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.