Google Steps Up and Bans Ads from Payday Lenders

054985500_1441013137-google-headquarters-sign-640x0_digital_trendsNew Orleans   Just because we’re chasing them, doesn’t mean that payday lenders are on the run, but recently we got a break that could end up as a fatal blow and perhaps stiffen the backbone and open the eyes of those unwilling to confront the predatory practices that define the business model of payday lenders. Google or Alphabet or whatever they are calling themselves are one the largest tech companies of the world, and they have now announced that forthwith they would no longer accept advertising from payday lenders. Hooray!

A number of consumer advocates weighted in with congratulations, and, surely, this was a win that undoubtedly came after extensive behind-the-scenes meetings, but no matter how the result was achieved, it’s a significant victory. In the highly competitive online advertising world, hopefully, it will be “monkey see, monkey do,” and followed by Facebook, Twitter, and the hundreds of other sites and applications that worship that almighty ad dollar. The payday lenders association, or whatever that gang of hyenas call themselves at the predators’ ball, cried “foul,” and claimed they were doing a public service in stealing from the poor, but they were left with no recourse. Google is a private company after all, and not some politician they can just ply with a campaign donation or sic their lobbyist on.

All of which calls into play whether or not tech companies might be good targets for more and more campaigns, and that’s worth some thought. Even while we praise Google, we shouldn’t make the mistake of thinking that they will be pushovers if the history and ideology of tech companies is any guide.

Apple certainly waged a huge battle under Steve Jobs and his successors to prevent unionization of its contract janitors, and to this day, unless something has changed recently, solved the problem by simply taking the work in-house as direct employees rather than deal with the union. Many of these tech companies and their execs are Ayn Rand fanboys and hard leaning libertarians. The role of Microsoft’s Gates and Facebook’s Zuckerberg in trying to privatize and charter up public school systems is now legendary, where often their main partners are the Walmart Foundation and its conservative crew. Michael Bloomberg and Charles Koch coauthored an op-ed recently where they wanted to get their two cents in on the amount of free speech on college campuses where they are afraid that administrators and professors are bending over too far to kowtow to minorities, women and others that might built the power to object to some of the baked in dogma opposing their interests. Austin, Texas voters just had to administer a butt whipping to the ride-sharing Batman and Robin, Uber and Lyft, who wanted to allow their drivers to not be fingerprinted like other drivers in that city. Facebook is taking heat as well for slanting its newsfeed and creating an echo chamber. Amazon seems the most Teflon, since it seems to still be consumer crack.

The good thing is that at their current size, none of these tech behemoths can just hunker down and hide in Silicon Valley anymore. To the degree that public perception and buying power still is a major part of what makes them winners or losers, we may have some collective power to punish the baddies, like payday lenders, that we need to exercise even more by putting tech companies on our “must target” list.

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Robber Barons behind Payday Lending and Their Enablers

MoneyMartNew Orleans   In trying to take a close look at payday lenders, we’re always interested in who the money bags are behind these predatory lenders who are feasting on lower income and desperate families. It’s not a pretty picture and the perhaps the worst snapshot comes from looking at one of the world’s big outfits, Money Mart, and the man ultimately holding the purse strings and the profits, John Grayken.

Talk about a robber baron, this guy specializes in what is euphemistically called “distressed” properties, but more often seems to be simply anyone distressed and desperate. He’s a billionaire of course, joining the Forbes list this year with over $6 billion to his name. He owns something called Lone Star, which of course is headquartered in Dallas, where his career began doing deals with the Bass Brothers and their oil fortune. He started flipping properties for them in partnership with the Federal Deposit Insurance Corporation (FDIC) back in the savings and loan crisis, and you could almost say, he’s gone down from there with a gaggle of private equity funds and more bottom fishing. An article in Forbes in March, doesn’t draw a pretty picture of his work:

Since the Great Recession Grayken has made a specialty of buying up distressed and delinquent home mortgages from government agencies and banks worldwide. He’s also picked up a major payday lender, a Spanish home builder and an Irish hotel chain. Regulators hassle him, and the homeowners whose mortgages he owns or services despise his tactics. In fact, he has become accustomed to taking shots from detractors and has been the subject of protests from New York to Berlin to Seoul. Last year New York Attorney General Eric Schneiderman reportedly opened an investigation into Grayken’s heavy-handed mortgage-servicing tactics, including aggressive foreclosures, which have unleashed widespread outcries from homeowners, housing advocates and trade unions.

The “major payday lender” was Dollar Financial Services (DFS) which specializes in pawnshops and payday lending through its ownership of Money Mart, the largest predatory lender in Canada with other offices around the world, including the United Kingdom where it is also the largest payday loan operator through the Money Shop, along with other brands.

Before Dallas he was a Massachusetts native, though he has now renounced his US citizenship for an Irish passport in order to pay less taxes, meaning he can’t spend more than 120 days a year on US-soil. I doubt if this is the kind of “inversion” that fellow billionaire, Donald Trump, is talking about stopping if he ever gets to sleep in the White House. Grayken is really a citizen of nowhere, and pretty much in trouble almost everywhere he operates for his predatory tactics.

Sadly, predatory lending and vulture acquisition of foreclosed homes pays well, so the returns on his equity funds are in the double digits, and, according to Forbes, they have made this robber baron especially popular among pension funds. Oregon is a good example though they are not the only ones slurping from this poisoned well:

The Oregon Public Employees Retirement System has invested $2.2 billion in many of Lone Star’s funds. In 2013, for example, it committed $180 million in Lone Star Fund VIII and has already posted annualized net returns of 29%. A $4.6 billion fund Grayken raised in 2010 has returned 52% per year to Oregon pensioners.

When you start following the money in the predatory, payday lending world, make sure you have a shower handy, because this is dirty, dirty business. Of course for Grayken and his jealous peers and greedy investors, this is just the way business is done. Done to us, that is!

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Ongoing Battle Against Predatory Payday Lenders

1415215958733Halifax   Payday lenders throughout out North America are both under attack and organizing fiercely to resist effective regulation.

In the United States, Republican lawmakers nationally and in some states are being mobilized by payday lenders to pushback against the Consumer Financial Protection Bureau (CFPB) efforts to rollout regulations establishing minimum standards for payday lending. What do they want? They want to keep the regulations, such as they are, remaining a patchwork quilt from state to state allowing them to slip and slide from border to border, and try to jump over the obstacles online. The CFPB insists they are trying to establish a “floor,” while the industry wants the floor to be whatever they can get away with in various states.

ACORN Canada has been fighting payday lenders for over a decade, but they are slippery. The Conservative government slipped the noose federally and pushed the regulations down to the provincial or state level allowing the rules to be better in a Manitoba and worse in a Nova Scotia.

In British Columbia, ACORN is promoting a 5-point “model” program that would cap interest rates at 17%, similar to the Manitoba standard, bar on-line payday lending, create and maintain a unified database that would limit the number of payday loans per customer to prevent pyramiding of the loans across multiple lenders, extending the payback period for loans, and finally lowering the level of allowable loans to no more than 25% of a customer’s annual income rather than the current 50% of the income. In Nova Scotia payday lending is actually regulated by the same board that regulates utilities like gas and electric, which makes you worry about how serious they really are about any regulations at all. ACORN though is pushing for similar limits with the board.

In Ontario, Toronto ACORN is trying to limit the locations of payday lenders using “minimum distance separations” law similar to the gold standard won in Burnaby, a working suburb abutting Vancouver in British Columbia. In Burnaby no payday lending establishments can be opened within 400 meters of any school, church, or, most importantly, any residential area. To move forward on minimum distance ordinances or bylaws, the province of Ontario has to pass enabling legislation allowing any city, perhaps of any size, to enact such measures, which appears likely by no later this fall. Nationally, ACORN has entered an alliance with the Canadian Union of Postal Workers (CUPW) to reestablish postal banking that would complete with and attempt to replace payday lenders. ACORN has launched a Fair Banking Campaign with postal banking as one demand.

The lack of information on deposits and loans correlated to census data is also unavailable in Canada, creating increasing support for a campaign to create a Community Reinvestment and disclosure regime similar to the US program. Information available in the United Kingdom is starting to be available on voluntary submissions by the banks, but not correlated to census data. There is also no regulations on online lending in Canada which is a major loophole as well!

Country to country this is still a hard, hard fight with the predators continuing to run wild.

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Payday Lending Regs, Good; Not Going Far Enough, Bad!

CFPBClarkKentNew Orleans      I was sitting next to an organizer from British Columbia while reading the reports on the new set of regulations being proposed by the Consumer Financial Protection Bureau on payday lending.  We have fought payday lenders in Canada for over a decade and we’re batting over .500, but a long way from a perfect score with our biggest victory having been to get enough federal support to devolve the regulations to the provinces, where we have won significant protections in some areas and nothing in others.  In the patchwork quilt of little to a lot of regulations on payday lenders in the United States, we have been pushing for the CFPB to hit a home run, not a scratch single.  We got a hit, but it seems way more “bureau” than it feels like “financial protection.”

Almost by definition payday lending is a product that seems to invite predatory corporate behavior, because these are loans that low and moderate income families are taking because they are so desperate for cash for whatever the reason, and studies show most frequently the reason is simply that there is “more month than money,” that they are willing to allow the company to take a big bite of their check with interest before it gets in their hands where they urgently need it.  Interest rates go through the roof and studies ACORN Canada has done and analysis that the CFPB has done indicate that payday lending is the crack of contemporary finance.  Once you have one, you keep going back month after month, usually 10 times over a 12 month period, to get more loans to pay the old loans, and on and on and on.

There are real steps forward in the CFPB proposal.   The movement to make “affordability” the litmus test for a loan and cap the levels of repayment amounts is one breakthrough, and my Canadian colleague gave that oohs and aahs.  The other step forward is the recognition that we need federal regulation, because not only does the patchwork quilt victimize families, but the access to these products through the internet makes a mockery of many of the better state regulations.  That’s also a step ahead of Canada.

The CFPB offers options though, which I find weird for federal regulations, particularly ones that have evolved over an extensive time period and after a survey of millions of loans.  What, they couldn’t decide what protection really was?  Are you kidding, they want the predatory lenders themselves to decide how they are going to fleece the consumer? For a young government agency, this seems like a bureaucratic stranglehold more than a breakthrough. Furthermore the other option limits lenders on the number of loans per year with some restrictions, but given the lack of love the Republican Congress already has for the CFPB, you just know that they will never have the enforcement capability to monitor this well.

This isn’t over yet.  The rules aren’t final.  There will be more comments and a lot more lobbying, but it’s still disappointing.

Often, when I visit my mother late in the afternoon, she and anyone around would be watching the television show, Jeopardy.  Once when I was dropping stuff by, they had a week of former great champions competing against each other.  To my surprise there was Richard Cordray, the CFPB’s director, as one of the contestants.  He didn’t do all that well. I worry that he may have forgotten one of the cardinal rules of that game. When the bell rings that it’s “double jeopardy,” the contestants have an opportunity to double-down, especially if they are behind, and bet everything that they will get the answer right and win.  Cordray needs to go for broke here and win, not just try to have a little prize to take home when the game is over.

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Plenty of Good Proposals for Replacing Payday Lending

article-2511819-19A290E800000578-756_634x458New Orleans        Enough of the negative, let’s go positive and not just talk today about how predatory payday lenders are and how they are ripping off lower income families and trapping them in a vicious spiral of debt, but instead look at the ideas and institutions that are doing something different.

Let’s start with Senator Elizabeth Warren’s argument that we use the United States Post Office to handle loans and transactions of small sums.  In Japan, the post office is a huge savings system.  In Canada, the post office handles money transfers or remittances for families sending cash to their home countries, although unfortunately they do so with a contract with MoneyMart, one of the primary MTOs.  In short, there’s already a way, if we just had the will.

In the United Kingdom there is an active market to undercut the predatory marketing model of the payday lenders, especially the big whopper in Britain, Wonga, and much of it is led by a revival of credit unions over recent years.  According to The Guardian:

My Community Bank…operates online with the aim of becoming the first national credit union in the country. Its interest rates expose the high cost of the payday lending sector yet again, as borrowing £255 from My Community Bank for 30 days (the average payday loan) would cost £5.62. At Wonga, you’d pay £83.65.

In dollars, we would be talking about huge savings.  255 pounds is about $390 and a Wonga rip-off would cost a bloke $127.90 compared to the credit union’s charge of $8.59 for a simple in the pocket profit for Wonga that is 14 times the credit union charge.  Too bad My Community Bank can’t be in the US and Canada or heck, go global at those prices!

What’s surprising is that there are only a million credit union members all told in the UK, compared to Canada say where 50% of the population are members of a credit union, and some of them, like our frequent partners and supporters of ACORN Canada, VanCity, in British Columbia, are huge.   Unions in the United Kingdom see fighting the payday lender bunch as part of their mission.  Unite, the largest union in the UK, has created a network of credit unions for their members and families, as has Unison, the second largest.  Unfortunately in the United States it is sometimes hard to tell the credit unions from the regular banks or worst.  In a big push to join your local credit union to protest banks a couple of years ago, I marched in myself and plopped some dollars down.  I now get more mail from them than anyone else for credit cards, high priced loans, and pretty steep fees.  You figure.

But, hey, let’s keep this positive.  There are good ideas around the world about how to create alternatives to these scum buckets.  They need support and encouragement, and maybe some pressure and push to policy makers to finally stand up to their lobbyists and contributions and do the right thing for everyone for a change.

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More Proof on Payday Lenders Targeting Vulnerable Communities

The Economic Impact of Payday Lending in Economically Vulnerable Communities Haydar Kurban, Ph.D., Adji Fatou Diagne, Charlotte Otabor December, 2014

The Economic Impact of Payday Lending in Economically Vulnerable Communities
Haydar Kurban, Ph.D., Adji Fatou Diagne, Charlotte Otabor
December, 2014

New Orleans          Payday lending was the first national campaign for ACORN Canada and, despite winning some relief in several provinces, the effort to clamp down on the industry nationally continues to be a priority and continues to elude.  Currently, ACORN is on a national advisory committees studying another effort to update the regulations.  In doing so, a fascinating study fell into our hands that was written by the Howard University Center on Race and Wealth in Washington, D.C focusing on the economic impact of payday lenders in Florida, Mississippi, and Alabama.  It’s an eye opener!

Using sophisticated data mining and software with current Census Bureau economic data, it was no surprise that the Howard researchers found that payday lenders swarm to communities and zip codes dominated by lower income and minority families like vultures on the highway fly towards road kill.  That’s not news.  Importantly, Howard found that, despite the industry claims, the short term negative impacts on these states were significant.  Florida, as the largest of the states studied, bore the brunt of the damage the hardest.   There “the payday loan industry destroyed 2,150 net jobs, and reduced labor income, value added, and total sales by about $107 million, $308 million, and $381 million.”  Alabama and Louisiana also took a licking from the industry, though interestingly Mississippi was so desperately poor and unbanked that on the short run they showed some benefits from payday lending, though the decreases in savings and citizen wealth would wipe that out quickly in subsequent years.

Looking at the maps on zip code concentrations, the industry strategy is redlining in reverse as they try to pile as many stores as possible into lower income areas.  This seems to support the successful strategy being employed by ACORN in Burnaby and Surrey of using zoning strategies to prevent multiple payday lenders in our lower income areas.

The report speaks for itself.  Looking at part of their data analysis of Louisiana is unsettling:

Louisiana ranks sixth in the country in the percentage of households reliant on the combination of check cashers, pawnbrokers, and payday lenders to meet family needs, with 23 percent compared to the national average of 18 percent. Additionally, African-American households in Louisiana are twice as likely as white households to use predatory lending such as high-cost financial services and payday lenders at 37 percent compared to 17 percent. Payday lenders are prevalent in every major Louisiana city, with payday loan stores outnumbering banks in low-income neighborhoods, according to a 2009 FDIC study. Approximately 57,000 households (3.2 percent) in Louisiana took out at least one payday loan in 2007. The problem is more pronounced in larger parishes. For example, in East Baton Rouge Parish, the median household income is more than $4,000 higher for those living in bank neighborhoods (that is, neighborhoods with access to traditional banking institutions) than for those living in so-called “payday-loan neighborhoods” (Mathis, 2011). Payday-loan neighborhoods in Orleans Parish, on average, are 70 percent African-American, with median household earnings of $16,562 and bank neighborhoods in the parish are 46 percent African-American with median household earnings of $24,137 per year. It appears that payday lending is threatening the economic and financial environment of African-American families in Louisiana who encounter poverty at almost three times the rate of white families in the state.

When predators come near your family and community, you build a fence, you pass our flyers and warnings, you tell children to walk the other way, you notify the police to keep an eye out, and hunker down.  The payday lending industry specializes in the kind of behavior and targeting that requires the same kind of protection in terms of regulations, ordinances, and legislation.  Stealing is stealing, and it is past time to name the crimes they are committing in our communities and put a stop to it.

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