Legal loan sharking
Whether lawmakers want to admit it or not, Florida has legalized loan-sharking.
A Sanford woman who's going through a divorce has only her car to her name. She turns to a title-loan company for a paltry, $250 loan. In return, she is charged interest and fees totaling 264% a year - plus the company keeps an extra set
of keys to her car, just in case she doesn't pay up. It's all perfectly legal.
A homeless Orlando couple with too little money to maintain a bank
account must pay a fee and forfeit 3% of their meager earnings simply to cash a paycheck. Then, to pay their bills, they have to shell out even more to buy money orders because they can't write a check.
It's all perfectly legal.
A Winter Springs woman needs $100 for car repairs. She goes to a store where she gets an advance on her paycheck - for what amounts to a triple-digit annual interest rate. Still struggling to pay her bills, in the next two and a half years, she will wind up borrowing nearly $2,500 and paying back more than $6,500. And still she will be in debt.
Again, its all perfectly legal.
Title-loan companies that require you to put up your car for collateral, check-cashers that can take a huge cut from people too poor to open an account at a regular bank, stores that give you an advance on your paycheck at absurd interest rates -- those businesses all prey on the working poor, the elderly on fixed incomes, and others desperate for money. And they do so with the states blessing.
In Florida, the law treats the poor and financially strapped differently from those who have money. And the shameful truth is that the poor pay more than the rich. Though state law limits the interest rate that banks and Florida-based credit-card companies can charge to 18% a year, predatory businesses on the financial fringe are flourishing. They are devouring the meager assets of hundreds of thousands of Floridians who live payday to payday - the very people who can least afford to be exploited.
No knee-caps get broken, but - in a manner of speaking - lots of backs do. The charges are more than the poor can bear. Florida's booming tourism industry, which has brought comfortable salaries to those at the top, has spawned a huge population of minimum-wage workers. Unfortunately, banks have had little desire to busy themselves with such meager paychecks.
The fringe lenders, on the other hand, are only too happy to step in - at an exorbitant price. They defend their practices by pointing out the risks they take. They say they stay open long hours in neighborhoods that banks have abandoned, dealing with people who have credit problems and who may not pay back the money at all.
It seems plausible enough - until you stop to wonder why, if the risk is so great, those businesses are proliferating into empires. Consider just one, ACE Cash Express Inc., the nation's largest check-casher and also a payday lender. In just over 10 years, it has managed to expand to more than 800 stores and, despite that aggressive expansion, already had profits of more than $6 million last year.
Such businesses lure desperate people with a promise of fast cash, just what someone a few dollars away from eviction wants to hear. You can see the lenders' signs littering the roadside: "Need a loan? Have a car?"
But what those greedy sirens know is that people in a financial pinch aren't likely to be helped by a small, payday advance for, say, two weeks or a title loan for 30 days. The lenders know that many of their customers will never quite be able to pay back in full and on time, that they'll always be a few dollars short and a few days late. They know that what was supposed to be a two-week or one-month loan likely will escalate into a burden of a year or more. Meanwhile, the interest will soar into triple digits. Let the buyer beware, the lenders say. No one is forcing people to borrow And if they do borrow, they can read the fine print for themselves.
In an ideal world, yes. But the world of people who need those loans is not ideal. They may be single parents. They may be sick or disabled. They may be unemployed, underemployed, or unable to read. Many of them don't have the minimum balance needed to open a bank account.
They don't have a lot of options.
The loan sharks are only too happy to invite them in for a swim.
So, what have our lawmakers done?
Well, when they haven't been snoozing, they've been accepting generous campaign contributions from those businesses and making matters worse. In 1995, the Legislature passed a law allowing these predatory businesses to charge a monstrous rate of as much as 22% a month thats 264% a year - on loans secured by a car title. Most lawmakers say they didn't even realize what they had voted for in the waning days of the session. How could that possibly be?
Whatever the excuse, legalized loan-sharking is disgraceful, ever more so in a prosperous state such as Florida. The two key players now are Senate president Toni Jennings and House of Representatives speaker John Thrasher. Today, Ms. Jennings sits by quietly, letting it happen, and Mr. Thrasher looks to be doing all he can to help these lenders stick it to the poor. Yet, together they share a unique responsibility to protect the poor, the powerless, and the politically unconnected.
Can they not hear the victims crying out for help? Do they care? They need to lead the charge to rein in these predatory money-lenders and wrestle their interest rates down from the stratosphere.
These businesses are part of a dangerous slide toward a Florida in which the have-nots are thrust into a minimum-wage, or worse, subculture to be used, abused, and tossed aside. It feeds off the low-paying tourism industry, the poorly educated, the new immigrants, and those just poor. It is simply wrong and cannot be allowed to happen.
The governor and Florida legislators need to speak up and say"enough; that Florida is better than what these highinterest lenders would make us. This kind of loan-sharking should be against the law
Copyright MASTHEAD National Conference of Editorial Writers Winter 2000
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