How good are hard times for those in the poverty business? Those in the payday industry and other storefront lenders claim they're struggling along but the numbers show otherwise. Read my piece in TheAtlantic.com exploring why with the financial misery high, these are fat times for many businesses operating on the economic fringes. Defaults may be up but so, too, are per-store revenues as a whole new market of people struggle to make ends meet. "People who might have been able to take out a home equity loan in the past are now going to the payday lender," an industry figure named Larry Meyers told me. "People who could borrow through their credit card -- that's not an option anymore for a lot of them." Please visit TheAtlantic.com to read more.
Click here to read about Tim Thomas, who owns Daddy's Money Pawn Shop in Wichita, Kansas. I met Thomas at the annual check cashers convention in Las Vegas. What I loved about talking with him was his complete candor about the dollars and cents of the poverty industry, walking me through the various fees he collects from check cashing to payday loans to debit cards and instant tax refunds.
"Turning Poverty Into a Multibillion-Dollar Industry": Click here to hear me talking with Terry Gross about Broke USA.
The rest of the description from the "Fresh Air" website:
"Pawnshops, payday lenders, check cashers and rent-to-own companies take in $33 billion a year. In writing his new book, Broke, USA, Gary Rivlin discovered how the businesses justified making huge profits off the working poor."
I write about Allan Jones – W. Allan Jones, Jr., if I were still on staff at The New York Times – in a piece for The Huffington Post. The Cliff's Notes version of that post: Let’s just say that Mr. Jones (pictured) and those around him are not the most progressive bunch on issues of race and gender – and, too, this man who was the first to see the potential to strike it rich making small denomination loans to the working poor has a rather gluttonous appetite for money.
Below are some book outtakes that might shed light on this outspoken man who fathered the $40-billion-a-year modern-day payday lending business – and longs for the days when he was collecting more than 500 percent interest on the money he loaned out through these small denomination, short-term loans, rather than settling for the mere 390 percent he makes in most states where his company, Check Into Cash, operates:
Dan Okrent (photo) was an editor at Time and Life magazines. He wrote a column for Esquire and has authored several well-received books, including most recently, LAST CALL: The Rise and Fall of Prohibition. Depending on the social circle, Okrent is best known either as the person The New York Times turned to in 2003, post Jayson Blair, when seeking its first public editor or founder of Rotisserie baseball, the premier fantasy sports game.
And, as of a day or two ago, after posting this review at CNNMoney.com, he's one of my favorite writers.
I appreciate that Okrent describes BROKE as "fascinating," of course. And I love this line as well: "Rivlin opens up, dissects, and eviscerates the gigantic industry of vulture finance."
But what impresses me most is how he captured the flavor of the book in a pithy 450 words.
The subprime credit card issuer charging interest rates of 25 percent or more. All those subprime auto lenders charging 20 or 22 or 25 percent a year in interest for a car loan. Others in the poverty industry. All are saying the same thing:
We didn’t cause the Great Recession of 2008 so why is Congress including us in its financial reform package?
Or, more specifically: Why is the federal government proposing a new consumer financial protection agency that would monitor our activities when we were blameless for the global calamity that has caused so much pain?
There will me more in this space soon about Allan Jones, the man who invented the modern-day payday lending industry. A pretty interesting character who has grown hundreds of millions of dollars rich loaning the working poor $200 or $400 at a time. But for now I'll say I'm happy that my book, even if just a small piece of it, is finally starting to get out there with this excerpt appearing in the upcoming issue of Business Week, which now officially goes by the name Bloomberg Business Week. This piece, which is adapted from two of the book's payday lending chapters, tells that story of Jones stumbling on the idea for a cash advance business geared to those living on the economic fringes and his determination to turn it into a nationwide business. The story: PAYDAY NATION: How lending to people against their future paychecks went from a single shack to a strip mall staple.
Click here to see a bird's eye view of Jones's astonishing house, then under construction (picture). He told me during the two days we spent together in Cleveland, Tenn. that he had always dreamed of owning a Beverly Hills mansion like the one the Clampetts called home on "The Beverly Hillbillies." In the end, he went for a manse modeled on the famous Biltmore, the stunning French Renaissance-style vacation home George Vanderbilt built for himself during the Gilded Age.
In March, Keith Epstein of the Huffington Post Investigative Fund blew me away with an in-depth look at the dollars the payday lending industry has poured into its lobbying efforts over the past decade. As much as the industry spent in the second half of the 1990s and early 2000s convincing state legislatures to exempt these two-week, short-term loans from existing usury laws, that pales compared to the dollars they are spilling to protect the franchise. Where the payday lenders spent $2.0 million on state and federal lobbyists in 2001-2002, that figure reached $5.7 million in 2007-2008, according to Epstein's terrific report. Proposed federal legislation that would effectively put the industry out of business spurred the industry to spend even more last year: $6.1 million in just Washington in 2009, Epstein found, or about what JPMorgan Chase spent on lobbyists that year.
And those figures don't include campaign contributions: $2.2 million in 2007-2008, and $1.3 million in the 2009-2010 election cycle through February, 2010.
This week provided an example of how those investments are paying dividends. Read the rest of this entry »
I love the way this podcast from the talented folks at NPR’s “Planet Money” opens: with an ad the payday lending industry created to oppose a range of reform measures working their way through Congress (the subject of my last blog entry). Except here, when the industry is calling the shots, they’re not payday lenders charging horrifically high fees but instead “local, short-term lenders” there “to help ends meet.”
That’s the new thing, I discovered when researching my book. The term ‘payday’ has grown so toxic that some in the business avoid the phrase altogether. Mike Hodges, for instance, who operates 21 stores in the Nashville area with his wife Tina, uses “cash advances” in the local TV ads it runs while Amscot Financial sometimes uses the phrase “life-line product.” Read the rest of this entry »
Why the $40-billion-a-year payday lending industry fears financial reform on Capital Hill. As the Senate nears a vote on a financial reform package, I wrote this piece for the Huffington Post. Less popular than the country's cigarette makers, and charging fees that can top 652 percent if expressed as an annual interest rate, the payday lenders ask themselves if they can live another year given general sentiments toward any industry charging subprime rates. Sen. Dick Durbin, D-Ill. (photo), plays a starring role with Sen. Kay Hagan, D-NC, making an interesting cameo.