Turning Poverty into a multi-billion dollar industry
In a recent story, NPR investigated the growth of the Payday lending industry and its manipulation of those in poverty. From the story:
Payday lending operations have grown rapidly in the United States since the early 1990s. At the industry's peak a few years ago, there were more payday lenders in the United States than McDonald's and Burger King stores — combined.Rivlin answers a variety of questions throughout his interview, including why these loan operations exist in the poorest neighborhoods:
"The payday lender is kind of the emergency banker for the working poor," explains journalist Gary Rivlin. "The idea is that you have some bills that you have to pay today — your check isn't coming for a couple weeks, and you can take a loan out against that upcoming check."
In return, a person agrees to pay interest on the loan — which can be up to "200 percent interest or more on their money," Rivlin says. "It's a bridge loan to cover a gap, but the problem is, the gap keeps getting wider and wider."
Rivlin goes behind the scenes of the payday lending industry in his new book Broke, USA, which examines the $33 billion-dollar-a-year "poverty industry." Rivlin, who attended an annual conference of check cashers to learn industry tips, says he decided to write about the industry because of its rapid growth in recent years.
"[Payday loan operations] are there because banks have fled certain neighborhoods — it's working-class neighborhoods, inner city neighborhoods, some rural neighborhoods. Where can you get your loan? You go to a payday lender, you go to a consumer finance shop [or] you go to a pawn broker. To me, the real reason payday has grown like it has is more of an economic reason than a geographic reason. There's been stagnating wages among the lowest 40 percent [of wage earners] in this country, and so they're not earning anymore real dollars. At the same time, rent is going up, health care is going up [and] other expenses are going up, and it just becomes harder and harder and harder for these people who are making $20,000 [or] $25,000 [or] $30,000 a year to make ends meet. And the pay lenders are really convenient. Between going home from work and going shopping, you can stop at one of these stores and get instant cash in five minutes."The story sparked a long conversation on Facebook about the Payday lending interesting. Some comments were particularly insightful:
- Banks won't cash checks unless you have an account. if you can't afford an account (i.e. fees, overdrawn charges have you upside down) you have no choice but to cash at these places or through friends...have you never been poor? banks are soooooooo NOT free of charge.
- Having worked at a place that had a check cashing service, it's been my experience that people use those businesses because they can't get a bank account (extremely bad credit, owe money to someone-usually a bank) or don't think to get a bank account.
- it's an outrage! I looked through a free newspaper here in Houston called the Greensheet last month and there were over 9 full pages of advertisements for these payday lenders and check cashers places..... ACK! How scary is that?!!
- I can so relate. I was so poor between 2000-2006, I was forced to use payday lending services. It was either that or have utilties turned off. Hellish way to live. The USA now thrives off of Poverty Pimps.
- Isaiah 3:14-15 - The Lord will enter into judgment with the ancients of his people, and the princes thereof: for ye have eaten up the vineyard; the spoil of the poor is in your houses. What mean ye that ye beat my people to pieces, and grind the faces of the poor? saith the Lord God of hosts.
- It's amazing how expensive it is to be poor -- if you don't believe it, leave your middle-class bubble and visit a convenience/grocery store within walking distance of a housing project. You'll see crappy, unhealthy food offered at up to triple the price you pay at your nice clean well-stocked suburban store. It's so incredibly messed up.
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