Pay Day Loans and The Circle of Poverty
There are those “people” in this world that take advantage of people (any retail establishment, insurance company, or mortgage broker) and then there are those that take advantage of the people who legitimately have no other viable recourse left and are grabbing at any straw they can to survive. These predators are the worst people in this world. I read The Working Poor: Invisible in America by David Shipler recently. That book has taught me more about poverty than anything else I have ever read. The American experience of working, not one, but two full time jobs and still existing under the poverty line is an unacceptable, yet a REAL facet of many American’s lives. The book speaks about the “circle of poverty” and how one act a poverty stricken family takes leads to the next act that keeps them in poverty. It is truly sad. When I read this article and had to share it with you. Read, Think, Get Smarter
The skeevy business of payday loans.
By Timothy Noah
Roughly 20 years ago, during the administration of President George H.W. Bush, I wrote a news article for the Wall Street Journal about the federal government’s plans (later codified in legislation during the Clinton administration) to distribute food stamps and other government benefits electronically. Poor people would have debit cards and could have immediate access to the funds they needed. This was a more novel idea than it sounds today, because speedy, point-of-sale credit card terminals still lay in the future. In those distant days, when you went to the supermarket, you had to bring cash or write a check.
The Bush appointee I interviewed was very excited about the new scheme for one simple reason: It was going to put check-cashing companies out of business. This was an industry despised even by Republicans for exploiting society’s least advantaged by charging them outrageously high fees. Instant access to cash would eliminate this market. I don’t remember exactly what the Bush appointee said, but his overall message was loud and clear: Good riddance to a sleazy and predatory business.
Two decades later, check-cashing companies are still around and a thriving new sleazy and predatory business, the payday-loan industry, has grown up beside them. Payday loans replace check-cashers’ outrageously high fees with usurious interest rates. What neither the Bush appointee nor I anticipated was that the same technology that sent welfare moms and retirees their government benefits in the blink of an eye could give a new kind of predatory lender instant access to unwary customers’ bank accounts. Electronic banking giveth and electronic banking taketh away.
I thought about all this on Oct. 4, when the Federal Trade Commission announced that the co-founder of Swish Marketing Inc. paid $850,000 to settle charges that he allegedly debited customers’ bank accounts without their knowledge. According to the FTC, Swish operated Web sites that guided consumers to payday lender sites. (One of them piously named “Christian Faith Financial“; never mind Matthew 21:12.) To get the loan, you filled out a form giving the lender access to your bank account. That’s a bad idea, but standard practice for payday lenders, and perfectly legal. The illegal part (according to the FTC) was what followed. When you submitted your application, you were automatically sent to a Web page with a button that said “Finish matching me with a payday loan provider!” (example here). This Web page also happened to offer consumers the chance to acquire four additional items. Three of these offers were pre-clicked “No,” but a fourth was pre-clicked “Yes,” which was easy to miss. This fourth offer was for the purchase of a debit card on which you could load $2,500, in the unlikely event that you happened to have $2,500. (If you had $2,500 why would you be applying for a payday loan?) Just to purchase the empty debit card cost $54.95. Some sites billed the debit card as a “bonus offer” and revealed the $55 charge only in tiny type. In any event, it was very easy for the borrower to miss entirely the fact that in applying for a payday loan, he or she was also letting a separate company reach into his or her bank account to extract $55 to pay for an unrelated product that he or she almost certainly didn’t need.
The attorney for alleged perp Jason Strober said in a press release, “We are confident that [he] would have prevailed in court.” Strober settled only because “it became too expensive to continue fighting.” Strober, meanwhile, has created a blog, Prosmallbusiness.org, whose first entry states that the FTC’s “power to destroy businesses they don’t like is truly scary.”
It may or may not give Strober solace to learn that under the recently-passed Dodd-Frank financial regulation law, the FTC will yield jurisdiction over payday loans to the newly created Consumer Financial Protection Agency, whose overseer, Elizabeth Warren, really, really hates payday loans. In a 2008 paper coauthored by Oren Bar-Gill of New York University Law School, Warren offered payday loans as a key example of “a credit product that can impose substantial costs on imperfectly informed and imperfectly rational borrowers.” Typically, she explained, you pay a $30 fee for a two-week cash advance on a $200 paycheck, which amounts to an annualized interest rate of 400 percent. That’s not particularly high for this type of loan; some of them go up to 780 percent. Thirty bucks “is unlikely to bankrupt any consumer,” Warren conceded, but the payday lender is counting on the likelihood that many customers will roll the loan over for another two weeks, and then another. Ninety percent of the industry’s profits come from suckers who do this five times or more over the course of a year. “This is very expensive credit,” Jean Ann Fox of Consumer Federation of America told me.
Indeed, interest rates don’t get more insanely high than this. That raises the question: Isn’t usury illegal? It turns out the federal government imposes no statutory maximum on interest rates. Many states do, and some states (for instance, New York) ban payday loans altogether. But under federal law, payday lenders who don’t commit outright fraud may operate with impunity. Well, almost. The Pentagon got fed up with its recruits getting ripped off by payday lenders and in 2007 got Congress to make it illegal to extend such loans to members of the military. But civilians remain fair game.
Indeed, one of the sketchier provisions in Dodd-Frank affirmatively prohibits Warren’s new agency from setting a maximum interest rate on payday loans. This was inserted at the behest of Senator Bob Corker, R.-Tenn. (The payday-loan business was reportedly born in Corker’s home state and continues to thrive there.) You might think the banking industry would pressure Congress to shut down payday lenders because they give lending a bad name. But a recent report by National People’s Action, a network of community activist groups, and the nonprofit Public Accountability Initiative revealed that big banks extend $2.5 to $3 billion in financing to payday-loan companies. Wells Fargo is in especially deep.
“The payday industry WELCOMES regulation,” according to Payday Loan Industry Blog, operated by Trihouse Enterprises, which owns 16 payday-loan stores. “It helps the industry legitimize their industry, it manages the few unscrupulous payday loan operators that exist in all industries, and it creates a level playing field for consumers.” Implicit in this assertion is the confident belief that no regulator would dare put them out of business. The authors don’t seem terribly worried that Warren will prove that assumption wrong. Do they know something we don’t?
Just an FYI
Comparing Bush’s Tax Cuts vs. Obama’s Tax Cuts
By Justin Gardner | Related entries in Barack, Bush, Democrats, Obama, Republicans, Taxes
Pretty straightforward and helpful for those who don’t realize that they’re taxed at different levels of their income, not just one bracket.
See, I’ve discovered, through the course of just asking around, that many folks don’t realize that they’re taxed at different levels. Many think that if they make over a certain amount of money, all of their money is taxed at that rate. That’s why you heard all that talk about taxes being a disincentive to making more money, which is obviously nuts and was meant to confuse the average taxpayer who doesn’t understand how our system works.
In any event, the graph via Wash Post…
And a little more about where this came from:
A Republican plan to extend tax cuts for the rich would add more than $36 billion to the federal deficit next year — and transfer the bulk of that cash into the pockets of the nation’s millionaires, according to a congressional analysis released Wednesday.New data from the nonpartisan Joint Committee on Taxation show that households earning more than $1 million a year would reap nearly $31 billion in tax breaks under the GOP plan in 2011, for an average tax cut per household of about $100,000.
Does everybody now understand how big of a giveaway this is to the wealthiest 2%?
Were the rich hurting in the 90s when the tax rate was 39.6%?
Can we all agree that people making between $200 and $500K can take a $400 hit?
And to those who make over $500K, well, you still don’t have to pay Social Security tax on hardly ANY of your income. And since many of the super rich derive their income from investments, which is taxed at 15% since it’s considered long term capital gains, you’re still gaming the system effectively.
Yes, rich people…you’re still rich and you still win.
Meanwhile, teachers, firefighters and cops don’t deserve to keep their jobs according to Republicans, but they want to give $10 billion more to people who are so wealthy that few of us will ever understand what it is to be in that company?
Do they look alike or what?
Before you attack me for “unamericanism” or some other bullshit made up word – Know this, I simply glanced at the pic of Ahmadinejad on Yahoo.com this morning and for a sec thought it was a pic of Bush. So, I simply I ask you…Do they look alike or what?
What I noticed:
Ear Shape: CHECK!
NOSE SHAPE: CHECK!
JAW SHAPE: CHECK!
WHITE BUTTON DOWN: CHECK!
BEADY EYES: CHECK!
*I KNOW and BELIEVE that Bush and Ahmadinejad have nothing in common when it comes to politics, religion, and the good ole USA. So, easy tiger. Just vote in the comments, or be a moron and call me unamerican or anti-american and prove to the world you are an idiot.
Rummy the Influenza Profiteer
Do you know someone who has the flu? Have you ever had the flu? If you answered “yes” to any of those questions-Did you or the person you know take Tamiflu? If so, Donald Rumsfield thanks you. Not for preventing the spread of the flu, but for making him rich while stopping the spread of influenza.
Here are the facts. On November 1, 2005, then President George W. Bush went to the National Institutes of Health in Bethesda, Maryland to hold a high profile press conference, to announce a 381-page plan, officially called the Pandemic Influenza Strategic Plan. The President surrounded himself with half his cabinet, including Secretary of State Condi Rice, Secretaries of Homeland Security, Agriculture, Health & Human Services, Transportation and, Veterans Affairs. The White House also invited the Director-General of the World Health Organization, who flew in from Geneva for the occasion. Needless to say this was a big deal. The President’s opening remarks set the tone:
“At this moment, there is no pandemic influenza in the United States or the world. But if history is our guide, there is reason to be concerned. In the last century, our country and the world have been hit by three influenza pandemics — and viruses from birds contributed to all of them. The first, which struck in 1918, killed over half-a-million Americans and more than 20 million people across the globe…Scientists and doctors cannot tell us where or when the next pandemic will strike, or how severe it will be, but most agree: at some point, we are likely to face another pandemic. And the scientific community is increasingly concerned by a new influenza virus known as H5N1 — or avian flu…”
Here is where it gets interesting. Despite the stated absence of a clear and present danger to the American public, the President called on Congress to immediately pass a new $7.1 billion in emergency funding to prepare for possible future danger. The speech was a testament to the Bush Doctrine that President Bush is so well known for. BUT WAIT… The President’s list of emergency measures was a call for Congress to appropriate another $1 billion explicitly for Tamiflu. THATS ONE BILLION.
Tamiflu, made by Gilead Sciences, seems to work, so its no shock that it would be needed to be mass produced…wait, mass produced for an issue that isn’t even an issue. Seems odd. Well..its not only odd but it may have been unethical or illegal.
GUESS WHAT? The Secretary of Defense under President Bush, Donald H. Rumsfeld, was on the board of Gilead Sciences since 1988 and Chairman of the Board of Gilead Sciences from 1997 until early 2001 when he became Defense Secretary. On October 26, 2005, Sec. Rumsfield released a statement that he had “reclused” himself on any Pentagon discussions involving Gilead Sciences. Seems like a good move to remove himself from any “conflict of interest” issues, RIGHT? HOLD ON!!! Before he removed himself from “any further discussions”, Rummy purchased $18 million dollars in additional stock in Gilead Sciences, making him one of its largest if not the largest stock owners. That reclusion came after he had already scored his windfall on the Gilead Science stock price jump. How big was the price jump, you ask?
FACT: In 2001, when Rumsfield became Sec. of Defense and left Gilead Sciences’ board, the stock price went from $7.00 a share to $50.00 a share in 2005. That is a 720% profit from his initial investment 4 years earlier.
On November 15, 2005, Fortune Magazine reported:
“The Defense Secretary decided not to sell his many shares in Gilead so as to ‘avoid being accused of insider trading.’ If true, that means Mr. Rumsfeld, apparently not one to shy away from turning a fast buck, has bagged an eye-popping windfall, as demand for Tamiflu worldwide explodes. Today it is the hottest drug in the world market. On October 6, the Pentagon announced it had stockpiled quantities of Tamiflu for members of the military.”
Is is considered insider trading when you can manufacture the threat of a “future” pandemic that causes hysteria and the only way to squelch that hysteria is by selling the people a drug you make?
I didn’t think you could yell “FIRE” in a theater when there isn’t a fire at all….I guess I was wrong. Again, I find myself angry and depressed at the obvious manipulation of the American people by our administration for their own personal profit.
On a side note, Gilead Sciences closed at 46.985 yesterday. Still going strong.
Congrats to you Mr. Rumsfield. Be sure to bundle up, it is flu season after all.
EVERY FAN OF GEORGE BUSH NEEDS TO READ THIS, BUT WON’T.
I am completely floored by this. If you think I am completely off base for posting this…follow the links included and cut off your biases and weigh the evidence for yourself.
CLICK HERE FOR ORIGINAL POSTING ON KOTORI MAGIZINE
YOU HAVE BEEN EDUCATED thanks to Dan Benbow.