When do we enforce the usury laws?

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I can recall sending out our truck drivers routinely to make deliveries to hospitals and clinics around the US. And, because our company was growing by leaps and bounds (we averaged 220% growth from year 2 to year 12 (the first two years manifested even  greater growth), we sent them out with enough cash to get to their destinations. Then, as our payments rolled in, we got them money for their return trip.

A shop window advertising payday loans.
A shop window advertising payday loans. (Photo credit: Wikipedia)

They never really had to wait. Because back then, we had a deal with Western Union. We could ‘wire’ up to $ 350 for an $ 18 fee- and the funds would be available within 20 minutes.

So our drivers would be able to let us know they were finished with their deliveries and which truck stop they would be reaching- and voila…. Money was available for their return trip.

And, this process meant someone had to go to the bank, cash a $ 1000 check, and drive to the local Western Union Office.  Which at that time shared was within a local check cashing place, the Ace Check and Loan. Which was in and of itself interesting.

This place would cash someone’s check- who only needed a driver’s license- for a fee. If the check was a bonafide pay check from a local firm, they charged a flat 8%. If the check was for any other purpose and it was local, they charged 10%. If the check wasn’t local, they may either deny cashing it or charged significantly more.

This meant that all those folks who had no banking relationship were losing a big chunk of their money. Just imagine- you are working 40 hours a week, at higher than the minimum wage- say $ 8 and hour. That means your gross $ 320- and assuming you owed no federal or state taxes- your take-home check is $295.72- and you now get $ 271.87 after you cashed your check. After paying rent (which [since we are using 2014 dollars] was about $900 a month or more, you less than $ 60 a week for food, telephone, etc. That 8% ate up a lot of your check.

That’s better than the other business they offered these “unbanked” customers. (By the way, the “unbanked” are not just illegal immigrants; they could have been someone who bounced two checks (for pennies short) in a year- and are banned from the banking system for 2 or 3 years.)  they were proffered a loan against their paycheck. This “industry” is call the Payday Loan system. The companies doing this also say they offer “cash advances”, “post-dated check loans” or even “delayed deposit loans”. The subject writes a check to Ace (or any of its competitors) for the amount of the loan- plus a fee. The fee for a $ 250 loan would be $ 18 bucks. And, that $ 268 check would have to be made good within two weeks with cash or a money order.

If the check were to be cashed at the facility, you can see that one’s pay check is now fully depleted. So, 40 hours of work got the subject to cover his rent (apportioned) and now only $40 for everything else.

But, now these “banking” guys have a new racket to keep the poor poor. You bring in the title for your car (it has to be fully paid, so you have the title) and they will loan you 75% of that value and charge you interest weekly until you pay the loan. (More than 1 million such “loans” were processed last year.) Given the disposable income we just discussed, you can see that few ever really pay the loan off- instead they lose the car- and still owe folks like Ace money.

The rates these guys charge are not the 30% that credit cards charge their poor risk candidates- but 500% or more. These payday advance and car title loan companies need to be regulated. To insure that the rates they charge don’t violate the various state finance laws.

(Yes, the laws generally exist.  These outfits are just not “included” in the enforcement.)

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