Like an addict and his pusher
By Brian Hicks
She is in her mid-70s, living on Social Security and looking for a job to make ends meet — retirement, recession-style.
By the time she goes to see Toby Smith, a credit and mortgage counselor at Family Services Inc., she is also juggling four payday loans of $300 each.
You know how to juggle payday loans? Borrow the maximum $300 — because why get $200 when you can get $300 — and in two weeks pay off the loan for $345 (a 15 percent jack, or 391 percent annual percentage rate). To pay it, most people immediately take out a new loan.
The folks who do this are in a bind. They are borrowing this money to pay the power bill, keep the phone on, make the insurance payment.
Between September 2006 and August 2007, these companies made 4.3 million such loans in South Carolina. Family Services estimates that about half the people they see with problems paying their mortgages also have payday loan issues.
These loans are the crack cocaine of the credit industry — once you get hooked on them, it's nearly impossible to stop.
"I have seen the devastation they cause," Smith says. She suggests people pay their mortgage first and work out payment plans with other lenders, but says there is an unusual loyalty to these businesses. People will sell their cars, let their mortgages fall into default to stay in the good graces of their payday lender. Those lenders, many people feel, are there for them.
It all sounds way too much like the relationship between an addict and his pusher.
Regulate a business? Here?
Right now, the Legislature is looking at two different proposals to further regulate this industry.
The House has passed a bill the industry apparently loves. It raises the loan limit to $600, but says you can only get 10 — 10? — of them before a cooling off period. They want to set up a database to stop people from having more than one at a time.
At the same time, Sen. Robert Ford wants to limit loan amounts to the lesser of $500 or 25 percent of what a person makes in that two-week period — which is probably going to be a lot less than $500. That would require a sort of loan qualifying to make sure people aren't getting in over their head. He would also limit people to one loan at a time.
Ford also wants a seven-day waiting period between loans, to stop the addiction from feeding itself.
Consumer watchdogs love Ford's idea, and he thinks he's got a shot to pass it.
But we all know how the General Assembly feels about waiting periods.
Wall Street's example
Sue Berkowitz, director of the South Carolina Appleseed Legal Justice Center, which provides legal advocacy to the low-income community, makes the best point of all.
"We're in a huge economic mess because the mortgage industry made loans to people who didn't have the ability to repay," she says. "Why would we want to do anything different in the short-term loan industry."
Now, the deregulation crowd will say it's not the government's job to be a parent, to save people from themselves. Of course, they say that when the payday loan industry throws around loads of cash in campaign contributions at the Statehouse, making it the new big dog on the block, the new video poker industry — in perhaps more ways than one.
You know, the government outlaws drugs because people can use them to hurt themselves and other people.
It doesn't look like there's much difference here.
Reach Brian Hicks at 937-5561 or bhicks@postandcourier.com. To read previous columns, go to postandcourier.com/hicks/.
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10216340 (anonymous) says...
Oh my goodness....soon we will be calling our elected officials "mommy" and "daddy". This is one of many baby steps our government is taking towards running every aspect of our lives. It is so insidious that we won't know what hit us when one day we wake up and have to get approval for every decision we want to make. Ford is acting like a communist and so is every other supporter of this and measures like it.
March 18, 2009 at 6:44 a.m. ( permalink | suggest removal )
Get_seriousHELP (anonymous) says...
Posted by 10216340 "Oh my goodness....soon we will be calling our elected officials "mommy" and "daddy"."
Yes indeed, the nanny state is in full power grab mode and that is just what the obamaNation democrats want. Needy victims, addicts to the State (the federal government).
Soviet Premier Nikita Kruschev bragged to American Patriot and Secretary of Agriculture Ezra Taft Benson: "Your grandchildren will live under communism!" To which Secretary Benson enthusiastically replied: "If I have it my way, your grandchildren will live free!"
Kruschev, undeterred, fired back: "Oh you Americans! You're so gullible! We'll spoon feed you socialism until you're Communists and don't' even know it. We'll never have to fire a shot!"
A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and carries his banner openly. But the traitor moves amongst those within the gate freely, his sly whispers rustling through all the alleys, heard in the very halls of government itself.
For the traitor appears not a traitor; he speaks in accents familiar to his victims, and he wears their face and their arguments, he appeals to the baseness that lies deep in the hearts of all men. He rots the soul of a nation, he works secretly and unknown in the night to undermine the pillars of the city, he infects the body politic so that it can no longer resist. A murderer is less to fear." -- Cicero (106-43 BC)
"I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under pretense of taking care of them. "
-Thomas Jefferson
March 18, 2009 at 7:57 a.m. ( permalink | suggest removal )
hotchick (anonymous) says...
I have tried three times to write a comment and each time the P&C website automatically refreshes and wipes it clean. To make this short:
1 - headline is misleading
2 - I'm tired of feeling sorry for those who are making bad decisions with their money and debt. I have budgeted, lived within my means, took a fixed mortgage that I could afford, paid my bills on time, etc. Yet we are supposed to feel sorry for those who keep making bad decisions and are getting sympathy and handouts. I should be the one being rewarded for taking care of myself instead of making dumb decisions. Americans need to grow up and stop looking to the government to bail us out and to make laws to help protect us from ourselves.
March 18, 2009 at 10:52 a.m. ( permalink | suggest removal )
postman01 (anonymous) says...
If we all agree on this, why do we keep REELECTING the same people?
March 18, 2009 at 10:54 a.m. ( permalink | suggest removal )
postman01 (anonymous) says...
Why are we constantly reading news articles written by people with whom we obviously disagree?
March 18, 2009 at 10:57 a.m. ( permalink | suggest removal )
eyfigueroa (anonymous) says...
*SIGH*
We cannot and should not save everyone from themselves.
Without failure there cannot be success.
March 18, 2009 at 10:59 a.m. ( permalink | suggest removal )
eyfigueroa (anonymous) says...
postman: I do not vote the same folk in every time. Apparently i'm in a true minority.
I read/comment on these articles because the P&C is the only local daily we have. I actually like reading about what's going on even with the political slant.
March 18, 2009 at 11:44 a.m. ( permalink | suggest removal )
UrGatorbait (anonymous) says...
Taking care of the stupid and irresponsible is called "caring" if we don't fall over ourselves to "help" them, we get labeled whatever name and are subjected to the garbage, victimhood, fish wrap quality articles that the P&C publishes nowadays.
March 18, 2009 at 12:10 p.m. ( permalink | suggest removal )
wjhamilton3 (anonymous) says...
Apparently most people are happy to let anyone with money eat the poor alive in South Carolina. This is the last stage of economic failure. Most of these people are living on virtually nothing. They're not supposed to get paid a decent wage. They're not supposed to join a union. They're not supposed to live under a bridge, in a tent in the woods or at the homeless shelter. Many of them are sick, old or disabled and employers don't want them.
I assume good Christians don't believe they should kill themselves. They aren't going to just disappear.
Now that family size has declined so much (you don't want the poor to have babies either) we're going to have a lot of lonely, elderly poor. Many of these people survive their children. Many of their children don't have jobs.
The retired population we recruited to buy houses is going to get older and poorer. This is a huge problem in Florida and California.
The full pews on Sunday are full of empty hearts and God knows it all.
March 18, 2009 at 2:40 p.m. ( permalink | suggest removal )
eyfigueroa (anonymous) says...
wjhamilton: I'm not going to speak to your rant against Christians. I'm not a religious person however one needs not be one to state the obvious.
MOST of those that visit and get trapped by the payday loans joints are victims of their own making.
Even if you make less than $10/hr you can still try to live within that or you do what it takes to elevate yourself. I left the Army and made $6.50/hr with only $300/mo in child support. We lived 'poor' and we plowed through it.
Years later when I was making triple that, instead of remembering humble beginnings I started living beyond my means and found myself at a Check Casher. I had no one to blame but myself. I often saw many of the people you are railing about and believe me most who do use those places aren't your poor & huddled masses, but people who didn't live within their means. People who were chatting on their cell phones rushing in to get their $300 to pay the cable bill.
Now are ALL of those who use these places ne'er-do-wells?
No.
But as passionate and heartfelt your post was, it failed to do what is needed to be done, be intellectually honest about the hows and the whys most people use these places.
My posts don't lack charity; in fact my heart is full of it. I would gladly volunteer my time, money and resources to help those who are truly less fortunate.
But let's be real here, legislating behavior is NOT going to cure the bad habits that led most people to these payday loan outfits. They will just find another way.
We cannot and should not attempt to save everyone from themselves.
March 18, 2009 at 3:31 p.m. ( permalink | suggest removal )
eatmorecollards (anonymous) says...
If one takes out a loan for 300 dollars, pays back 345 dollars, turns around and takes out another 300 dollar loan and does it every two weeks, for a year, its like someone loaning 300 dollars and making 1170 dollars on 300 dollars in a year.
Ridiculous!
March 18, 2009 at 6:14 p.m. ( permalink | suggest removal )
wonderdog (anonymous) says...
Nicely said, eyfigueroa.
The people who go to the payday advance places could do what my ex did - take out the loans, default, take out more, default, etc.
March 18, 2009 at 8 p.m. ( permalink | suggest removal )
MyView (anonymous) says...
eyfigueroa-"AMEN"
You cannot legislate behavior or morality.
March 19, 2009 at 8:58 a.m. ( permalink | suggest removal )
gingerlatte (anonymous) says...
This is a prime reason we need to teach money management in schools. If enough people became money-wise, then there would be less of an incentive for payday and title loan companies to open their doors. But, that's as far as I think we should go. If you've been taught how to manage your money and you still choose to use a service like payday loans, you are on your own.
Is it me or have we become bail-out happy? No one seems to be learning a lesson here other than holding out their empty hands will gain them sympathy. What happened to responsibility and self-pride?
March 19, 2009 at 9:10 a.m. ( permalink | suggest removal )
coolfreaknbeans (anonymous) says...
Great post eyfig ! I absolutely agree. You can't dictate good decision making. Some people have to live an learn. To my knowledge, the military does not let any military members get these loans anymore. Just like if you're a military family you can't get "rapid" tax refunds either. It's so stupid. As if we need the gov't to hand hold and say, "No, no, that might not be a good decision" Thanks Mommy. Read the fine print and if you're willing to pay a huge fee/rate, it's up to you. Not the govt.
March 19, 2009 at 10:03 a.m. ( permalink | suggest removal )
please_believe_it (anonymous) says...
its a shame that recommending that someone live within their means so they don't have to hustle to a govt agency to get food or go to a loan shark payday lender and can eventually improve their lives for themselves and their families is considered by so many to be cruel, mean and heartless...there's nothing virtuous about being poor...think about it...when you're poor you can't even help others in need..its all about yourself
March 19, 2009 at 11:50 p.m. ( permalink | suggest removal )
NeedCashSometimes (anonymous) says...
Payday loans are accessed by 19 million Americans each year because they offer significant cost savings versus:
The avg. $27-plus-interest fee on a bank overdraft (APR 704%)
The avg. $29 fee on a late credit card payment (APR 757%)
$51 in NSF and merchant fees on a $100 payment (APR 1329%)
A $50 late/reconnect fee on a $100 utility bill (APR 1303%)
In addition to being more expensive, these options negatively impact credit ratings that may hurt a consumer's access to employment, housing, insurance and other credit options.
APR is a measurement tool designed to compare ANNUAL products and does not accurately depict the fees a consumer pays for a $100 two-week payday loan. In addition, similar products with similar fees are currently offered by traditional banks and credit unions with terms that may result in additional fees and even higher APRs.
Most bank account holders would pay more to withdraw their own money from an ATM than Nanny State Do-Gooders would suggest short-term lenders charge for an unsecured loan.
Don't limit consumer credit options or competition. Working families pay the steeper price.
March 20, 2009 at 12:22 p.m. ( permalink | suggest removal )
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