May 12, 2004
Depressing economics
So before work this morning I cruised down Rossville Blvd. looking unsuccessfully for a place to hawk the Xerox copier and Lexmark printer in the trunk of my car. This isn't because there aren't any pawn shops, but because no one was interested. But as I drove down the street I saw a lot of title pawn and check advance places, and got really depressed.
There are two relevant articles on Slate that bear reading (1, 2). Basically, the way title pawn places work is that you drive up with the title to your car, hand it over, and leave with cash equal to a discounted trade-in value for your car. You have one month to pay it back. If you do so in the first month, there isn't any charge - the first time. If you can't pay it all back, you can make a payment, the minimum required being the interest on the loan, which can be up to 30%. Per month. The loan will continue until you pay everything back, but if you make only the minimum payment, you will never pay it off.
The way check advance places work is almost worse. You drive up and post-date a check for the amount you wish to borrow plus a hefty fee. First-time borrowers get discounted rates at a few points, but return customers can expect to pay up to 500%. You then walk out with cash, and the lender cashes your check on the specified date. The theory is that you are deposited your paycheck and that the money will be there. If it isn't, you can arrange to make payments, again, frequently for interest only, a not insignificant sum given the rates we're talking about. A common loan contact is for one week, borrowing $200 and paying back $250.
Why isn't this illegal? An explanation can be found in the above articles, but I don't find it satisfactory. This is simply usury, and it's awful. The people who frequent these places will never get out of debt. They will be making payments for the rest of their lives. It is common for them to go to a new lender to pay off an old one.
On Rossville Blvd., these establishments are more common than fleas on a dog. The area is downright seedy, and is pretty economically depressed. The three biggest business types are shitty used-car lots, pawn shops (title and otherwise), and check advance services. These seem to be largely sophisticated ways of cheating the poor out of what little money they do have.
I would be very happy to see them all made illegal. But that isn't very likely, I'm afraid. Last year the check advance business grossed almost $10 billion. It is estimated that they will issue over $18 billion by the end of this year. And with profit margins like these, that's some pretty good money.
There are times a little governmental interference in the economy would be a good thing.
Now, back to covalent bonding...
sell your stuff on ebay.
and yes those places should be run out of business. not that I think there's necessarily special places in hell, but if there is, those who prey on the poor and otherwise disadvantaged should have one. the reason they're not illegal is that they have fat lobbiests.
Posted by: bobw at May 12, 2004 11:29 AM