Payday Lending is All About the Pyramiding the Loan, not the Payday

Little Rock   With the admissions that the bigger-than-God-and-government banks are skimming gazillions in profits from predatory payday loans, some welcome sunlight is shining on the dark caves of financial services for workers trying to stretch the money to make the month or deal with emergencies.  The Pew Research Center released a report on some of the experiences of payday lending consumers that seems to match a similar study from ACORN Canada of practices there more than 5 years ago.

Pew’s summary of their findings is straightforward:

“Pew’s survey results reveal that people choose these loans to avoid outcomes like long-term debt, borrowing from family or friends, overdraft fees, and cutting back further on expenses. But the average loan requires a repayment of more than $400 in two weeks, the typical duration, when the average borrower can only afford $50. When borrowers have trouble paying off the loan, they return to the very same choices they initially tried to avoid.”

Additionally, Pew said that, “the average payday loan is $375. Americans spend $7.4 billion per year on the loans, including an average of $520 in interest per borrower who ends up indebted for five months of the year.”  As terrible as that sounds, the ACORN Canada study found far worse, even though the general legal climate for payday lenders, which we campaigned on aggressively and with significant success in several provinces, is better in Canada.  We found in a more extensive survey that on average it took 14 months for payday borrowers to escape the payday lenders.  The first loan generally initiated a cycle of something akin to borrower “recidivism” that put the loan victim on a yo-yo back and forth with new and adjusted loans before they were bounced out or escaped with loans outside the system.

The Pew figures are bad enough when the reality emerges that interest overwhelms the initial loans.  Reading the study, it would also seem that the Pew figure does not include the additional bank charges and fees triggered through the collection process through automatic bank drafts, NSFs, and surcharges.   At the same time Pew finds that “while payday loans are often presented as an alternative to overdrafting on a checking account, a majority of borrowers end up paying fees for both.”

The industry association claims to the New York Times that the “typical fee” is $10 to $15 on $100 borrowed, which is obviously complete balderdash.

This study, our study, and a million others cannot alter the fact that these loans are predatory, essentially because they can be.  Families desperate for money to bridge gaps and emergencies see no choices and therefore with eyes wide open march to the slaughter of these outfits, until drowning or pulled ashore when forced to confront their own embarrassment.  Nonetheless the industry can lie brazenly, since they and their bankers know no shame.  Predation is the business model.

 

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Welcome to My World on Thanksgiving!

photo from ACORN in Buenos Aires

New Orleans   On the eve of the USA Thanksgiving there is a long list of chores and cleanups, some long postponed, that have to be sorted out as family and friends assemble.  Normally, these times signals a momentary lull, a chance for a breath, but believe it, working in the world is not like that at all, and the pace quickens.   While so many are getting ready to put their feet up and feedbag on, I thought I would share:

  • Canada has Thanksgiving, but almost a month ago, so it’s just another workday and the emails keep rolling, especially on their release of a new remittance report.
  • Pictures in this morning finally from Buenos Aires on a recent human rights workshop in La Matanza, which the organizer had time to send since a general strike yesterday shutdown the city and most of the transportation.
  • Skype conference call today to prepare for our setting up the field program next week in Ecuador for the national elections in five provinces.
  • The election may be over in the USA, but ACORN International members are examining slates, programs, and plans for elections this coming year not only in Ecuador, but also in Honduras, Kenya, and Indonesia.
  • Work slowed in Mumbai as our operations in Dharavi with many Muslim members battened down the hatches as the shock troops of the right parties hit the streets to mourn the death of communalist instigator Bal Thackery.  Newspaper reports indicate that police have picked up two young women who questioned the respect being given this man on Facebook.
  • Social Policy went to printer yesterday for the fall issue, so proofs have to be checked out today, so issue hits mails internationally and domestically next week.
  • Interesting hour long conversation yesterday with David Moberg, labor reporter at In These Times, about organizing strategy and the work being done by UFCW at Walmart these days in USA.
  • Interesting reports from ACORN Italy on new legal services support being rolled out for our members there with more details to follow.
  • Early morning email from Belgrade where a former ACORN organizer in Ottawa is starting the process of seeing if an ACORN Serbia can be built there in coming months.
  • As I write this, I’m bouncing back and forth on Skype notes, about how to integrate community organizing into an on-line medical training course being offered globally and recently accepted as a pilot for 500 med students in Sudan.  They asked that I block dates in November 2013 to speak with them at their conference in Thailand potentially.
  • Double checking the schedule at Fair Grinds Coffeehouse so we can fit in the meeting after the holiday on how well we are doing on our environmental footprint and sustainability measure, making sure we are staffed fully on Thanksgiving because our community needs us, approving another group to play soon and another yoga and dance time slot, and getting ready to host the Tides Foundation JBL Awards presentation next week.

There’s always a lot to be thankful for on Thanksgiving and this small sample reminds me how lucky I am many decades ago to have found work that teaches me daily and resists boredom no matter the tedium of tasks, and where so many of us have developed small skills that can make contributions to the work being done every day around the world to bring justice, equity, and security to so many people.

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