Who Hijacked Our Country

Wednesday, May 25, 2005

Loan Sharks

Payday lenders. They claim to be offering a necessary service to middle class customers. But for some odd reason most of them are located in poor neighborhoods or next to military bases. Which middle class are they aiming for?

Every community has a very clear inverse relationship between the number of payday lenders and the number of traditional banks. Poor communities have fewer traditional banks, and they have payday lenders springing up like mushrooms. And vice versa for wealthier neighborhoods.

Payday lenders target the working poor who are living week to week; paycheck to paycheck. They offer short-term loans with annual interest rates up to 391%. And you thought extortion and mugging were illegal.

Some of their victims, er, customers end up taking out another loan to pay off the first loan, then another loan to pay off the second loan, and on and on. Eventually they can end up with five or six loans costing hundreds of dollars a month in interest and penalties.

Sure, you can argue that these people should be more responsible and make smarter decisions. But with this kind of lending practice, one stupid move can be compounded again and again and lead to a vicious circle. And this reasoning of “they should have known better” can be carried too far. After a point, it’s like saying assault and robbery should be legal and it’s up to everybody to learn Karate and carry a gun.

Payday lenders are exempt from state and federal usury laws, and they’ve successfully fought all government attempts to rein in the sleaze factor.

They count on people’s ignorance and desperation. A spokesman for a consumer group said “their business is geared toward confusing people and trapping them in this treadmill and squeezing every dollar that they can out of them. The whole premise behind the industry is to target a certain group of people and take advantage of them.”

No wonder conservative politicians keep cutting funds for education. More uneducated people means more fodder for their corporate donors.

Military families are some of the most popular targets of these predators. If you A) support our troops, and B) claim to be a Christian, you should be outraged at this legalized thievery. Are you?

If you think the Bible was written just to condemn homosexuals and abortion, here is what the Bible says about greed and usury. Why aren’t millions of devout Christians preaching fire and brimstone at these loan sharks?

If you support our troops, maybe you could quit fondling your yellow ribbons long enough to think about the irony here. Our government spends billions drumming up wars to send our soldiers off to. Their pay is insufficient, they’re sent into battle with insufficient armor and ammunition, their VA benefits keep getting reduced and then they get preyed on by a bunch of sleazewipe loan sharks. Are the armchair generals and fire-and-brimstone preachers planning to do anything about this?


Blogger ~jay said...

I find it pretty disgusting myself.
These kinds of rackets are what make me think our economy isn't anywhere near as robust as we say it is, or else we wouldn't need these kinds of loans....

May 25, 2005 at 9:46 PM  
Anonymous JollyRoger said...

You are so right-high-interest loansharks have preyed on GIS since there were GIs; I used to get disgusted by the interest some of those slaps charges soldiers. And (at least then) you had to pay off a debt, or you could find yourself discharged for not conducting yourself correctly.

The "Culture of Life" has already proven they don't give a rat's ass about anyone not like them-and I explicitly include the magnet-lovers in that statement. See my blog tonight for the kind of "Support!" the retired Troops!" are getting-I am sure you already know what kind of treatment the GIs are already (not) getting for their PTSD.

May 25, 2005 at 10:29 PM  
Anonymous Tom Harper said...

~jay: What do you mean -- the economy is getting better all the time, and Freedom is On The March. It's morning in America :)

No, you're right, if things were as good as Bush Inc. keeps telling us, who'd be needing a loan shark?

Jolly Roger: Yeah, that Culture of Life (at least if you're a fetus or a vegetable).

GI's have always been preyed on by every kind of sleazy hustler. The military brass never gives a shit about that, but get caught smoking marijuana and you're dead (at least that was true when I was in the Navy a long time ago).

It's too easy for politicians to stand in the limelight and gloat about supporting our troops, and then stab them in the back as soon as the cameras have left.

May 25, 2005 at 11:47 PM  
Anonymous The Bastard said...

Yeah, you can thank good old Ronnie Reagan for eliminating the usary laws. I got caught up in one of these types of things when I was stationed in San Diego. Boy, they were so nice to me and my $345.00 a week salary from the Navy.

After defaulting on the loan and it getting sent to a collections agency it took me damn near 5 years after I got out to get back on my feet and pay the damn thing off.

Yeah I learned my lesson and lucky for me I had an education to land a good enough job to pay off the debt. Didn't even think of claiming bankruptcy like the right thinks always happens. Was to proud to do that. But being older and knowing what I know now I would have definately claimed bankruptcy.

May 26, 2005 at 2:48 AM  
Blogger Right On! said...

I had heard about these about 3 years ago on the news and wondered WHY this kind of crap is NOT illegal.

391% HELLO!? You deserve to be in debt if you get a loan with that kind of interest on it!

May 26, 2005 at 8:07 AM  
Blogger Unadulterated Underdog said...

I think the entire credit industry is corrupt. It's sad that our government felt the need to pass legislation punishing the public end of the abuse but not the business end. Guess it helps when the companies' party is in charge. How double-standard bearing can our laws get? Don't take out credit cards OR get loans on wages if you don't absolutely have to. Also, don't lend money to those who can't afford it OR at ridiculous interest rates that can't be paid back. The industry as a whole needs reforming.

May 26, 2005 at 11:14 AM  
Anonymous Tom Harper said...

The Bastard: Ouch! Painful lesson. When people get into desperate situations, there's always someone anxious to prey on them. Those usury laws were part of the safety net that Reagan thought was too "excessive."

Downtown San Diego (at least in the early '70s) was full of sleazy merchants preying on sailors: jewelry shops, Bible stores (fancy illustrated Bibles costing hundreds of dollars). They'd push every emotional button to get someone to buy, and then have this merciless payment plan. Plus the loan sharks.

Right On!: This practice should definitely be illegal. Of course it's stupid to take out a loan with that kind of interest rate, but desperate people do stupid things. Who else would go to a 300-pound loan shark named Vinnie who's gonna break your legs if you don't pay up? But there're lots of poor and desperate people out there, and people who prey on them should be prosecuted.

OK Democrat: You're right, they should crack down on both ends of this. I wouldn't have a problem with the bankruptcy bill if it included some limits on the credit industry. But they're still allowed to rain hundreds of credit card offers on people who can't afford it; and they defeated a proposed interest limit of 30% on credit cards. People need to be more responsible, but Big Business needs to be held to some minimal standards of decency and honesty.

May 26, 2005 at 1:12 PM  
Blogger Rich said...

I can agree to a point but people atleast have a choice wether to participate in these "loans"... If you wanted to rave you'd rave about the Insurance companies stealing money and it trule being the LAW ... you HAVE to have insurance... lol

May 26, 2005 at 2:07 PM  
Anonymous Tom Harper said...

Rich: Sure, this works both ways; people choose to take out these loans. But when people are desperate they'll do stupid things. They should be smarter, but it shouldn't be legal to prey on them.

Oh yeah, insurance companies. I remember when California made car insurance mandatory in the '80s; I remember thinking "gee, it must be nice to make your living selling a product that everyone is required to buy." I just read that Elliot Spitzer is going after AIG.

May 26, 2005 at 3:34 PM  
Anonymous Anonymous said...

I agree that these folks are shady people, but. . .we have a grand established tradition in this country of the smart making money off the stupid. Hello, Lottery? It certainly shouldn't be illegal.
I can't speak for the G.I.'s but I can speak (from experience) for the typical low-income customer of such establishments. The vast majority of them are not the humble, honest, hard-working and downtrodden folk many would like to believe. Instead, they are juggling shaky finances, trying to either a) live far above their means, furnishing their ghetto apartments with sleek rent-to-own furniture, wearing expensive name-brand clothing to their call-center jobs, and driving cars that cost more than their gross annual income, or b) drug consumers trying to stretch their first or second or third actual paychecks to cover rent and bills and a weekly eightball. Responsible, informed consumers simply don't fall for this sort of bullshit (and by informed, I don't mean educated, simply literate and savvy enough to read the fine print before they sign).

May 26, 2005 at 11:55 PM  
Anonymous Tom Harper said...

Anonymous: Can't argue that. Like the saying goes, "you can't cheat an honest man." Most scams zero in on the instinct, that drive to get something for nothing.

But there needs to be a balance between self-reliance and protecting the most desperate and vulnerable. I think every political viewpoint agrees with that; they just disagree on where the line should be drawn.

Sure, lots of people try to live beyond their means. Ghetto tenements with plasma TV sets; that overdrawn yuppie driving the Lexus he can't afford, etc. But sometimes it really is just a desperation to pay the bills and keep the lights on and food in the cupboards.

Like I said in an earlier comment, desperate people do stupid things. You don't go to a loan shark who's gonna break your legs if you don't pay up, unless you're desperate. And people do.

There are laws against the leg-breaking loan shark, but if they're wearing suits and they're "only" gonna take your car and your house, it's legal? It doesn't make any sense. You could just as easily say a mugging victim should have been more observant, and shouldn't have been in that neighborhood at 3 a.m.; therefore we don't need laws against mugging.

May 27, 2005 at 1:55 AM  
Blogger Scott C. Smith said...

I was stationed at Pearl Harbor from 1987-1990, and there were numerous companies near the base that offered easy credit to the young and foolish at super-high interest rates. I signed up to purchase a $400 stereo system that ended up costing me $1200 -- I had to agree to a monthly payment of $100. I was 18 and didn't know any better, and it set me on a course to financial ruin. I don't know if things have improved for the sailors and marines at Pearl Harbor, but I would not

May 27, 2005 at 9:53 PM  
Anonymous Tom Harper said...

Scott C. Smith: Yeah, that's a perfect example. Who isn't young and foolish at some point? Or desperate and foolish? Or down on their luck and foolish, etc. That doesn't mean some sleazoid hustler should be allowed to take advantage; that's like saying mugging is legal and it's up to everyone to learn self-defense and stay out of bad neighborhoods.

When I was in the Navy ('69-'73) sailors couldn't blink without getting written up; but if they got taken in by a hustler or loan shark, the lifers would just look the other way.

May 28, 2005 at 12:39 AM  
Anonymous Anonymous said...

Let us not forget that these places exist because Banks will not go to the affected areas.

I remember when check cashing places went to poor neighborhoods they cleaned up because they charged less then Banks. The Banks smelled oppurtunity and opened up branches in the Supermarkets. Now you see less check cashing places.

The irony is these loansharks have a strong lobby in the big Banks and other financial institutions who see any effort to clean them up as further regulation on them. They denounce these "bad apples" but refuse to give up the right to fleece us as well.


May 28, 2005 at 12:31 PM  
Anonymous Tom Harper said...

Erik: Yup, that's just the banks are doing. They use their financial clout to protect payday lenders from any government regulation; while pretending to have nothing to do with them.

May 28, 2005 at 3:54 PM  

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