were they being demagogues? Or were they calling for much needed reforms? And how, specifically, are the two appeals different?
The second part where I ask you what a reasonable APR cap would be is simple enough. You challenged the view Chris put forth, and I’m asking you — as a rational human being — what a fair limit should be.
Can you not clarify two relatively simple questions here on points you initially brought up?
Saying that the interest rates are upwards of 400% is not a fair assessment because to get that number, a borrower would have to renew their loan every 2 weeks for a whole year. Responsible borrowers pay back their loans like they’re supposed to, at the end of that 2-week short-term period, so it’s misleading to use such a high interest rate on these loans.
Teddy–you make too much sense for a blog like this.
that is assuming it is a normal or traditional loan, these are not. It is getting an advance on an expected paycheck and paying fees to get that paycheck early.
and the $15 per 100 is most likely a pretty low interest rate. Say someone borrow $350 from a payday lender. If someone is only making minimum wage they are earning less then $300 a week. They didn’t get anything at all extra, all they got was part of that paycheck early. There is no extra $350. When they do get their paycheck it goes to satisfy the loan and the fee and they get what is left.
Their gross pay for two weeks is around $580 (based on 40 hours at what I think minimum wage is), then you subtract taxes, lets say that is $80 for federal and state, leaving them with an even $500. They borrowed $350 of that original $580, and if we use the lowball $15 per $100 there is an additional 52.5 that must be paid to the lender. What is owed the lender is 402.5…if you do the math it works out like this….
gross pay 580- taxes 80-loan payback and fees 402.5=97.5 that has to last that person two weeks.
Anyone like that idea still??
Sylvie, maybe everything you said is true. But the answer then is, of course…don’t get a payday loan! Personal responsibility is what’s being left out of this whole argument on this blog (unfortunately).
personal responsibility is a big part this argument. People are simply trying to survive, and maybe they think the only way that they can be responsible for taking care of financial obligation is to use the scenario I just described. It could be that they’ve run out of options, the one left stinks, but they don’t see any other way.
I think that assuming the irresponsibility at just the feet of the lendee is in itself irresponsible. There can be more resources made available to help teach people sound budgeting. There can be more resources out there to help people meet those “WTF I gotta pay what for a new radiator?” moments and they make less then the cost of a new radiator every two weeks. There can be businesses who are willing to loan money..actual loans with decent terms that are comparable to people with more sturdy incomes. Individuals, churches, non-profits, government and private agencies and businesses can all help our neighbors who’s finances are in a bad way. There are many options infinitely better then fee based cash advances.
Yes, also many of the folks getting these loans are already responsible and pay the loan back in two or three weeks as designed with the small fee. A lot more than some people would have you believe.
Good try. You were close that time, really.
http://tinyurl.com/nkeefj
Here’s the cliffs notes for you:
“A full three quarters of loan volume of the payday lending industry is generated by borrowers who, after meeting the short-term due date of the loan, must re-borrow before their next pay period”
“Among the over 80 percent of payday borrowers who conduct multiple transactions:
Half of new loans at the borrower’s first opportunity (immediately or after a 24-hour or more waiting period where required).
87% of new loans are opened within two weeks, or generally before their next payday.
Only 6 percent of subsequent payday loans are taken out longer than a month after the previous loan was paid off.”
“Payday lenders generate loan volume by making a payday loan due in full on payday and charging a sizeable fee—now nearly $60 for an average $350 loan. This virtually guarantees that low-income customers will experience a shortfall before their next paycheck and need to come right back in the store to take a new loan. This churning accounts for 76 percent of total loan volume, and for $20 billion of the industry’s $27 billion in annual loan originations.”
I suppose by “many folks” you meant 25% of borrowers from the payday lenders huh?
Dude, your pretty transparent there.
I can cut and paste facts and figures from an interest site that is biased towards one side of the argument, too.
I realize you’ve got some sort of blind allegiance to ideology, but c’mon.
That’s it, attack the source of the information instead of refuting the information itself. You’re a pro dude! Well done!
Do you have answers to those questions yet, or are you just standing slavishly by that conservative ideology of yours whether you’ve got facts to back up your claims or not?
If all you’re going to do is keep going in the same circles, I’m going to have to move on. This is getting kind of boring.
“Yes, also many of the folks getting these loans are already responsible and pay the loan back in two or three weeks as designed with the small fee. A lot more than some people would have you believe.”
Which is why Congress passed a law to prevent such lenders from loaning money to people in the military? Because there was NO PROBLEM with how they do business? Because people in the military are inherently irresponsible? Please, explain this.
“Dude, your pretty transparent there.
I can cut and paste facts and figures from an interest site that is biased towards one side of the argument, too.
I realize you’ve got some sort of blind allegiance to ideology, but c’mon.”
This… heckling I’ll call it… actually has me feeling a little embarrassed for John now.
It happens all the time, actually. And it’s a fair assessment, because the payday loan companies offer a service where such a rate of interest can easily compound to nearly 400%. That’s how they make their money, because people stay in debt to these lenders and spend increasing amounts of money paying off the minimum payment while borrowing more. With a credit card, the upper limits have hard caps on them thanks to federal laws. That’s not the case for most people who take out payday loans.
It IS THE CASE for people in the military, because federal law limits the APR on those loans, as I explained above.
I’d like to see John address at least *some* of the questions Chris and Steve asked him. It’s got me on my toes.
I’m starting to doubt that’s going to happen.
The article touches on the fact that usury is unethical, and it’s unfortunate that it’s legal in our society. That problem runs so deep that it’s the cause of 99.9% of the financial woes of our nation in my opinion. Payday lenders charging interest is just as unethical as banks using fractional reserve banking, (where they can loan out 10 times or more then they are holding) only with in this case, it being done in the private sector, it’s even more open to criticism.
Legality doesn’t equal ethical, (duh) ..but the heart of the issue stretches further then has really been acknowledged. This debate is a microcosm of a larger debate about the ideology of economic practice in general. Where I stand on the issue is I don’t use banks, if I must borrow my only real options are family and friends, which I’m very fortunate to have, unlike some folks.
I joke that I have an FDIC mattress. lol
“The article touches on the fact that usury is unethical, and it’s unfortunate that it’s legal in our society.”
You know it’s going to be a good day when you and I find something we can agree on ChAng.
We may agree in a more narrow sense, but I’m not sure about in the larger one. I know you’re anti-Ayn Rand and her ilk Chris, (and that’s ok, there was more to her then her economic ideals after all) and I’ve still never gotten around to reading Atlas Shrugged by the way, but what I’m getting at is Keynesian economics as practiced in general is at the root of the bigger picture. Do you think I’m correct in seeing payday lending as simply a more blatant and localized form of usury compared to the routine economics of this century?
It’s effects are easier to point out because the stats on it are readily available. Ask a bank manager at what rate they use fractional reserve banking and they may as well say, “I’d tell you been then I’d have to kill you.” or something of the sort is what they told me anyway, with an evil eye.
Maybe I’m an idealist for buying into the whole Austrian school of economic theory, but in this debate, and in general, I believe it equates to honest and ethical financial fundamentals, as opposed to the commonplace high interest rates behind payday lending, and all current economic practices on a grander scale.
I just think real money, as defined, should be something of intrinsic value, not something representing debt as fiat currency does. Sure we may not have seen such capital growth bubble up over the past century otherwise, but look where we are now. China basically owns us, our dollar is nearly worthless, and everyone is working a whole lot harder for a lot less material gain. It’s the kind of system that has created a market for private usury institutions such as payday lending.
As I see it, an ethical argument against usury (and payday lending) is an argument against our current economic system. It may be seen as a broad comparison, but one well worth making, I believe.
“We may agree in a more narrow sense, but I’m not sure about in the larger one.”
We don’t agree on the larger point that you were making. That’s why I only quoted your first line in the first comment. Still, I respect your right to hold those views, and I’ll take our agreements, however small and infrequent they may be, for what they are.
Do the two of you at least agree that the deck is stacked against the best interests of the borrower in the case of payday lending, and that it’s certainly a system that could stand re-examination by lawmakers?
I definitely agree with that.
Oh yeah, definitely. I just think usury is unethical on all levels, is the point I was making. Not because it’s labeled as being wrong in the bible, but because it destroys the value of currency and makes life a lot harder on those that are already struggling to survive. It’s the old adage of making the poor poorer and the very rich even richer kinda thing. The game is rigged, and the house always wins.
If you ban payday lending or enact laws that make it impossible for the payday lender to remain in business, it doesn’t address the need that is out there. People go to payday lenders for a reason; they have nowhere else to turn. Banks have tightened up credit, nsf fees are astronomical and the economy is in shambles. I work for a payday lender and the customers that I see have an emergency that they need help with. They are grateful that we are there to help them because their family members are in the same boat as they are. Some regulation of any industry is fine. It needs to be done for the right reasons though and with a full understanding of what the outcome will be for the people that it affects.
Even limiting the max APR to a non-crippling rate would be a start, although the credit union solution Chris mentioned earlier would address this same need.
Amazing that you never see Credit Unions and Banks treated with the same level of criticism as payday lenders. That wouldn’t have anything to do with who funds the “self-purported consumer advocates” and “media elites” who take biblical quotes out of context and use them for their own self-serving ends.
Let’s set the record straight and let the consumers decide!
Short-term loans are most often used by individuals who cannot obtain access to credit cards or other sources of short-term financing and credit. They compete against the “overdraft protection loans,” charged by banks and credit unions as well as late penalties, bounced check fees from banks and merchants, over-drafted account fees, etc.
The debate over short-term loans (whether called payday, deferred deposit, cash advances, etc.)is a simple one:
The average short-term loan in South Carolina carries a fee of about $15 per $100 borrowed for two weeks. That’s $0.15 per $1.00 borrowed.
By contrast, the average bank and credit union overdraft protection “LOAN” (according to the FDIC) has a fee of $27 + per $36 borrowed from three or four days. That’s $0.75 per $1.00 borrowed.
In some cases, banks now charge up to $40 per overdraft check and after 4 days, charge an additional $8 per day charge. In this case, the fees on a $100, two-week “overdraft protection LOAN” from a bank or credit union equal $128. That’s $1.28 per $1.00 borrowed.
Now is it coincidence that the Center for Responsible Lending, cited by the author as a “good source of information” is the advertised marketing arm of one of the nation’s largest credit unions – Self Help out of North Carolina. Is it coincidence that the Center has been identified itself as predatory and that it received much of its original operating funds from Herb and Marion Sandler – two of the leaders in predatory mortgages and the financial meltdown? Is it a coincidence that the media tends to side with the banks, while accepting millions of taxpayer dollars from those banks in the form of advertising?
It is critical that the community has a voice in public debate, but make sure it is the CUSTOMERS not the media and “self-proclaimed consumer advocates” who are being heard!
The following is a link to voices of actual payday customers!
http://www.youtube.com/watch?v=L6Iy-Z0WPQA
“Short-term loans are most often used by individuals who cannot obtain access to credit cards or other sources of short-term financing and credit. They compete against the “overdraft protection loans,” charged by banks and credit unions as well as late penalties, bounced check fees from banks and merchants, over-drafted account fees, etc.”
I don’t think that’s accurate. For one thing, overdraft protection isn’t generally used that way, and it’s certainly not marketed that way. The parallels between the two are pretty shallow.
“The debate over short-term loans (whether called payday, deferred deposit, cash advances, etc.)is a simple one …”
You going to need to source everything after this, because it doesn’t mesh with other information that has already been sourced, not the least of which being that “churning” loans — loans that are renewed regularly without ever being fully paid off — account for 76% of payday lending. At least, that’s what it says here: http://www.responsiblelending.org/payday-lending/research-analysis/phantom-demand-short-term-due-date-generates-need-for-repeat-payday-loans-accounting-for-76-of-total-volume.html
And that’s from The Center for Responsible Lending, “a nonprofit, nonpartisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices.” Not from someone who works at a loan company.
“By contrast, the average bank and credit union overdraft protection “LOAN” (according to the FDIC) has a fee of $27 + per $36 borrowed from three or four days. That’s $0.75 per $1.00 borrowed.”
Since it’s not actually a loan, but rather a penalty fee, there’s absolutely no comparison. Not to mention that the BASIC RELATIONSHIP of a bank to a depositor is that the bank is borrowing money and paying interest on it. Your example would only start to work if the payday loan company borrowed money from an individual.
“In some cases, banks now charge up to $40 per overdraft check and after 4 days, charge an additional $8 per day charge. In this case, the fees on a $100, two-week “overdraft protection LOAN” from a bank or credit union equal $128. That’s $1.28 per $1.00 borrowed.”
Again, that’s not a loan. It’s a penalty from an existing business relationship. And since the average payday loan is actually $350, and the fee is nearly $60, your argument begins to break down quickly. An actual loan from an actual bank would have a much, much lower interest rate than even the nicest payday loan company.
“Now is it coincidence that the Center for Responsible Lending, cited by the author as a “good source of information” is the advertised marketing arm of one of the nation’s largest credit unions – Self Help out of North Carolina.”
Actually, they’re a non-profit advocacy group with a lending arm, not the other way around. And since their stated mission is to help low-income home buyers, non-profits and small businesses — not to mention their long history of advocacy — I think you’ll have a tough row to hoe when it comes to convincing anyone that they’re really an evil, money-grubbing bank.
“Is it coincidence that the Center has been identified itself as predatory and that it received much of its original operating funds from Herb and Marion Sandler – two of the leaders in predatory mortgages and the financial meltdown? Is it a coincidence that the media tends to side with the banks, while accepting millions of taxpayer dollars from those banks in the form of advertising?”
Says who? Why don’t you source this, because it’s not a well-founded claim at all as far as I can tell. Also, think about this: In order for you be right, there has to be a media conspiracy, government involvement and cooperation from the existing financial mainstream to support a NONPROFIT company’s attempt to inform people that payday lending might just not be in their best interest in the long term. Doesn’t strike me as plausible.
“It is critical that the community has a voice in public debate, but make sure it is the CUSTOMERS not the media and “self-proclaimed consumer advocates” who are being heard! The following is a link to voices of actual payday customers!”
Funny how all we get are little clips of people who appear to be repeat customers who regularly use this service. None of them explicitly state that they aren’t in an endless payment loop with the company. Many imply otherwise, in fact. And since they’re all there trying to get a loan, I would think they’d be disinclined to say critical things. Were those customers filmed BEFORE that week’s loan, or AFTER? Is there a resource where we can read or watch their entire statements?
In some cases, it’s not even clear that they’re being positive about the loans, just that they used the service. We know nothing about these people or their loan situation, just that they’re happy someone will lend them money in an emergency. I wonder how they’d feel if they knew their other, less costly loan options?
And what would those same people have to say about a cap of, say, 36-percent max APR on their loans? Do you think they’d be for it, or against it?
Here is some info on the CRL. therte is a clear and definate link to the Sandlers that you are so obviously ignoring. Its all over the web, even on Wikipedia! http://biggovernment.com/mvadum/2010/04/26/the-irresponsible-center-for-responsible-lending/
Let’s just say that I call into question the veracity of any article that starts with the following sentence …
“The left-wing architects of the subprime mortgage collapse have yet to be called to account.”
Having read the article, it’s even less compelling. It’s just another guilt-by-association piece, and it’s utterly irrelevant to whether or not payday lending is an abhorrent, predatory practice that takes advantage of the poor. It’s not like the only people saying payday lending is wrong is the CRL.
How about you demonstrate what is RIGHT and FAIR about payday lending? And also explain why the U.S. military has taken so many pains to limit such lending to people in uniform, if you would.