New Orleans A bunch of payday lenders skirted state by state bans on payday lending by offering their predatory products directly through the internet. New York State and some others are suing to stop these practices, but as soon as one snake’s head is cut off, another one seems to crop up and one of the most pernicious starting to come out of the shadows is workplace-based lending.
Here the hustle for some of these nonbank lending operations is to get the employer to add the loan program as part of the package of their so-called workplace “benefits” or what he Wall Street Journal noted was “pitched as the financial equivalent of a health-wellness program.” The real hook for the lenders is getting the companies to also agree to process the repayment, like a United Way contribution, directly from the employee’s paycheck, assuring them that they get their money off the top with their biggest risk being whether or not the worker lasts on the job. 100,000 workers are not being offered these loans and companies, like Think Finance and FairLoan Financial, involved in these operations have puffed up the projections to a potential of 10 million workers over the next couple of years.
Make no mistake that this is a directly related cousin of the payday lending industry. Even employers offering the program, like Arizona Restaurant Systems through its Sonic Drive-In Restaurants are plainspoken about the fact that they opened their payroll systems to these kinds of loans after Arizona outlawed payday lending.
The size of the loans are usually less than $1000 and more in the couple of hundred range and the fees and interest add up to something less than the worst payday lending products but still hit 53%, 90%, 115%, and up to 165% depending on the company and the loan. Tell me that’s not predatory.
Most of the companies are claiming that they are not taking a piece of this action, but instead are doing it out of the goodness of their hearts for their lower waged employees in much the same way that some Walmarts have sponsored food drives for the holidays for their workers. Trust me, that if these hucksters are able to reach 10 million workers there will be a long list of companies taking some of the vig on these loans!
Don’t get me wrong. The fact that banks have essentially pushed much of the lower paid service sector out of the mainstream financial industry and employers continue to scrape the bottom on wage rates is the real issue here. People are all too often going to need cash and need it now, making them prime fodder for all kinds of predators.
Putting employers into the picture though and allowing the first crack of someone’s check chipped off towards one of these high-priced loans though should not be the kind of co-dependence anyone would encourage at the regulatory level or even the level of simple morality. I don’t even want to think about what might happen to some of these workers when their bosses are then caught in the swirl of their personal financial predicaments, because like payday loans, these things will also have troubling repetitive patterns of loans to payments to more loans while workers try to get on their feet.
There ought to be a law, not just more ways that financial fast operators try to get around the simplest kinds of consumer and worker protections.