The payday loan industry is indefensible

A mother and her two children, one a baby in her arms, the other a toddler holding her hand, approach a neon-lit storefront. It is snowing outside, but the toddler is trying to remove her puffy jacket for reasons that are probably very important to her but very frustrating to her mother, who struggles not to drop the baby while forcing the sleeves back around her daughter’s tiny arms. That accomplished, the woman guides her little girls past the threshold of a business named, unbelievably, “Cash Store.”

They are there because the woman has no money and needs some. Probably it will be another two weeks before she is paid again by the pharmaceutical chain that employs her, at the rate of $10 an hour, to stand behind a counter and ask customers whether they have signed up for the Rewards Program. But she hasn’t got two weeks to wait. She has to put gas in her vehicle and pay her rent and the bill charged by the care center where her children spend their days while she furthers the vital mission of the Rewards Program. She has to buy formula and juice and crackers and maybe food for herself. She has to figure out what’s going on with the bill from the pediatrician’s office — but, what’s that, it’s already gone to a collection agency even though she was told by an agent of the insurance company to which she gives $300 a month that her daughter’s visit was fully covered. She wants to call to ask about that, but her phone service was terminated last week. Maybe, too, in a moment of rashness, she did what Sen. Chuck Grassley (R-Iowa) told her not to do, even though he expects robust economic growth this year, and bought something for herself, like a beer or a movie ticket, that she didn’t really need.

So rather than explain to her baby that the formula will have to wait she hands the Cash Store clerk a copy of her pay stub and her bank account information. In a few minutes she leaves with $400. If all goes well, she will only have to pay back the $400 plus another $200 in interest and miscellaneous fees. Doubtless this $200 would be useful to her in two weeks’ time, but she needs that $400 now.

Payday lending, with its grotesquely high interest rates and fees, …read more

Source:: The Week – Business


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