The Society of the Owned: Deeper In Debt

[marmar]

from OurFuture.org:



The Society of the Owned: Deeper In Debt
By Terrance Heath

February 27th, 2008 - 11:45am ET


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Part Three of a series.

Let's return to our metaphorical street corner from the previous post, because to understand the current economic crisis it might help to consider how many have been run down at that economic intersection as conservatism stands by and watches. There's another lending crisis that's gone on for a while now, making far fewer headlines than the subprime crisis, the credit crunch, or the housing slump—because of the people it affected. But as those crises intensify and affect more and more people, this one may become even bigger news than it has been so far.

Back in December 2006, when the subprime crisis was just getting started, The New York Times ran a story about short-term "payday" loans and their devastating impact on the poor, who get caught in a never ending cycle of debt.

While such lending is effectively banned in 11 states, including New York, through usury or other laws, it is flourishing in 39 others. The practice is unusually rampant and unregulated in New Mexico, where it has become a contentious political issue. The Center for Responsible Lending, a private consumer group based in Durham, N.C., calculates that nationally payday loans totaled at least $28 billion in 2005, doubling in five years.

The loans are quick and easy. Customers are usually required to leave a predated personal check that the lender can cash on the next payday, two or four weeks later. They must show a pay stub or proof of regular income, like Social Security, but there is no credit check, which leads to some defaults but, more often, continued extension of the loan, with repeated fees.

Drive through any low-income neighborhood and you'll see as many of them as you will banks, if not more, with signs advertising cash checking services and short-term loans, money wiring service, and phone cards.

The article focused on the effect payday lenders have had on a Native American community near Gallup, NM. Since then, payday lenders have spread to a wide range of communities, ostensibly to serve a new and growing demographic of customers. Their tactics have changed, too. Earlier this month, an article in The Wall Street Journal revealed that payday lenders are targeting the elderly and disabled now, tapping into their bank accounts, taking control of their Social Security and disability benefits, and giving them "allowances" after the lenders subtract their chunk.

One recent morning, dozens of elderly and disabled people, some propped on walkers and canes, gathered at Small Loans Inc. Many had borrowed money from Small Loans and turned over their Social Security benefits to pay back the high-interest lender. Now they were waiting for their "allowance"—their monthly check, minus Small Loans' cut.

The crowd represents the newest twist for a fast-growing industry—lenders that make high-interest loans, often called "payday" loans, that are secured by upcoming paychecks. Such lenders are increasingly targeting recipients of Social Security and other government benefits, including disability and veteran's benefits. "These people always get paid, rain or shine," says William Harrod, a former manager of payday loan stores in suburban Virginia and Washington, D.C. Government beneficiaries "will always have money, every 30 days."

The law bars the government from sending a recipient's benefits directly to lenders. But many of these lenders are forging relationships with banks and arranging for prospective borrowers to have their benefits checks deposited directly into bank accounts. The banks immediately transfer government funds to the lenders. The lender then subtracts debt repayments, plus fees and interest, before giving the recipients a dime.

In the first post in this series, I referred to the long dead practice of sharecropping. In many the images of people lined up outside a lender's storefront reminds me of sharecroppers lined up to get their pay after harvest, usually getting less than they had coming to them, and finding themselves still in debt with little hope of getting out. ......(more)

The complete piece is at: http://www.ourfuture.org/blog-entry/society-owned-deeper-debt

[Tandalayo_Scheisskopf]

1. This has all been...

An exercise in creating a new, slightly more civilized, Bonded Servitude Class. A Service Class to go with the Service Economy. A class that lives and dies to serve its "betters".

We are three years, max, from the tipping point, as a society, on this turn of affairs, if things are not addressed.

[ayeshahaqqiqa]

2. That is disgusting!

In Missouri, they advertise these places, but have to say in writing AND in voice over that payday advances are risky and shouldn't be used for trying to solve financial problems. There are several of these stores in the town in Arkansas where I work. too, and appear to be doing a thriving business. To my mind, that is scary--but with stagnant wages that weren't all that great to begin with, what can you expect?

[Hydra]

3. The 3 part series confirmed what I thought had happened

The mortgage crisis was deliberate- and the Fed allowed it to happen for the greater gain of their members.

Beyond that, I used to work for a payday loan company, and I'm not surprised that they want the people getting gov't checks to be their debt slaves. People change jobs, change bank accounts, move, etc. The elderly and the disabled are the perfect prey.

Welcome to the new gilded age- you'll never survive without going into debt...and then you'll never get out.

[ordinaryaveragegirl]

4. It seems like there are only two "classes" in this country nowadays...

The Moneyed Class, and the Indebted Class. And the honest mistakes of the latter only help the former. The haves keep getting richer, and the have-nots are just trying to get by, whatever it takes. I'm over these "lenders" preying on the working, often low-income people of this country. It's the sham of the century.

[earth mom]

5. K & R & Bookmarked to comment later! nt

[ThomWV]

6. Want to know what makes it worse? Once they have made the loan

Once the pay-day-lenders have made the loan to the old geezer they then have an insurable interest in the customer. That means that not only will the checks keep on coming as long as the geezer can keep on breathing but it also means the lender can insure against loss on their loan should the old geezer bite the big one.

[TahitiNut]

7. Funny how "Christian" Conservativism conveniently forgets USURY is a sin.

Charging interest on a loan was, for many centuries, against Church teachings and canon law. Indeed, this is just one of the factors that left such enterprises to the Jews (the "money-lenders").

Religion is a funny thing. :eyes:



"Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of anything that is lent upon usury." (Deuteronomy 23:19).

"Thou oughtest therefore to have put my money to the exchanges, and then at my coming I should have received mine own with usury." (Matthew 25:27).