Paydays and Predators

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Via TPMCafe comes a new report from the Center for Responsible Lending on how the payday lending industry exploits low-income borrowers. Here’s how a typical exchange might work in, for instance, Texas:

A borrower writes a check to the lender for the principal and interest. According to the center’s example, for a $325 loan, the borrower writes a check for $377, the principal plus $52 in interest. The money is typically due two weeks later, an APR of more than 400 percent in this example.

If the borrower does not have the $377 when it is due, they can pay another $52 fee. This does not pay down the principal; it pays to keep the loan afloat. According to the center’s study of the industry nationwide, “the average payday borrower pays $800 to borrow $325.”

Cracking down on rogue lenders seems like the obvious solution here. A better policy solution, though, as outlined by Anne Kim of the Progressive Policy Institute, would simply be to get mainstream banks to offer the sort of services—check-cashing, payday lending, etc.—that are in high demand among low-income families, making it easier to regulate predatory lending. As was noted after Katrina, poor families often don’t have bank accounts; but this is less because they don’t understand how banks work—as many suppose—and more because mainstream banks simply don’t offer much in the way of actually useful services for those low-income families. Payday-lenders, check-cashers, and pawnshops, on the other hand, do, and tend to proliferate in poorer areas. But because these services are so small and unregulated, they end up charging exorbitantly high fees and stripping billions of dollars in wealth away from low-earners. Vicious cycle ensues.

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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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