We don't need another payday loan business in Columbia

Friday, November 27, 2009 | 12:01 a.m. CST; updated 8:20 p.m. CDT, Monday, August 30, 2010

Payday loan stores remind me of what comedian Chris Rock once said of ATM machines: “Drugs are illegal, but ATM machines are open twenty-four hours a day. Have you ever taken out three hundred dollars at four o'clock in the morning for something positive?”

Loosely translated in Columbia: Have you ever walked into a payday loan store with nothing but air in your bank account and had something positive come out of it?

Based on the reports from those who attended last Monday’s forum at the Columbia Public Library, the answer is a definitive “No.”

For the unaware, payday loan businesses dole out quick cash at obscenely high interest rates. The state caps interest at 75 percent, which means a $1,000 loan could cost an extra $750. The lenders, however, list 430.68 percent as the interest cap in their fine print, which is revealing of their business model to say the least.

Even before Monday’s forum, I’d attended community meetings in which individuals tearfully recalled their experiences with payday loans. Debts that started in the hundreds quickly skyrocketed into the thousands. Loan reps began harassing them at work. Nearly all felt misled or abused.

Before you cry personal responsibility on behalf of those taking out the loans, consider this: We already have 24 payday loan stores in Columbia. Would you want 24 strip clubs in Columbia? How about 24 mini-casinos? If that were the case, I can only imagine the outcry that would arise at Columbia’s next City Council meeting.

Rep. Mary Still, D-Columbia, who sponsored the forum, is also sponsoring legislation aimed to place a tighter cap on fees and interest as well as limit loan renewals, but the General Assembly hasn’t allowed her bill to come up for debate. I wonder why.

The City Council, to its credit, placed a six-month moratorium on new payday loan stores while the council considers expanding zoning restrictions and, based on population, limiting the number of business licenses issued. I’m not a fan of oppressive regulation, but for Columbia to avoid regulation altogether is to send the message to payday loan stores that they can charge whatever they want, wherever they want, as many times as they want.

Most of us have endured a financial jam at some point. Would capping interest at 36 percent, as other states have done, really be so unreasonable? At the least, we can stop them from overpopulating Columbia like liquor stores.

Most ridiculous was hearing lobbyist Randy Scherr on Monday refer to payday loan recipients as “savvy” borrowers who are simply frustrated with traditional banking venues. “Savvy” sounds like a trumped-up buzzword from a public relations team to describe dirt-poor residents who are one paycheck from the curb. Borrowers who are savvy tend to avoid short-term, high-interest loans altogether, especially when garnished against their paycheck. How many of these supposedly “savvy” borrowers showed up to Monday’s forum with glowing reviews of payday loan stores? Zero.

Instead, we heard from a lobbyist who represents as many as 350 payday loan businesses and was there because he was paid to be there. To figure out whom payday lenders are targeting, one need only drive around Columbia. The sketchier the area, the more likely you’ll see a payday loan store.

Memo to those in need: If you’re facing a financial crisis or know someone who is, there are far more viable alternatives than legalized loan sharks. The Columbia Housing Authority offers 10-week courses in personal finance. Circles, a program under Central Missouri Community Action, can also provide financial counseling as well as group support. They won’t loan you money, but at least they can help you manage it. And, unlike payday loan stores, they won’t charge you interest.

Or charge you anything, for that matter.

Brian Jarvis is a journalism graduate student at MU and producer for the radio show Global Journalist.

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Allan Sharrock November 29, 2009 | 5:38 p.m.

I am all for good mgt of money. Why didn't you discuss how banks have a overage charge of $25 or more when you take out more than what you have? Plus it isn't like anyone puts a gun to a persons head and makes them walk into the payday loan place. At least they are not going to cause you physical harm if you don't pay back the money, unlike some other personal lenders. Look the bottom line is that people need money in a hurry at times and banks are not fast. People will always need quick cash and if they can't get it legally they may resort to other means.

(Report Comment)
Ryan Harris November 30, 2009 | 8:39 a.m.

If payday loan businesses were so horrible to their customers, then how could the industry have grown to where it is today. Sure, there are a vocal group of people unhappy with their payday loan experiences. Every business has its share of unhappy customers. You don't hear from those satisfied with payday loans because of the stigma placed on the lending practice by media elitists and consumer advocates who think they know what is better for everyone else. Most people want to keep their business private.

Allow me to explain the interest rates. Critics quote these triple digit interest rates, but fail to realize or mention that those numbers are based on an annual basis. These are two week loans. There is a one-time fee placed on the money you borrow, typically between $17 and $20 per $100. That one-time fee never changes. An interest clock is not set when you borrow the money. You borrow $100 and you pay back $117.

If you cap the interest at 36 percent, lenders would only be able to charge about $1.35. That doesn't cover the cost of writing the loan. Arbitrary rate cates shut down the payday lending industry and eliminates choice for consumers.

(Report Comment)
jane whitesides November 30, 2009 | 10:18 a.m.

Mr. Harris, aren't you a paid spokesman for Check into Cash? I think you would have more credibility with your statistics and statements if you disclosed that fact.
Jane Whitesides
Missouri Progressive Vote Coalition

(Report Comment)
John Schultz November 30, 2009 | 10:54 a.m.

A couple numbers to insert in this conversation:

I believe Bryan is incorrect when he talks about a $1000 loan resulting in $750 interest since my understanding is that payday lenders are allowed to originate loans up to $500 and not a higher amount. I'm also a bit dubious that the 400+% interest rate is listed in the fine print.

Columbia charges $30 to $45 to reconnect utilities if they have been shut off:

5. What are the fees for disconnection?

If a customer's delinquent account is on the shut-off list, the following charges apply:

$15 trip fee
$15 for the re-connection trip fee.
$15 for after hours connections trip fee.

If one is in a temporary bind and money is on the way shortly, it may make sense to hit a payday lender for the needed money to save on the reconnection charges. As Mark has posted in another thread, long-term money management is a better solution, of course.

(Report Comment)
Ryan Harris November 30, 2009 | 12:22 p.m.

Yes, I am a spokesman for Check Into Cash. I assumed it was evident I represented the payday lending industry based on my comment. I apologize for not being clearer about that. I do stand behind my original comment and the figures in it.

(Report Comment)
Jess B December 1, 2009 | 8:31 a.m.

I find it interesting that there is absolutely no discussion in this article about access to credit. From my understanding, these loans aren't offered any cheaper by other legitimate lending institutions. If they were offered cheaper or more conveniently by other lenders, consumers would get the loans somewhere else other than payday lending stores. If one of these consumers bounces a check by one penny, they are charged between $20-$35 depending on where they live. A $17 flat fee sounds cheaper to me in the long run. I think consumers are smart enough to figure this out.

(Report Comment)
Brian Jarvis December 5, 2009 | 11:45 a.m.

Let me reiterate the main point of my article was not that Payday loan businesses need to be outlawed, or that banks and lending institutions are without flaws, but rather that Columbia is at capacity. With 24 Payday loan businesses blighting the landscape, it's safe to say the market is effectively captured.

(Report Comment)
John Schultz December 5, 2009 | 2:43 p.m.

If the "market is effectively captured" then why does the city need to establish a moratorium or place further limits on that particular business type?

(Report Comment)
Allan Sharrock December 5, 2009 | 6:47 p.m.

So you think having the word Pay Day loans on buildings is blighting the area? That makes little sense to me. I really don't see how pay day or check into cash or whatever other spin off causes a building to be blighted. If the sign is in good condition then it really shouldn't matter what it says within reason. If the market is captured don't you think they (pay day) wouldn't build/rent anymore buildings. There are a lot of rental buildings sitting vacant and if one business moves in then so will a second and we need more businesses.

(Report Comment)
Tim Dance December 6, 2009 | 2:01 p.m.

The concentration of payday loan places are near the more poorer neighborhoods. There is a strip mall that has not one but two payday loan places. The market is indeed effectively captured. The moratorium is for those who erroneously believe it is not. This town has a history of overbuilding. The payday loan industry has flown under the radar for too long. Thanks to Mary Still for flushing this usurious practice in the open.

When you use old drive-though restaurants, garages, and "under used" strip malls for stores. It looks pretty crappy. Again the Libertarians add nothing insightful other than their "government is bad" mantra. I'm glad their ideology is falling on deaf ears. Ms. Whitesides, you keep challenging these "payday loan" enablers.

(Report Comment)
Allan Sharrock December 6, 2009 | 3:11 p.m.

One day Tim the government will try and take away something you care about or they will restrict your freedom in some way. Then you will wonder why so many people dislike giving the government more power then they already have. The reason the businesses are near poor areas only makes sense business wise. I mean a guy that has a 250K home doesn't exactly need to visit a payday place. If you are living from paycheck to paycheck then you may need some help and you want it from a legal source. The only real problem the government has with payday loans is the fact they didn't think of them first.

(Report Comment)
Ray Shapiro December 6, 2009 | 4:31 p.m.

There's no moratorium on bicycle repair shops or tattoo parlors and I don't see them popping up everywhere.
If payday loan companies wish to take a chance opening up in legitimate store fronts, why should the government stop this?
Are payday loan companies the new enemy of the poor?
Perhaps if the government worked in conjunction with small business entrepreneurs instead of trying to muscle them out of existence there would be more job opportunities for those who can work instead of the ever-growing government payroll and increased public dependence on Uncle Sam for everything.
If we want a community with alternative financial help for emergency situations to its poorer members, then perhaps our politicians should be cultivating our nonprofit sector and interfaith groups instead of punishing or blaming businessmen who are in the middle of cash flow and job creation in the private sector.
Dems have a funny way of doing things recently. Even Obama saw no value in including the U.S. Chamber of Commerce and the National Federation of Independent Businesses in his discussions.
("The government does not create wealth. The government does not create jobs," Taylor said. "The government's role is to allow the energy and the initiative of the American people to emerge in the marketplace. That's where wealth is created. That's where jobs come from.")
I noticed this town recently had a meeting of private landlords.
Can you imagine such a concept.
We actually have opportunists who become private property owners who then rent to the poor "serf."
What happens to these entrepreneurs if government officials suddenly decide that there are too many landlords or they are charging too much rent to these poor unfortunate people in need of a roof over their heads?
When will Uncle Barry not just look to redistribute financial wealth, but also take away private land and hand out parcels to these pitied renters?
Villafy Libertarians, Republicans, Conservatives and Moderates if you think that justifies your position on the payday loan companies or the insurance companies or increased muscle of union/government control.
I choose to villafy the lefty progressive movement as it permeates the thinking and actions of the populace.

(Report Comment)
Tim Dance December 6, 2009 | 8:30 p.m.

Freesom = exploitation

There are 90 nursing homes that provide "payday advance" services to their underpaid workers. But hey that's freedom. No, that's disgusting. Government should protect their citizen from exploitation. Not making anyone out to be the villain, the worshipers of the "free market" are doing that on their own.

(Report Comment)
John Schultz December 6, 2009 | 9:14 p.m.

Good ol' Tim Dance and his anti-Libertarian boogeyman stories. Too bad my kids are asleep and I can't scare them with his mutterings.

(Report Comment)
Ray Shapiro December 6, 2009 | 11:15 p.m.

Know of any private employers allowing payroll advances or company loans at "reasonable" interest rates?
(Some might view that as an employee benefit.)
Of course, those who are underemployed and live beyond their means or constantly have financial emergencies may wind up "owing their soul to the company store."
But then again in the words of Dylan, "You're gonna have to serve somebody."
(At the same time, like I've said, what role can and do the church and nonprofits play in all of this?)

(Report Comment)
Allan Sharrock December 7, 2009 | 8:57 p.m.

Tim you are free to open a loan company and charge whatever you want. In fact you can charge nothing at all. Think about how the pay day would react. They would have to lower their rates in order to compete. That is free market at its best.

(Report Comment)

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