Payday loan opponents struggle to get a fair hearing

February 22, 2010 | By | 20 Replies More

Payday loans are high-interest short-term unsecured small loans that borrowers promise to repay out of their next paycheck, typically two weeks later. Interest rates are typically 300% to 500% per annum, many multiples higher than the exorbitant rates charged by banks on their credit cards. A typical payday borrower takes out payday loans to pay utility bills, to buy a child’s birthday present or to pay for a car repair.  Even though payday loans are dangerous financial products,  they are nonetheless tempting to people who are financially stressed.  The growth of payday lenders in the last decade has been mind-boggling.  In many states there are more payday lenders than there are McDonald’s restaurants. In Missouri Payday lenders are even allowed to set up shops in nursing homes.

Missouri’s payday lenders are ferociously fighting a proposed new law that would put some sanity into a system that is often financially ruinous for the poor and working poor.  Payday lenders claim that the caps of the proposed new law would put them out of business.  Their argument is laughable and their legislative strategy is reprehensible.

Exhibit A is the strategy I witnessed Thursday night, February 18, 2010.  On that night, Missouri State Senator Joe Keaveny and State Representative Mary Still jointly held a public hearing at the Carpenter Branch Library in the City of St. Louis City to discuss two identical bills (SB 811 and HB 1508) that would temper the excesses of the payday loan industry in Missouri.  Instead of respecting free and open debate and discussion regarding these bills, payday lenders worked hard to shut down meaningful debate by intentionally packing the legislative hearing room with their employees, thereby guaranteeing that A) the presenters and media saw an audience that seemed to favor payday lenders and B) many concerned citizens were excluded from the meeting.  As discussed further down in this post, payday lenders are also responsible for flooding the State Capitol with lobbyists and corrupting amounts of money.carpenter-branch-library

When I arrived at 7:00 pm, the scheduled starting time, I was refused entry to the meeting room.  Instead, I was directed to join about 15 other concerned citizens who had been barred from the meeting room. There simply wasn’t room for us.  But then who were those 100 people who had been allowed to attend the meeting?  I eventually learned that almost all of them were employees of payday lenders; their employers had arranged for them to pack the room by arriving en masse at 6 pm.

Many of the people excluded from the meeting were eventually allowed to trickle into the meeting, but only aspayday-employees other people trickled out.  I was finally allowed into the meeting at 8 pm, which allowed me to catch the final 30 minutes. In the photo below, almost all of the people plopped into the chairs were payday lender employees (the people standing in the back were concerned citizens).  This shameful tactic of filling up the meeting room with biased employees has certainly been used before. [BTW, I suspect either that these employees were being paid to attend or I was witnessing a roomful of FLSA violations].

The irony of using these tactics is that the proposed new bills are arguably industry-friendly; they (I’ll sometimes refer to the bills in the singular since they are identical bills, one for each Legislative House) don’t outright ban payday lenders, despite the danger of these loans.  Rather, the bills gives payday lenders the ability to charge high interest rates (up to 36%) and “loan setup fees” (up to an additional 5% on a 90 day loan) on their loans.  This additional “setup” fee is the equivalent of 20% more interest per annum (for loans paid off in 90 days) and the equivalent of 130% per annum (for those customers who pay off their payday loan in 2 weeks). The new law thus gives payday lenders the ability to earn 56% (36% interest + 20%) on loans that are paid off within 90 days and 166% (36% interest + 130%) on loans that are paid off within 2 weeks.  Keep in mind that 20% would be a high rate of interest on a credit card.  Consider also that paying 460% interest on a payday loan of $500 is the equivalent of paying 5.8% interest on a loan of $40,000.   payday-employees-from-back

Bottom line – the proposed new law would allow payday lenders to charge between 56% and 166% on the money they lend out.   But that’s not good enough for the payday lenders, because they want to continue charging obscene amount of interest, 400% or more.  Keep in mind that payday lenders weren’t the first to rake the working poor with high interest loans where the payment was due on the customer’s payday. That tactic was commonly used more than 100 years ago, and we used to call those lenders “loan sharks. We outlawed those types of loans back then, because the financial services industry wasn’t as powerful as it is today.

The proposed new law also would make a second change that the payday lenders probably hate even more than the 36% interest rate cap.  The new law would prohibit payday lenders from making any new loan to a borrower until one week has passed after that borrower fully paid off an existing payday loan.  This provision was designed to prevent payday lenders from creating a continuous series of fake “new” loans to stretch out the original loan as far as possible.  The tactic is simple:  when a borrower comes into the payday loan store to attempt to pay off a loan, the lender suggests folding the amount still owed on the original loan into a “new loan.”  Consequently, the borrower pays the interest accruing over the past pay period (a typical example would be $70 of pure interest every two weeks on a 469% loan of $400), and the lender repeats this as often as possible.  This is how “short term” payday loans get converted into dangerous long term loans that strip borrowers of their freedom and dignity. You can see why payday lenders would fight so hard against this bill.  Who wouldn’t like to charge $70 every two weeks on principle of $400?  That’s $1,820 of interest every year—it’s like printing money.   Paying $70 twice a month is enough to buy a $7,500 car (based on a 6% loan over 60 months).

Payday lenders are motivated to make these fake new loans because the current law allows only six “renewals” (extensions of the original loan for an additional pay period).  They also like these fake new loans because current law also limits total interest and fees to 75% of any particular loan; it is much more profitable to make many “new” loans because the 75% cap is quickly exhausted over the course of any one loan since payday lenders charge such high interest rates. You can just imagine the sorts of conversations that occur in many Missouri payday loan shops: “Ms. Jones, why renew your 469% interest payday loan?  Instead, let’s tear up your original loan and finance that $500 you owe us with series of “new” loans for your convenience?  All you need to do is visit us every two weeks to pay the interest . . .”

But wait!  Aren’t these problems all caused by the payday loan customers?  Why do these people keep taking out loans that they can’t afford to pay off?   To address this issue, let’s start with the assumption that most consumers are bad at math. This is a proven fact.   For instance, 60% of Americans can’t add two simple numbers and calculate 10% of the total. Based on this undeniable fact, we immediately come to a fork in the road.  Given that our state has millions of people afflicted with innumeracy, what shall we do about it?  Should we allow these math illiterate people to keep getting victimized by products that they shouldn’t be buying?  Should we essentially throw up and rationalize that the consumers are incompetent and they’ve therefore got what’s coming to them?  Should we really buy into this social darwinist claptrap?   Or should we, instead, rein in sophisticated lenders who are profiting from the aggregate misery they are inviting?  The answer is clearly the latter, given that society at large needs to deal with the mess created by the irresponsible actions of payday lenders.

Consider further, this this compelling hypothetical offered by Elizabeth Warren with regard to defective toasters (her example was a comment on the danger of predatory home mortgages, but the logic can easily be extended to payday loans):

It is impossible to buy a toaster that has a one-in-five chance of bursting into flames and burning down your house. But it is possible to refinance your home with a mortgage that has the same one-in-five chance of putting your family out on the street—and the mortgage won’t even carry a disclosure of that fact. Similarly, it’s impossible for the seller to change the price on a toaster once you have purchased it. But long after the credit-card slip has been signed, your credit-card company can triple the price of the credit you used to finance your purchase, even if you meet all the credit terms. Why are consumers safe when they purchase tangible products with cash, but left at the mercy of their creditors when they sign up for routine financial products like mortgages and credit cards? . . . Consumers entering the market to buy financial products should enjoy the same protection as those buying household appliances.

Speaking of the sophisticated lenders, bear in mind that current Missouri law prohibits a payday lender from making a loan to any customer unless the lender has “considered” the financial ability of that borrower to reasonably repay the loan.  The problem is that most payday lenders flagrantly violate this requirement.  In the real world, most payday lenders put on blinders.  They merely look for the existence of a checking account and a pulse.  In my consumer law practice, I have never yet seen any indication that any payday lender has actually considered the income stream and current indebtedness of any borrower before making a loan.  Lenders don’t care if prospective borrowers have massive indebtedness. They don’t care if borrowers can barely able to make their house payments, car payments, child support payments and utilities payments?  In fact, such people would be perfect customers.  They are the kind of folks likely to beg for an unending series of fake new loans running juice at 400% or more.  The reality is that payday lenders prefer customers who can’t quite pay off those high interest loans.  They want semi-desperate customers who will come back to the shop with a handful of interest-only cash, again and again.

What is the damage done by payday loans?   Consider the financial damage done to a borrower who has taken out a payday loan of $500 at 400% interest, where the loan is stretched out for a year (by converting the original loan to a series of fake new loans).  After paying almost $2,000 in interest over a year, such a borrower would still owe the payday lender $500 principle.  That original loan of $500 looked so very tempting, but it was the financial equivalent of crack cocaine.  It’s pretty amazing, that payday lenders can squeeze that kind of money out of so many desperate people.  Those unending interest payments create a huge sucking sound, as scarce money that should be going to pay electric bills, medicine and school supplies feed the profits of big companies that are smart enough to have tricked the Missouri Legislature into believing that they were offering “short-term” loans.  And, of course, the damage isn’t only financial.  There is also human tragedy.   Harassing phone calls, lawsuits, damaged credit ratings, and parents working second jobs at $7/hour and thus unable to spend time with their children.  All of this is being caused by payday shops handing out dangerous loans to consumers who don’t have the resources to dig themselves out.  Research has suggested that payday loans often lead to terrible problems such as foreclosures and bankruptcy.  Truly, why should we allow such loans at all?  Yes, these customers were financially stressed before they took out the payday loans, but that financial desperation is multiplied by many months whenever they step into a payday store.  Virtually every person who ever takes out a payday loan would be better off without that loan.  The nicest thing a payday store could possibly do for its customers would be to refuse to give them those long-term 400% loans.consumer-attorney-john-campbell-presenting

Near the end of Thursday night’s meeting, long after the television cameras had packed up and headed back to the stations with footage of the slick presentation by representatives of the payday industry, attorney John Campbell was allowed to comment on some of these issues from the consumer’s perspective.  John also addressed some of the many false claims still being made by payday lenders as part of their efforts to trash the proposed new Missouri law:

John and I work together at the Simon Law Firm in St. Louis.  We are currently litigating several complex class actions against some of the biggest payday lenders in Missouri.  It’s the same problem over and over: payday lenders systematically violate the weak payday lending laws that currently exist in Missouri.

In addition to systematically violating the laws of Missouri, most payday lenders compound the problem through legal trickery.  They make customers sign contract provisions prohibiting class actions and class arbitrations (e.g., see this extremely difficult-to-read arbitration agreement presented to the customers of Quik Cash).  In our pending suits, John and I have successfully argued that payday lenders (and other merchants)  have tricked their customers into to signing mandatory arbitration clauses that (on their face) prevent customers from bringing any class proceedings.  Missouri appellate courts have recently agreed with us that these “class waivers” (the clauses prohibiting customers from bringing class actions or class arbitrations) are unconscionable and thus unenforceable (here is the opinion of the Missouri Court of Appeals in Woods v. QC Financial, where the Court struck the class waiver of Quik Cash, Missouri’s biggest payday lender).  For deep insight into the problems with these arbitration clauses, consider viewing this video by consumer attorney Bernard Brown, who eloquently explains why class waivers are so unfair to consumers.   In another recent case,  we convinced the Court of Appeals to ban class waivers in “title loans,” an even more reprehensible financial product (where the customer is required to hand over the keys to the family car and the title as part of the loan application).  Therefore, Missouri consumers can now bring class actions on behalf of large classes of customers of high interest lenders for the systematic violations of Missouri payday lending laws.

In our class claims against payday lenders, we have alleged that Missouri’s largest payday lenders:

A) failed to consider the financial ability of the borrower to reasonably repay the loan in the time and manner specified in the loan contract; or
B)  charged a total amount of accumulated interest and fees exceeding seventy-five percent of the initial loan amount of that loan for the entire term of that loan and all renewals of that loan, or
C) did not reduce the principal amount of the loan by at least five percent of the original amount of the loan as part of any renewal; or
D) renewed the loans more than six times.

[I will update this post with the results of our pending class arbitration actions against three large payday lenders.]

Representatives of St. Louis Community Credit Union also appeared at the hearing.  They indicated that they are making money by issuing 25% APR 90-day loans.  Further, there is a forced savings component built into the program.  Consumers taking out these loans will be actually putting 10% of the money borrowed into their own accounts in the process of paying back the 90-day loan.  In other words, a credit union are issuing the kinds of  low interest loans that payday lenders claim will put them out of business.  In fact, quite a few Missouri credit unions are issuing these loans, and making money doing so.

You might be surprised that I haven’t discussed usury laws anywhere in this post.  If you were under the impression that there were usury laws, you’re in for a surprise.  There used to be usury laws, but they have now been loosened up for financial institutions to the point where they are essentially non-existent.   It’s like the Wild West out there now (and see here) (and see this excellent article by Chris Peterson regarding payday lenders and usury laws) .  You’ll find further commentary on this issue of usury here.

Interestingly, the proposed Missouri law is similar to a federal law passed to protect members of the military from these same predatory loans.  Apparently, legislators figure it’s OK to rip off consumers as long as they aren’t in the military.

Here’s one more troubling note to end this troubling post.  While I waited for my chance to get into the meeting on Thursday night, I had a detailed conversation with a long-time savvy political consultant.  He indicated that the proposed new payday loan law would have essentially no chance to be heard in either the Missouri Senate or the Missouri Houses.  Why not?  Because

A) the legislative committees that have the power to hear such bills are headed by Republicans,
B) the Republican committee heads are given total discretion as to the bills that will be considered (and not considered), and
C) the Republicans have made it clear that they will not step on the toes of the payday industry.

Disheartened, I again asked the consultant why these highly worthwhile payday loan bills couldn’t get a hearing, and he starting talking about political power, political relationships and political money.  He mentioned that it costs $250,000-$500,000 to run a competitive race for State Senator, for instance, and that this means that an aspiring Senator would need to raise $2,000 per week for four years in order to be competitive.  Hence the need for money, combined with the fact that the financial services industry is flush with money and lobbyists.

What a terrible note to end on.  If a state government can’t correct flagrant payday lender abuses, what can it do.  Reforming payday loans should be a slam-dunk. If this consultant is correct, though, the consideration of this proposed new payday lender bill will have nothing to do with the merits of the bill.   Which inexorably leads to the topic of campaign finance reform—another topic for another day.


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About the Author ()

Erich Vieth is an attorney focusing on consumer law litigation and appellate practice. He is also a working musician and a writer, having founded Dangerous Intersection in 2006. Erich lives in the Shaw Neighborhood of St. Louis, Missouri, where he lives half-time with his two extraordinary daughters.

Comments (20)

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  1. Pamela Aldred says:

    It has been my understanding that we already have laws regarding loan sharks. Why isn't anyone prosecuting these organizations with the laws we already have in place.

    • Erich Vieth says:

      Why aren't these companies being prosecuted? I would suspect it's a matter a limited resources and other priorities. I am hoping that the class actions John and I have brought on behalf of consumers will change the behavior of many of these companies. Time will tell.

  2. Zoevinly says:

    Erich, thank you for suing the loan sharks with the laws that we have. Pamela, the laws we have are easy to dance around. As Erich says in his post, even "the proposed new law would allow payday lenders to charge between 55% and 165% on the money they lend out." Still, the law represents a huge improvement on the environment today, in which payday lenders can charge over 400% interest and keep rolling old loans into new loans.

    John's words at the hearing yesterday were right on. These payday loans wreak misery on people stuck between a rock and a hard place. My clients have told me that if they stop paying on one of these loans, they'll get visits at home and ten or more calls a day. Even their relatives and friends will receive several calls a day from payday lenders trying to find out how to get a-hold of them. In the end, they'll do pretty much anything not to be harassed like that again, including taking out a payday loan or two, or three to pay off the old loans and still pay the bills.

    So why should people who can't compute a 10% tip get the protection of new consumer laws? It's because leaving the poor, the under-educated, and the vulnerable behind doesn't help the rest of us out, either. As John Campbell said, payday lenders don't contribute to the economy. They strip the working and disabled poor of cash they could use to pay their energy bills, car payments, mortgage payments, or to buy food, medicine and clothing. Many of the people who take out payday loans receive food stamps and other public benefits. They're down to the last straw, and, payday lenders will tell you this– in fact they crow about it– the loan sharks are the only ones who care to take advantage of this situation.

    Borrowers will take out many loans, not just one, because the first loan is like a potato chip laced with crack. It is 99.99% sure to be rolled into a new loan because the exact circumstances that made a payday loan perfect for the borrower (she's taking out the loan to pay a bad debt, can't get a bank loan, doesn't have savings and makes only minimum wages) leads to a .001% likelihood that the borrower can pay off the loan, at its ungodly interest rate, without taking out another.

    We don't allow heroin dealers to hang around schoolyards. We don't allow payday lenders to prey (as much as they used to) on members of the armed forces. If we can't extend the protections afforded members of the military to to the poor and vulnerable, then we're uncivilized.

    • Erich Vieth says:

      Zoevinly: I was most impressed by the credit union reps at the meeting. They offer payday amount loans at 25%, which includes a savings component–when the loan is paid off, the customer now has a bank account with 10% of the amount of the loan already in it!

      Yet the payday companies claim there is no way they can do it for 35% (or 55% or higher).

      It's pathetic that we can't even correct the payday problem through legislation. If we can't correct this problem, what can we correct?

  3. Demand says:

    I love how you want to prevent those that oppose you from exercising their right to free speech. You could have shown up early to be sure you were admitted to the meeting. Instead you dilly-dallied and then complain about others exercising their right to free speech.

    The reason that there are so many payday lenders is that there is so much demand for payday loans. The solution is not to eliminate supply – which would only push people to actual loan sharks and eliminate jobs – but to educate people to budget, live within their means, and understand the cost of the loan they're taking out. Obviously, this is a harder and longer term solution, which is why you're looking for the short-term, easy fix despite its unintended consequences.

    Comparison to mainstream financial institutions are somewhat spurious, unless you consider the totality of costs and income streams. Credit unions should be able to make money on smaller loans at lower rates because they make more loans (economies of scale) and make money on more services, such as deposit taking, card interchange, etc. (economies of scope). Credit unions support capping payday lender rates for the same reason banks support limiting credit union activities – it hurts their competitors.

    • Erich Vieth says:

      Demand: You forgot to tell us your connection with the payday industry. I'm not being sarcastic. The only people I've seen who think there should continue to be payday loans (the way they currently exist in Missouri) are people who are affiliated with payday lenders.

      Please do enlighten us. And make sure you specify your real name so we can double-check.

  4. Niklaus Pfirsig says:


    The reaseon there are so many pay-day lenders is that the payday lon biz is easy money for those with money to lend.

    Some people resort to payday loans because they buy something they shouldn't, or they don't know how to budget, but many use payday loans in situations where an unforseen expense arises that need immediat attention. In fact, this is how payday lenders advertise their services.

    Many of the lowest paid workers in the nation live from paycheck to paycheck with little or no hope of building uop any significant savings.

    I personally know people who live in houses and apartments with no furniture because, after paying rent, utilities and groceries, they have nothing left.

    to these people, unforseen expenses like a sudden illness, repair bills for the old pickup, and loss of a second part time job, can put them in jeopary of losing that tenuous hold on a tenement.

    The subprime finance industry specifically targets these people, who can least afford the high interest, and push them further into poverty though various add-on fees, and loan perpetuation schemes.

    You seem to be saying that taking advantage ot the disadvantaged is a good thing. This is the sort of reasoning that was used to justify slavery, to justify child labor, debtors prisons and indenture contracts.

    So, rather than defend the industry, why don't you personally volunteer to educate a few of these people in how to maintain a budget.

    After all, payday lenders, title pawns, note tote car dealers, and credit card companies all use a busness model that works against the consumer and is partly based on making sure the customer is not educated on the full repercussions of being their customer.

  5. Zoevinly says:

    Right on, Niklaus. Demand, I know people whose minimum wages are still being garnished to pay off loans they took out 6 years ago. Sure, these people may have bought something they didn't need for basic survival. Maybe they had to keep the lights on; maybe they took out $250 to make Christmas worth celebrating. The fact is, if the borrower had taken out the same $500 at a rate of 100% (double your money in a year) instead of 450%, she would NOT have stopped when she realized that this mountain could not be climbed. Perhaps she would have been able to keep up their monthly payments. Of the people that I've met, no one has ever assumed that I won't judge them harshly for their failure to continue paying on such a loan. They feel shame – for being a victim, for continuing to pay, for being unable to continue paying. Payday loans are a recipe for more than just financial ruin.

    If the payday lenders' rates were capped at 150%, perhaps this borrower would have enough left over after working 45-50 hours a week to pay her current light bills, and those subsidies that everyone pays for through our tax system would go to a more fruitful cause – for all of us.

    The fact is, even while the payday lender who lent out just $500 6 years ago keeps getting paid, the rest of us are paying it (QC, Ardmore, MO Title, etc.) in invisible ways. Much like Wal-Mart takes advantage of our medical safety-net by forcing part-time employees to put in unpaid overtime (so that Wal-Mart doesn't have to pay benefits, and workers feel imminently interchangeable) while providing instruction to employees on how to apply for public benefits, the payday lenders rob us.

    The payday industry takes $50 every month from a 70 year-old woman whose only source of income is $674 in Social Security. She receives food stamps, energy grants and assistance from the food pantry all while forking over $50 a month to the payday lenders because she doesn't want to be a deadbeat… the minimum wage worker, the 70 year-old on Social Security, the disabled veteran and young learning-disabled people: these are the borrowers who get snared by the payday lenders.

    Could you make a buck lending out cash at 150% interest? Sure. Would you do that to a friend? Probably not. Under the proposed rules, a 150% APR would be legal in MO.

    Make no mistake. Borrowers are the unclaimed territory and victory is the culling of interest and fees from humans living at or near poverty – until it's literally impossible for them to continue making good on their promises. Then come the degrading calls, visits, lawsuits claiming that the borrower owes another $1200 in unpaid principal, interest, fees and, of course, legal costs, after already paying $1200 on a $500 loan.

    Demand says: "Why not allow the rich to rape the poor? It's just the way things are meant to be." Do you buy Demand's argument?

    When court staff, laypersons, even law students with no understanding of the latitude we've given payday lenders see what's happening, they always ask, "Is that really legal?"

    Don't be fooled by calls for budgeting classes and references to a war between big banks and small banks. No one seriously claims that PDLs add value to the U.S. economy. When people pay PDLs instead of buying food and groceries, the PDLs swallow our national potential for economic growth; and if the economy isn't growing, no one wins. If the last year-and-a-half didn't convince you that improvident lending is dangerous to the welfare of the American public, then perhaps nothing will.

    • Erich Vieth says:

      Zoevenly: Excellent points. Everyone agrees that some consumers (maybe even most of them) are irresponsibly spending more than their means. Do that mean that we should allow payday lenders to lay invisible traps for them to make it all the worse? And yes, I mean invisible, based on the menu arithmetic point. Should we be decent Christians (I know for a fact that some of the folks in the payday industry go to Christian churches), or should we become social darwinists who proudly screw those who are vulnerable? Which brings me back to Elizabeth Warren's example. We could say, "Stupid people didn't know how to buy a decent toaster," or we could regulate the industry so that toasters generally work.

  6. Erich Vieth says:

    The Post-Dispatch just published a Commentary piece blasting Missouri legislators for failing to restrain payday lenders.

    A comment to that piece defended payday lenders based on their participation in the "free market." What follows is my response to that comment:

    AA12345: If you want to allow payday lenders to keep gouging the working poor with endless high-interest loans that are throwing many of them into foreclosure and bankruptcy, yes, “you stand with the loan sharks.” Payday lenders are truly the modern version of loan sharks.

    Maybe YOU are good at numbers. If so, congratulations. Many people aren’t good at math/finances, however. In fact, most American adults are actual or borderline math illiterate. That simple fact puts us at a fork in the road. We can either:

    A) allow math-illiterate people to keep getting victimized by high-interest financial products, rationalizing that such people are incompetent and they therefore getting what’s coming to them (the social darwinist approach); or

    B) We could rein in sophisticated lenders who are profiting from the aggregate misery to which they are contributing

    Society-at-large must deal with the damage caused by payday lenders. Therefore, your appeal to the “free market” is not accurate. It’s not the “free market” at work when you let an industry profit in ways that hurts all of us (again, think of the foreclosures and bankruptcies in addition to the fact that those who are scraping together payments based on 450% interest are not able to pay many of their legitimate bills, such as utilities, medicine and school books). By definition, a free market does not exist when there is “asymmetric information” (sellers deceiving customers). Letting slick companies gouge your neighbor through trickery is not the “free market” nor is it a humane thing to do. See the above link for the many details on the types of fraud being committed by most payday lenders.

    It sounds like you are saying that it’s OK to offer known-dangerous products, and that it’s the “stupid” consumer’s fault even when the seller knows that a large number of consumers will be hurt by buying its products. If that were true, shouldn’t we shut down the Consumer Products Safety Commission? After all, isn’t it the fault of “stupid” consumers when they “choose” to buy defective cars, tools and other products that maim and kill members of their family? Why don’t those “stupid” consumers study physics and engineering, and independently tests cars before they buy them?

    Well, guess what? Most Americans are bad at math too, not just engineering and physics. You could scoff at them or laugh at them, but this problem of math-literacy puts kind-hearted people at a fork in the road. We can choose to ignore the damage payday loans are doing to millions of people, or we can do something to stop it. I strongly prefer the latter. Standing back and invoking the “free market” when millions of people are getting hurt is reprehensible.

  7. Michael Price says:

    Erich Vieth:

    "The only people I’ve seen who think there should continue to be payday loans (the way they currently exist in Missouri) are people who are affiliated with payday lenders."

    That's an incredibly stupid thing to say considering that obviously the customers think there should be payday loans. And guess what? Their customers generally do understand how much they're being charged nothing's "invisible". Not to mention there have been numerous defences of them by free market groups. But I guess you don't read people who disagree with you. So stop trying to tell poor people how to spend their money.

  8. Erich Vieth says:

    Michael Price:

    You forgot to disclose your connection with the payday industry.

    Please do tell us.

  9. Erich Vieth says:

    "The influential $42 billion-a-year payday lending industry, thriving from a surge in emergency loans to people struggling through the recession, is pouring record sums into lobbying, campaign contributions, and public relations – and getting results."

  10. Erich Vieth says:

    "Despite the threat of increased regulation on these alternative lenders, investors continue to see them as good bets. First Cash Financial Services (FCFS) is trading around $22, EZ Corp. (EZPW) around $21, Cash America International (CSH) around $40 and Advance America Cash Advance Centers (AEA) is around $6 — all at or close to 52-week highs.

    "The moons don't often align for all business units on a diversified portfolio like ours, but everything did come together," said Daniel Feehan, CEO of Cash America . . . "

    The payday lending industry (as it's often called, though most of these stores make other kinds of loans, too) has grown dramatically from just 500 locations in 1990 to over 22,000 today."

  11. Erich Vieth says:

    How do they do that???

    "[T]he Texas constitution says annual rates of interest over 10% are usurious. And the Texas Consumer Credit Commissioner sets interest rate limits of around 18%. However, these payday lenders routinely offer payday and car-title loans in the state at annual rates of 500% and above, according to a survey conducted by nonprofit group Texas Appleseed."

  12. Erich Vieth says:

    Money talks, when it comes to convincing Congress to give payday lenders free rein:

    A big part of the reason for this loss of steam in Washington is that the payday industry has been spending a lot of money there. The industry’s trade group, The Community Financial Services Association, spent $2.56 million lobbying Congress in 2009, or 74% more than in 2008, according to, run by the nonpartisan nonprofit Center for Responsive Politics.

    At least three payday lenders even make the organization’s list of the top 15 financial industry donors to current lawmakers, including the nation’s largest bank, Bank of America (BAC) and credit card lender American Express (AXP). Cash America International (CSH) contributed $629,229 million and was ahead of MasterCard International (MA) and conglomerate General Electric (GE) on the list. Advance America Cash Advance Centers (AEA) contributed $335,275, while QC Holdings (QCCO) gave $305,569, according to

  13. Erich Vieth says:

    Here's how payday lenders talk to each other when they think no one is listening.

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