That Sioux Falls paper's business journal covers the booming payday loan business in Sioux Falls, which currently has 56 of the state's 186 licensed payday lenders. (South Dakota has 67 hospitals. I'll guess that South Dakota has fewer than 186 grocery stores.) The usurers predictably portray themselves as decent businesspeople meeting financial needs unmet by a system beyond their control:
“Business is good,” [owner of three Dollar Loan Centers Chuck] Brennan said. “There is an incredible problem we have in this country when it comes to credit. Until the root cause is addressed, payday lending will continue to be an additional solution to short-term cash flow needs.”
...“The Loan Factory reviews a consumer’s credit file when making a loan decision. Loan amounts are based in part on one’s credit history and terms and APRs are adjusted. In doing this, we can service the needs of a wide range of consumers,” [owner Kevin] Cooper said. “There are always financial emergencies, and the good news is there are financial options where a majority of consumers can be serviced” [Virginia Olson, "Loosely Regulated Loan Centers Flourish," Sioux Falls Business Journal, 2013.07.24].
Come on: can we just call paying $22 plus 500% annual interest on a $100 loan predatory lending? Usury? Taking advantage of people in dire straits?
Olson gets the director of the state Division of Banking, Bret Afdahl, to assure us that he "fields very few complaints" about payday lenders. Of course he doesn't: how can anyone file a complaint when South Dakota makes predatory lending perfectly legal.
Rep. Rev. Steve Hickey (R-9/Sioux Falls) would like to change that situation. He says South Dakota should follow Montana's example and cap interest rates at 36%. That Montana initiative in 2010 got 72% voter approval. Payday lenders shut down pretty quickly. Rep. Hickey floated similar legislation during his first session in Pierre; his Republican colleagues shot it down quickly.
Now I'm hearing grapevine hints that Rep. Hickey may be organizing a coalition to make another push for an interest-rate cap to pen the payday predators. Hickey himself doesn't say "Initiative!" but he did send me this follow-up to the Olson article, saying he thinks an anti-payday-lender initiative would pass muster with South Dakotans:
We've tried to get a 36% interest rate cap passed in the legislature and those attempts quickly die in committee. It would seem to me an exercise in futility to try again with the legislature. However I do think a majority of voters in our state would respond favorably to an interest rate cap measure on a ballot because few would disagree that 400-600% interest is ten times too high. There is a loose coalition forming and the formation of something like South Dakotans for Reasonable Lending could spearhead an interest rate cap at the ballot. It would be David against Goliath in terms of money's available to fight back against predatory lenders in South Dakota especially now that the big banks are in on the big money. A case could be made that our states usury laws are immoral and even Gov. Janklow later admitted those laws were repealed to bring in jobs not open the doors to the exploitation of the poor or lead to charging excessive interest. It's immoral to target those barely hanging on to the fringe of our economy with defective financial products designed to be debt traps. The rest of South Dakota picks up the tab as these folks turn to the state for assistance while the big banks get bailed out by taxpayers for their irresponsible lending [Rep. Rev. Steve Hickey, statement, 2013.07.24].
Hmmm... an initiative to rein in payday lenders, alongside an initiative to raise the minimum wage... could we see a little working-class synergy on the 2014 ballot?
And what's that admission from Bill Janklow of which the good Hickey speaks?
Now, all the human side of it aside, if we're talking about the industry and 18, 19, 20-plus percent interest, do I think that's a healthy thing for human beings? The answer is no, I don't think that's healthy at all. And to the extent I played a role in that, I understand that [Bill Janklow, interview, PBS: Frontline, 2004.08.24].
That's Patron Saint of Citibank Bill Janklow, saying 20-plus percent interest is unhealthy. Our payday lenders are getting 500%. Dropping them to 36% seems a reasonable compromise between health and profit.
OHHHHH MR. Hickey!! You must know by now we are a republican controlled state. Any thing that favors the poor,the down and out, the low salaried people will be killed in the republican controlled committees in pierre!! Then they complain about people being lazy and all they want is to live on welfare!! Look what happened to the hard working people at the northen packing plant!!!! The state pumped millions of dollars into that fiasco and now people are complaining about the workers with no pay checks receiving unemployment!!!! will the payday lenders help them with there 500% loans?? No way!!!!
Good luck Rev. Hickey. On this I agree with you. But now you know what it's like to be a Democrat in this state
Republican legislators, the gov, the AG, the whole rotten bunch should be ashamed of themselves for tolerating the usury and other ripoffs of banks, and payday lenders (often the same with different names. There isn't just something rotten in Denmark, Pierre has become rotten from top to bottom.
The payday loan 36% rate cap petition was the most widely accepted and fastest-signed petition I've ever carried. The petition was signed by the entire political spectrum with few questions, except for libertarians.
We carried the payday loan petition with the minimum wage increase petition. It was a lot harder to get minimum wage petition signers. Negative responses included, "If people can't make ends meet on $7.25, they won't make it on more, either."
Payday loan corps spent a lot of money for rallies and advertising where they threw out gross numbers of lost jobs and revenues if the initiative hit the ballot. They hired pretty serious goons to harass and intimidate petition gatherers. They also dummied up their own ballots, said the 36% rate cap petitions were not legitimate, but to sign their better petitions with a 12% cap, then threw those signatures away.
There's a lot of money spent to protect the loan sharking. Even the mob didn't charge that much interest.
I see windmills worth charging...
...just don't charge the windmill makers over 36% interest.
Two topics worth this discussion.
The state slogan is "Under God the People Rule."
Well, given the new chair of the GOP is a very Godly man, I would think that he would embrace this law based on Biblical principals...along with the sin of gambling.
Certainly a leader like that couldn't ignore Christ's teachings on usury...or for that matter gambling.
Or on the other hand, was the South Dakota state slogan just a gimmick and maybe a typo...Under the GOP the People Rule...
My question is why doesn't anyone just come right out and ask our elected leaders...Tim Johnson included...if they follow the Bible...or is the campaign money more important.
Of course the response will be...forget God...think of the money and jobs!
Thank you Rev Hickey!
Pastor Hickey...here's a way for you to get your point home. Stage the money changers in the temple...the visual alone would carry the day.
Wait...what? Pastor Hickey is saying 36%?
Pastor Steve...what does the Bible set as an interest rate?
"If he has exacted usury Or taken increase -- Shall he then live? He shall not live! If he has done any of these abominations, He shall surely die; His blood shall be upon him." (Ezekiel 18:13)
Ask them if the word of God in Ezekiel have the same weight as God's words in Leviticus that the use to condemn abortion and homosexuality...
Better yet, just ask them if they are the hypocrites the Bible despises.
Use can use this as a reference for your GOP bretheren.
For once I'll agree with you on something. These places are bad news. I heard the owner of DLC is like the mob...wouldn't surprise me.
Oh great...now the good Reverend Hickey is supporting beauty contests to determine a woman's worth. Oh well, the Bible has women as second class citizens...so it's good to know he values this evaluation of women.
Just guessing that in GOP South Dakota, the pageant contestants are judged like 4H livestock on their breeding capability. Just like their brother in Iowa, Representative Steve King, who likes to equate people different than him to animals...like 130 pound Hispanic kids with calves like cantaloupes...or dogs.
Say, isn't Steve King good buddies with Kristi Noem?
Has she come out and denounced him yet? Guess I'll wait to see that on the SDWC where Pat can post how both Steve King groupie Dan Lederman and Kristi have both denounced and disowned the fine upstanding whack job House member King.
What? That won't happen?
Now pity PP is hammering the South Dakota Dems on not getting involved in the New York City mayoral race.
But as long as you brought up the War on Women...please proceed.
Tell us how South Dakota is championing the constitutionally legal right of women to exercise their right to carry or not carry. Even Pat is not that dense to see the obvious tie to gun rights and reproductive rights.
Liberal churches in MO supported payday loan 36% rate cap, but mainstream churches didn't want to talk about it.
Interestingly enough, the biggest and loudest advocate for the cap from the religious sector was the local muslim mosque. Islamic law prohibits usury - charging and collecting interest. They find it unethical and immoral, also.
Maybe they should put a ridiculously high ceiling like 75% so the credit card companies won't complain. Take the big money guys out of the protest and this might pass. The big guys won't complain in public. They just tell legislators that jobs will disappear.
Just a point of clarification, Roger. The big banks will complain no matter what you do because they provide the payday lenders the lines of credit that they use to make their loans. Payday lenders are just fronts for the big banks at this point.
Hey, Taunia! I see Montana did pass a minimum wage initiative in 2006 with a 73% aye vote. Did your 2010 effort not gain traction because that previous vote was still fresh in memory?
And Taunia, what's your read on the synergy between having both usury and minimum wage on the ballot? Does one issue boost or drag down the other?
The 36% cap would only apply to payday and title loans, not credit cards.
Steve: any idea to what degree fringe banking and video loottery are interrelated?
Pawn shops, payday loan centers and casinos are the trinity of the poverty industry in SD. I don't have data on the connection but I do have sad stories and that these are all tied together is to some degree self evident. Those who visit our state notice these three immediately when they drive through town. It's stark. Those who live here don't so much notice.
We carried both petitions last year, 2012.
MO Senator Claire McCaskill rode the wage increase issue into office in 2006, and it passed here by, I think, 67%+/-. There was a little of the "Didn't we just give them a wage increase?" mentality in last year's signature gathering. I think the stagnant economy and uncertainty were the biggest factors last year.
You won't get either issue passed on a midterm ballot.
I think it's a good thing to carry these two petitions together. I think carrying the minimum wage separately would be a much tougher sale. Intro the payday cap petition to a signer first and they're more willing to sign the min wage.
How does that affect your position in the party, Steve?
Thanks... and sorry, Taunia! Brain fart, confusing MO and MT.
New minimum wage for Montana went into effect Jan. 1 of this year. Some progressive views here:
This cap sure sounds good on the surface. Easy to defend isn't it? Got the Bible on usury, the mob, exploitation of the poor
But not a ounce of thinking of unintended consequences.
Unintended consequences? Let me guess, Troy: we Dems (and Rev. Hickey) hate the poor. We want to lock them into poverty by denying them the high-interest credit they need to build their financial futures. Something like that?
The consequences are that the predators leave SD. And here why this is good for our state:
The poor can get $300 thirty day loans from credit bureaus. Stay tuned.
I'm still waking up.
Dang: looks like Rep. Hickey is ready to rumble even when he's half-awake.
From Hickey's EOI link (a distinctly progressive-sounding Washington state outfit), in 2011, payday lenders cost the U.S. economy "$774 million in lost consumer spending and resulted in the loss of more than 14,000 jobs. Likewise, an increase in Chapter 13 bankruptcies of 1.587 percentage points (or 15.87 per 1000 borrowers) led to an overall loss of nearly $1 billion in the U.S. economy."
The CNBC article says 15 states have banned payday lenders. CNBC also notes the support big banks like Wells Fargo are giving the payday lenders, but they also note that JP Morgan could be our ally in a fight against payday lending. Maybe if we can just get the big banks to realize they can offer credit products like the credit unions do and thus take up the slack the payday lenders will leave when we drive them out of business, the banks will be happy to get the extra business.
From your progressive Montana counterpart, CAH:
Absent dad is late on child support. Mom can't buy groceries.
Car is in shop and needed to keep job. Can't get it until repairs are paid for.
Here is the reality:
Bank makes $20,000 car loan and they make about $1,500 over five years for making that loan (after their cost of funds). This is used for salary, overhead, and profits.
Payday lender makes $200 pay day loan for two weeks. Mom pays them back $225 plus $20 origination fee. Effective Annual Percentage Rate is 500%. Assuming the cost of funds are zero, the PDL has $45 for salary, overhead and profits.
Cap the above scenario at 36% APR, the PDL has $2.80 for salary, overhead and profits.
This low of gross revenue will eliminate this source of short-term funds for this people. Just so you know the consequences.
PS. The credit union solution will not be two week loans. You will be burdening these people with longer-term loans.
Seems like most micro-loans come with high APR rates. It's a whole different lending instrument, I think. Key to me would be to go easy on the collection side. If you're going to make that much, you can wait a while for your money if the customer is really strapped.
Hey Troy, let's start a little lending company.
Call it "Rich Uncle Jones" or maybe "Dollah Bill's".
Could be a hoot.
I'll do the logos and stuff.
You do the spreadsheets.
We could hire Stace and IP to do collections, and maybe Hickey and (...wait for it....) Howie... to be credit counsellors. :-)
My friend Troy - what did people do before payday lenders were in SD to solve their problems? What do they do today in Montana and the 15 states and on military bases where payday lenders aren't allowed?
btw No early payback penalty for a credit union. They can pay a 30 day loan off the next day if they want.
If the payday lender in your scenario above was only making $45 on the loan no one would have any issues with them. We both know they make far more when all is said and done. You make it sound like they can barely cover overhead. Please. Enormous amounts of profit are in this industry and their clientele are by and large the poor and the working poor - not the middle class. The prey on the unsophisticated consumer exploiting moments of desperation and leave the state of South Dakota to come along tend to the one the robbers left on the roadside.
In that Argus article the payday people made it sound like it only costs $25 to borrow a hundred. If that's true, why don't they build the business plan around that and charge a $25 fee and charge 25% interest.
What's true is they depend on people flipping the loan - average 9 times - and what's true is that on the average loan size of $375, borrowers pay an average of $520 in interest.
Lunch next week, on me. :-)
Here is the real reality: Payday loans intensify a cycle of debt people are already in.
I'm a little shocked someone like Troy Jones finds it acceptable to not only take advantage of someone's debt situation, but to make criminal amounts of money off them.
No one disagrees there's a need for short term loans. The disagreement is the difference between 36% and 500% interest.
The 36% rate cap is what military persons and families pay for payday loans, and have been since 2007 per the Military Lending Act.
Why can't civilians have the same?
Here's a pretty good micro lending model. http://www.kiva.org/india
Hey, Steve! Do you have any data on what percentage of payday loans are paid back quickly as in the scenario Troy describes?
And this interesting: the Consumer Finance Protection Bureau says that payday loans usually aren't reported to the credit agencies, so they can't be used to build a better credit rating.
Micro loans in many African development programs run about 19% with flexible payback options. 98% of those who take out those loans are able to pay them back (Nuru International).
If it's not predatory in nature, micro finance can be an immensely valuable tool... but then it has to be a non-profit endeavor.
Payday loans are a whole different beast. I had a friend who worked for one in Vermillion, and she finally quit because their practices made her physically ill. They trained her how to get people to sign up for more loans when they couldn't pay off their first, creating more origination fees and interest fees.
Truly, we should not be preying upon the downtrodden. I may not always agree with the Reverend, but on this I am behind him 100%.
Hi BF! Glad you're keeping us on our toes again. Missed you!
He looks great, too T: like a kid again.
"No one disagrees there's a need for short term loans. The disagreement is the difference between 36% and 500% interest."
The fact remains: If someone needs $200 for two weeks (until the next pay day), an interest rate cap of 36% Annual Percentage Rate will generate $2.80 gross revenue of the Pay Day Lender. Who can keep the lights on for $2.80? Nobody. Thus, the resource for people who need these funds will not be there.
P.S. I'm always struck by the denigration of the intelligence of those who borrow these funds. Personally, I have a lot of respect in both the intelligence and the creativity of people who manage at this income.
Oh well. I guess if I cared more about the poor I could feel good about thinking they are idiots and need go-gooders to make decisions for them.
There's the Troy I know and love!
There are plenty of intelligent and creative people working in sex trafficking as well; that does not warrant legalization of that exploitative industry.
I have to ask, Troy: would you extend the same admiration to those intelligent and creative folks making it on minimum wage if they studied the laws, identified every social welfare program for which they qualified, and kept their children fed, warm, and healthy without having to surrender their hard-earned pittance to the losing equations of payday loans?
First, my point is Taunia wants short-term pay day loans to be available but wants a law that will eliminate them. Thus, she really doesn't want them.
Second, the sex trade never has anything good. It is inherently exploitive.
Pay day loans have their place. Don't punish those who can and do use them for the good.
Third, I am pretty vehement a great deal of the federal poverty programs are long-term counter-productive. That said, I do and would support an expansion of private charitable, state and local poverty programs and be willing to pay for it in taxes. And, a person in need in our locality should avail themselves to that short-term help. It is impossible to be charitable without someone to give to. The giver will always get more than the receiver.
is that an actionable offer, troy?
Interesting that there is so much concern that people can't get by with only 36% interest and there is no concern about the financial state of those so desperate that they go for pay day loans.
Having worked in a court services office often used by bankruptcy referees, I have become quite familiar with payday loans. A one-month loan for $200 will cost almost $400 to pay back after service fees are added and because of the peculiar way interest is computed.
In a recent case, a client obtained a 3-month loan of $1,000 through a credit union. The total cost to the client to pay back will be $1,026.
One of the hats I wear is that I have a large daycare and learning center - 40 employees or so, half are PT and we have 150 or so kids - waiting list of 30-40 more kids. You'd think we could make a decent profit but the margins are close because the ratios for babies is 1:5. We lose money on babies, lots of money . The ratio of teacher to kid for toddlers is 1:10 and we can make money with the older kids.
Every business has areas that are more profitable and other areas that aren't - but they offer the product and or service because they care about what people need.
Legitimate lenders can make money on some products and that makes it possible to offer other products that aren't money makers but they are needed by the people they exist to serve . Payday lenders exist to make money on people who need to be served instead of sucked dry. The credit unions do small short term loans and they aren't money makers and they do them anyway. They should be celebrated and highlighted.
how dat rino workin' for ya' rev?
thinking jesuit, frankly.
Payday loan predators set up shop in nursing homes. Are you ok with exploiting elderly people so some corp can make a buck?
Most of the payday loan interest collected isn't staying in your community or even your state. Wells Fargo (headquarters - San Francisco, CA) finances nearly half of the payday loan places. Wells Fargo got nearly $36 billion in bailout money, and haven't even paid all of that back yet. They've paid back the interest on their loan in stocks and dividends.
Wells Fargo needed a short term loan. Why weren't they charged 500%? Even worse, they were charging granny extreme amounts of money- and still do, while their hands were out begging for their own loan. Why? Because granny is an easy target and doesn't have a lobbyist.
As Anne and Steve Hickey point out, credit unions give short term loans. Credit unions are generally locally owned, and the money is reinvested in local communities.
There's a lot more to this than simply screwing over the poor people at a storefront.
Troy says, "I am pretty vehement a great deal of the federal poverty programs are long-term counter-productive." Troy, you thus want to do away with those programs, right?
Anne gives another good example of how payday loans are long-term counter-productive; Troy, by your logic, should we not thus want to get rid of them and seek alternatives to serve what little good purpose the payday loans fulfill?
And just how much good do payday loans serve? Let's have a concrete example: show me someone who got help from a payday lender and did not end up in a worse situation.
Examples of payday loans helping:
or maybe this one:
Read Tony Amert's comment again.
The big banks can stick a small desk in a bright yellow enclosure in a dark corner of their lobby and make small loans at low interest without significantly increasing costs. That would eliminate the expensive middle men.
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