Conservative Viewpoints

"Government is not the solution…it is the problem" -Ronald Reagan

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Payday Lending: A crooked and corrupt practice based on lies and greed

Posted by Stephen on February 26, 2008

There’s really no defense for the predatory practices of payday lending other than get what you can while you can no matter the devastation left behind.

It doesn’t matter if a lender closes dozens of checking accounts. It doesn’t matter if they used devious and unethical practices to promote their business and invade the privacy of their customers. It doesn’t matter how many bounced checks the lender creates for the borrower after closing their checking account. It doesn’t matter if the lender does enough financial damage to a borrower that the borrower losses their home.

After all, as a manager of a payday lender, that is exactly what I did and Virginia Senator Dick Saslaw, Democrat and well financed supporter of the predatory industry of payday lending, thinks that’s a great idea for Virginians.

Dick threatened to kill all attempts to reform the unethical practices of payday lending unless an industry supported bill is passed.

Both sides said Saslaw’s threat to effectively end the discussion caught them by surprise.

“It implies that if it’s not an industry friendly bill, he would prefer to have nothing,” said Mark Hubbard, a lobbyist for the Center for Responsible Lending.

There are many frustrating claims by people like Dick Saslaw, but perhaps the most pathetic is the notion put forth that suggests that people need these loans to “get them by,” or “ to bridge the gap between paychecks.”

Let me make one thing perfectly clear to everyone other than Dick who refuses to hear anything not tainted with the slime dripping from the grip of the payday lending industry as it consumes the ethical standards he is charged to uphold. The people who take payday loans do not take them as an advance on their paychecks….they take these loans because they don’t have the money in the first place.

If you can appreciate the difference than you can begin to understand the two most important elements to the successful exploitation of people that the payday industry covets. First, we can begin to empathize with the desperation the borrower must feel to turn to such a despicable practice. Second, we can now see how the industry ropes borrowers into a long term debt cycle.

While the industry plays the role of Pied Piper by offering easy to obtain loans to people out of money and in difficult circumstances, the reality is the payday lender knows the borrower can’t pay back the loan the minute the borrower walks in the door. In fact, the predator payday lender is counting on it.

The borrower comes to the payday lender, not because they are awaiting an additional $200 on their next check, but because they will not have enough to make it to their next check without it. As a result, when they take the $200 loan they are signing their fiscal death sentence. When they come in to pay the $230 back in ten days they are taking money from their paycheck that they didn’t have in the first place. Therefore they are left with no alternative but to take another loan.

The cycle of debt exists for several reasons. One primary reason is because when they take the next loan they are taking it for $200 and not $230. The result is that they are now an additional 30 dollars in the hole. Remember, they weren’t waiting for an additional $200 dollars on their check. They were actually in a negative position of $200 and now they are in a negative position of $230. After they repeat this cycle they will be in a negative position of $260 dollars.

How long can they survive this process before they have to take a second loan or before they default on the first?

The industry thrives because of two primary assets. First, because they exploit vulnerable people and are supported by an APR of over 390% and second, they have politicians like Dick Saslaw in their back pocket. These two assets guarantee the industry will have the built in repeat customer that has turned this predatory practice into a billion dollar industry.

Dick will likely get away with the deceitful practices utilized by his people in the Senate chambers to allow predatory lending to continue in Virginia, but a day will come when those weighed down with greed and contempt for decency will stand in line to face the reality of their deeds.

I just hope victims of Dick’s decisions are holding the “gotcha” sign when Dick gets to the front of the line.

Stephen Winslow is the executive editor of Conservative Viewpoints and a former manager of a payday lender.


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