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Payday loan becomes monthly ordeal
Mark Laws
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Kai Ryssdal: We're probably still a couple of lawsuits away from figuring out exactly how much power the Consumer Financial Protection Bureau's eventually going to have. Senate Republicans say they're going to challenge President Obama's recess appointment of Richard Cordray to run the agency. The president says he did it because without a permanent director, the bureau couldn't do key parts of its job. One big part of which is regulating what're called non-bank activities -- check cashing, debt collection, payday lending.
Commentator and San Francisco resident Mark Laws has some experience.
Mark Laws: My mother died early on a Saturday in St. Louis. Right away my sister asked, when are you coming out? I was a cook at Al's Good Food Cafe on Mission, making $10 an hour. I didn't have the money.
I collected from friends what they could give, got an advance from my boss, but I still couldn't get there. So I went to this payday loan store. You can't miss their signs. I got a $300 loan. You write a check for $300, but you date it for your next payday. You get the cash right away -- minus $45.
I went to St. Louis, I lost a week of work, I came back and I was still broke -- and I had this loan. The problem is, you have to pay the whole $300 in two weeks. That's their payday. And there's no way to pay off just a piece.
I was making $500 every two weeks. I just didn't have $300, and they were about to cash my post-dated check. They said, don't worry, we'll give you another loan to cover it, minus of course another $45 fee.
This went on for two years. I was on the rat wheel. I paid $45 every two weeks because I didn't have $300 to pay off my debt. When my car broke down I asked if I could please, please have more time. They said no. They threatened to call the DA, press charges for a bounced check. I was trapped, ashamed. I didn't want to tell anyone.
I had written a check and thought, it's easy. When you ain't got nothing, you think, what's $45? It's not gonna break me. But when I figured it out after two years, it was $1,000. I thought loan sharking was a crime. It's not, it's legal.
Finally my credit union asked me, what was going on with all these checks? And they offered a real loan I could handle. And that's what I did. I've never had more than a couple hundred in the bank and the money's always earmarked. Sometimes you just give up. And when you give up, you do stupid stuff. I've decided, I'm not giving up anymore.
Ryssdal: Mark Laws comes to us from, "My Life Is True," a reporting project of the New America Foundation. Tell us what you think -- write to us.
This commentary first aired on KQED in San Francisco.
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Despite the truth that payday loans are often viewed as a bad thing, it is a product that individuals love. For these payday loans offers are obviously a helping hand when someone is in real need. It may actually be better to get a loan from an ideal stranger than to feel the awkwardness of asking family or friends to loan you cash. A recent study even showed that people usually believe they are being treated with respect when they go to a payday lender.
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I don't doubt that some people look to these loans to bail out their over spending habits, but truly some people look to these loans for the short term use for emergencies. As long as the consumer's demand for these type of services, the Payday loan lenders will be there to supply the needed service, that consumers are demanding. The world revolves around "Supply and Demand." I wish our economy would straighten up and Supply those who need jobs the opportunity to thrive again. I think a big mistake was bailing out banks, do you see the government bailing out payday lenders? NO! So, If the Big Banks want to RISK providing these payday loans, then they need to assume the loses along with the risk they are taking, to do so.
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I once found myself working for a company that did websites for... tadah... payday loans. While working on one I calculated the interest rate looking for bugs. The interest rate was over 925% so I flagged it. This was no bug. The response was that this was actually a *service* because it cost less than a bounced check or missing a car payment etc. On another site I discovered that the terms of service as light gray text. On a white background. in about 6-point type. On yet another, and this was near the end of my rope, I noticed they weren't even bothering with posting the credit info form via SSL. That's right: name, address, work history, social security number unencrypted. That one I made a top-level stink over. Once I really understood what they were doing I wanted nothing to do with it. It didn't take them long to feel about the same way about me. I hated that job from that day on and danced out the parking lot when things went to pieces for them in 2007. Make whatever comment you want pro or con, this was disgusting.
Mr. Law, It doesn't seem that the lender tricked you. You knew that you were required to repay the loan on your payday. You are lucky to live in a county where free choice is allowed. Why are you complaining? Sounds like you want big government to stop this lender from making these loans? What would you have done if that lender was not there? Probably you'd be feeling bad that you missed your mother's funeral. You don't like the price or the terms of the loan - you'll allowed that opinion. I don't like the price and terms of new cars. But, let's not suggest that the government needs to regulate the free market system and eliminate our freedom and choices. I would suggest you would benefit from refresher courses in consumer education, the US Constitution and Bill of Rights, and the principles of free enterprise.
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