The payday lending industry is the pinnacle of predatory, corrupt capitalism, unabashed loan sharks who prey on the poorest and most desperate Americans, charging interest rates in the hundreds and even thousands of percent APR, using strongarm tactics including threats of violence and rape to collect on debts, and papering over the whole thing by flooding notice-and-comment proceedings with bot-generated comments and secretly bribing academics to write papers explaining that usury is a social good.
Payday lending got a lot more vicious and a lot more profitable under Obama, thanks to the financial crisis and the decision to bail out banks but not the people they stole from, but in a parting shot, Obama created Elizabeth Warren's Consumer Financial Protection Bureau, which imposed modest regulations on the sector, just as Obama was leaving office. Predictably, Trump reversed all that, even making a loan-shark an assistant AG (the Trump campaign took millions from payday lender PACs).
Now, Propublica reports from the second annual payday lending convention to be held at the Trump Doral resort (the industry had never held an event at a Trump property prior to Trump's election), which have pumped at least $1m into Trump's personal coffers. The investigation reveals the suite of measures that Trump has put in place to benefit the predatory lending industry, and describe how Warren and Obama's plan to Republican-proof the CFPB by giving it an untouchable executive who wouldn't be subject to executive or congressional meddling backfired spectacularly when their chairman, Richard Cordray, quit to run unsuccessfully for the governorship of Ohio, leaving his position vacant for Trump to fill with a series of deplorable swamp creatures who have gutted the bureau.
Bernie Sanders and Alexandria Ocasio-Cortez have co-sponsored extensive anti-loan-sharking legislation that would restore many of the protections that Trump has removed.
Propublica's article is an excellent and long read, but I highly recommend the accompanying Trump, Inc podcast episode.
Don't miss this eye-popping stat: "The average [payday lender] only has 500 unique customers a year, but they have the overhead of a conventional retail store. If people just used one or two loans, then lenders wouldn't be profitable." That is, payday lenders are only profitable because they are designed to trap people in an inescapable cycle of debt and refinance.
Triple-digit interest rates are no laughing matter for those who take out payday loans. A sum as little as $100, combined with such rates, can lead a borrower into long-term financial dependency.
That's what happened to Maria Dichter. Now 73, retired from the insurance industry and living in Palm Beach County, Florida, Dichter first took out a payday loan in 2011. Both she and her husband had gotten knee replacements, and he was about to get a pacemaker. She needed $100 to cover the co-pay on their medication. As is required, Dichter brought identification and her Social Security number and gave the lender a postdated check to pay what she owed. (All of this is standard for payday loans; borrowers either postdate a check or grant the lender access to their bank account.) What nobody asked her to do was show that she had the means to repay the loan. Dichter got the $100 the same day.
The relief was only temporary. Dichter soon needed to pay for more doctors' appointments and prescriptions. She went back and got a new loan for $300 to cover the first one and provide some more cash. A few months later, she paid that off with a new $500 loan.
Dichter collects a Social Security check each month, but she has never been able to catch up. For almost eight years now, she has renewed her $500 loan every month. Each time she is charged $54 in fees and interest. That means Dichter has paid about $5,000 in interest and fees since 2011 on what is effectively one loan for $500.
Today, Dichter said, she is "trapped." She and her husband subsist on eggs and Special K cereal. "Now I'm worried," Dichter said, "because if that pacemaker goes and he can't replace the battery, he's dead."
How Payday Lenders Spent $1 Million at a Trump Resort — and Cashed In [Anjali Tsui and Alice Wilder/Propublica]
(Image: Anjali Tsui/ProPublica)